Page 23 - Central and Eastern European Transfer Pricing Review

Czech Republic | 23

Czech Republic

KPMG's Views on Transfer Pricing in
the Czech Republic

Transfer pricing in the Czech Republic is an important issue. Relevant OECD and
EU recommendations are refected in the local offcial guidelines issued by the Tax
Authority.

The Tax Authority has announced plans and is currently increasing their focus on
transfer pricing audits. At present, transfer pricing is included in every tax audit of
large taxpayers.
Adequate documentation serves as a tool to prove that prices applied are at arms
length. While not specifcally required by tax legislation, it is in practice expected to
demonstrate compliance.

Basic information What is the relationship threshold about the existence of a link to foreign
for transfer pricing rules to apply entities which can be viewed as a
Tax authority name between parties? transfer pricing risk indicator. Limited
Finanční úřad (Tax Authority) Ownership of greater than 25 percent information about transactions with
Specializovaný finanční úřad based on voting power, share capital, related parties is a part of the enclosure
to the fnancial statements.
(Specialized Tax Authority for companies common control, and entering a business
with turnover higher than 2 billion relationship predominantly for tax What types of transfer pricing
Czech koruna (CZK) and financial evasion purposes. information must be disclosed?
institutions), Generální finanční ředitelství
(General Financial Directorate) and What is the statute of limitations The enclosure to the fnancial statements
Odvolací finanční ředitelství (Appeal on assessment of transfer pricing should theoretically include an overview of
Financial Directorate). adjustments? signifcant related party transactions that
General limits for additional tax do not follow the arms length principle.
Citation for transfer pricing rules assessment apply. Additional tax What are the consequences
Income Tax Act 23 (7), legally non-binding may be assessed within 3 years after of failure to prepare or submit
regulations D-332, D-333, D-334 and the end of the respective taxable disclosures?
D-10. period. Theoretically, this deadline may
be extended up to 10 years in case of Not applicable.
Czech Ministry of Finance decrees D-332 repeated tax audits. Special rules further
(international standards for taxation of extend the deadline for companies with Transfer pricing study
transactions between related parties), tax incentives and/or tax losses.
D-333 (advanced pricing arrangements) Overview
and D-334 (recommended scope of Transfer pricing Is preparation of a transfer pricing
transfer pricing documentation) and study required i.e. can the
General Financial Directorate decree disclosure overview taxpayer be penalized for mere
D-10 (low value intra-group services). Are disclosures related to transfer failure to prepare a study?

Effective date of transfer pricing pricing required to be prepared or No statutory requirement regarding
rules submitted to the revenue authority transfer pricing studies exists. On the
on an annual basis (e.g. with the tax
other hand, it is assumed by the Tax
1 January 1993. return)? Authority that the documentation is a
Transfer pricing disclosure is not required basic tool to defend the prices applied.
by tax legislation. The Corporate Tax
Return Form contains only information
© 2013 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.