GFD

Tax 

Information of the General Financial Directorate on transfer pricing in financial transactions

On 9 August 2021, the General Financial Directorate issued information on the guidance on transfer pricing in financial transactions (the “Information”) in which the General Financial Directorate refers to Transfer Pricing Guidance on Financial Transactions (the “Guidance”) published by the Organisation for Economic Cooperation and Development (the “OECD”) in February 2020. Together with the Information, the General Financial Directorate published an unofficial translation of the Guidance into Czech. 

20. 10. 2021
Tax 

Additional tax returns: when are you at risk of penalties?

It is a well-established rule for most taxable entities that when they file an additional tax return voluntarily, they will not be charged a penalty representing 20% of the additionally assessed tax. The purpose of this rule is to financially motivate taxable entities to voluntarily declare and pay omitted tax liabilities to the tax administrator. However, starting from 1 January 2021, this rule has undergone a significant change due to an amendment to the Tax Code. The General Financial Directorate has even issued a methodical guideline on this topic, explaining the change in more detail. 

21. 9. 2021
Tax 

Remission of penalties, interest and now also fines for the late filing of a tax return

The additional tax assessment by the tax administrator gives rise to the obligation to pay interest on arrears; in addition, this often entails penalties, which may, in total, exceed the amount of the additional assessment. The institute of individual remission of tax penalties represents the way to mitigate the penalty consequences of the additional tax assessment. Moreover, on 1 January 2021, the possibility of remitting the fine for a late tax return was enshrined in the Tax Code. 

27. 4. 2021
Tax 

Information of the General Financial Directorate on the effects of the Covid-19 pandemic on transfer prices

On 31 March 2021, the General Financial Directorate issued information on the effects of the Covid-19 pandemic on transfer prices (the “Information”) pursuant to recommendations of the OECD of December 2020 (the “OECD Guidance”). The General Financial Directorate notes that the OECD Guidance does not involve a special recommendation beyond the currently applicable Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the “Guidelines”), it rather focuses on the application of the arm’s length principle in the context of the pandemic. Below, we summarise the opinion of the finance administration on certain issues which the General Financial Directorate discusses in more detail in its Information. Therefore, it can be assumed that the finance administration will proceed in line with the Information when examining the periods affected by the pandemic, although this does not constitute a change in the relating legislation. Together with the Information, the General Financial Directorate published the translation of the OECD Guidance into Czech. 

26. 4. 2021
Tax 

Wage compensation as deductible (non-deductible) expenses in the research and development tax relief

For five years, the expert public has been waiting for the decision of the Supreme Administrative Court in the matter of deductibility/non-deductibility of the wage compensation in the form of a holiday as part of the research and development (“R&D”) tax relief item. Tax advisors were convinced that the recognition of this expense is fully legitimate; however, the state administration firmly rejected it. At the turn of 2019 and 2020, two rulings of the Supreme Administrative Court (“SAC”) confirmed that the recognition of this expense was fully justified. At the end of last year, the General Financial Directorate sent a methodical instruction to individual tax authorities to determine the wage compensation amounts. What does this document mean in practice and what should the taxpayers pay attention to? 

16. 2. 2021
Tax 

Custom development and its utilisation as part of a tax-deductible item for research and development

In August 2020, the much-expected Instruction No. MF-17 was issued in the Financial Bulletin, reacting to the amendment to the Income Taxes Act in relation to the tax-deductible item for research and development and commenting on, inter alia, the much-debated issue of custom development. Apart from that, the Financial, Tax and Accounting Bulletin featured an article by a General Financial Directorate representative that focused on the same issue as well. How is custom development treated in practice? 

16. 2. 2021
Tax 

The Long-Awaited Information of the General Financial Directorate on the Implementation of the ATAD Was Published

Council Directive EU 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices (ATAD) was implemented into Czech tax legislation in 2019. New provisions of the Income Taxes Act arising from the directive that impact payers of the corporate income tax and their permanent establishments are currently discussed in more detail in the issued information of the General Financial Directorate. 

15. 2. 2021