The amendment to the Act on International Cooperation in Tax Administration introduced a new reporting obligation in the Czech Republic as part of the international exchange of information, so-called ‘Country by Country Reporting’. This generally obliges each group of enterprises with consolidated global income exceeding EUR 750 million and with local presence to disclose to tax administrations a yearly CbC Report that summarises the financial information on this group. The Report, which is then subject to automatic exchange of information between individual countries, shall be prepared on behalf of the whole group of enterprises by:

• The ultimate parent company; or
• The surrogate parent company (i.e. the Company that was designated by the group to prepare the CbC Report e.g. because the parent company does not have the obligation to prepare it or it is based in a country that is not part of the automatic exchange of CbC Reports – refer to the published list of jurisdictions); or
• The Czech member company if the ultimate parent company or surrogate parent company are based in a non-cooperating country, see above.

On 31 January 2018, the Ministry of Finance of the Czech Republic issued a list of jurisdictions that have an active exchange of information with the Czech Republic.

On 27 April 2018, this list was updated for the first time (FB No. 4/2018) and the following countries exchanging CbC Reports for reporting periods beginning on or after 1 January 2016 were added

• Bermuda;
• Cayman Island; and
• Pakistan.

As part of the second update of 23 August 2018 (FB No. 7/2018), the following countries exchanging CbC Reports for reporting periods beginning on or after 1 January 2016 were added to the list:

• Bonaire, Sint Eustatius and Saba; and
• Costa Rica.

In the case of Pakistan, the activation of information exchange was postponed until reporting periods beginning on or after 1 January 2018.

The complete list of countries is available here. The published list will continue to be gradually updated depending on the inclusion of additional jurisdictions in the system of CbC Report exchange with the Czech Republic and this information will be once again issued in the Financial Bulletin. In addition to this list, the CbC Report exchange takes place automatically within the European Union.

The first automatic exchange of CbC Reports for reporting periods ending 31 December 2016 took place between these countries in June 2018. This was the first period for which CbC Reports were filed worldwide. In this respect, there was a great deal of discussion about the relationship of the Czech Republic with e.g. Japan, the USA, China and Switzerland, especially regarding the valid periods for which the automatic exchange of information would be activated with these countries. The aforementioned list of cooperating states confirms that Japan and the USA exchange reports already from the taxation period of the FY 2016, so no alternative measures have to be taken with respect to them.

By contrast, China has not joined the automatic information exchange as part of CbC reporting at all so far. If a Czech company has a parent company in China, the group can either designate a surrogate parent company in one of the cooperating countries that is on the list and where the CbC Report for the group will be filed, or the Czech company has to file the CbC Report on its own in its country. This also has to be adequately indicated in the CbC notification. Thanks to transitional provisions, these obligations are only valid from the taxation period of the FY 2017.

Switzerland will start exchanging CbC Reports from the taxation period of the FY 2018. i.e. the same situation as in the case of China applies for the FY 2017, but for the following periods, the standard situation will apply as for other countries from the amended list, including the USA and Japan.

The exchange of CbC Reports for reporting periods ending no later than 31 December 2017 will follow next in the first half of 2019. If a Czech company is obliged to file the CbC Report at the local Specialised Tax Office, it should do so within 12 months of the end of the taxation period, i.e. for the FY 2017 taxation period by 31 December 2018.

The article is part of dReport – October 2018, Tax news; Grants and investment Incentives.