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Some Changes in Income Tax with an International Element

Some Changes in Income Tax with an International Element

Czech Republic
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Let us remind you of the two changes in income tax with an international element, which already have or are soon expected to come into effect (or to the end of the applicable time limit).

1. Controlled foreign company rule – the duty to “additionally” pay taxes in the Czech Republic for certain foreign subsidiaries (both direct and indirect), generally if they do not carry on a substantive economic activity and the respective foreign tax is lower than a half of the Czech tax that would apply if the subsidiary’s tax base were subject to Czech tax and its income generated in the Czech Republic. The rule is applied for the first time to the tax period that is the fiscal year starting after 31 March 2019 and the calendar year of 2020.

2. Obligatory reporting to the tax authority of cross-border structures (potentially) providing a tax advantage – a precise description including the given tax advantage must be provided to the tax authority; this will apply retroactively to structures implemented from 25 June 2018! Depending on the time aspects of the specific structure or its changes, the report must be submitted by 30 January, 28 February or 30 April 2021.

Do not hesitate to contact us regarding this matter. Our experts will examine your particular situation and we will find the best solution/remedy, or assess the risks.

By David Nevesely, Partner, David Krch
, Tax Partner, and Josef Zaloudek, 
Counsel, Havel & Partners

Havel & Partners at a Glance

HAVEL & PARTNERS, attorneys-at-law, with offices in Prague, Brno, Bratislava, Pilsen, Olomouc, and Ostrava, has a team of 220 lawyers, tax advisors and 500 employees in total, is the largest independent law firm in Central Europe.

Our clients include large international companies, leading Czech and Slovak firms, including strategic state-owned companies and public sector authorities, as well as medium-size businesses, individual entrepreneurs, and investors. We advise approximately 100 of the Fortune 500 companies, and almost 50 of the Czech Top 100 companies. HAVEL & PARTNERS currently provides its services to a total of 2,000 clients. We have the most comprehensive international support available to both Czech and Slovak law firms. We provide legal and tax advice in 12 world languages in more than 90 countries around the globe. Up to 70 % of the transactions we deal with involve an international aspect.

HAVEL & PARTNERS was named the best law firm operating in the Czech Republic by the prestigious British rating agencies Chambers and Partners (2020) and Who’s Who Legal (2018, 2019). It is also the most successful law firm, providing the most comprehensive legal services in the Czech Republic and Slovakia, based on the total number of all nominations and awards in all years of the Law Firm of the Year awards. The firm became the absolute winner of this competition four times in the last six years, receiving the main award Domestic Law Firm of the Year in the Czech Republic (2015, 2017, 2018, 2020) and ranking as one of the most recommended law firms in all categories of law. Our company is also a three-time winner of the Law Firm of the Year award for Best Client Services (2015, 2016, 2019). In the field of M&A, HAVEL & PARTNERS is the best law firm in the Czech Republic based on the annual International Advisory Experts awards (2018, 2019). In Slovakia, it also won the prestigious global M&A Today Awards (2013–2018) for Mergers & Acquisitions six times in a row, and repeatedly won first place in the ranking by Lawyer International Legal 100 (2017, 2018). Prestigious international rating agencies EMIS DealWatch and Mergermarket have ranked HAVEL & PARTNERS among the leading law firms by the number of transactions completed in the entire CEE region since 2009. Based on annual awards of the Acquisition International magazine, HAVEL & PARTNERS has become the Law Firm of the Year 2019 in the M&A category in the CEE region.

Firm's website: https://www.havelpartners.cz/en/