Page 24 - Central and Eastern European Transfer Pricing Review

24 | CEE Transfer Pricing Review

Other than complying with a Transfer pricing methods assessed (Czech National Bank REPO
requirement per the previous rate + 14 percent). This interest is
question, describe the benefts, if Are transfer pricing methods calculated beginning the 5th working
any, of preparing and maintaining outlined in Chapter II of the day after the original maturity day. This
a transfer pricing study? OECD Guidelines acceptable? interest charge is applicable for a
The main benefts are meeting the Yes. maximum period of 5 years. In specifc
expectation of the Tax Authority for Is there a priority among the cases, withholding tax on a deemed
transfer pricing documentation during acceptable methods? dividend is assessed (together with
a tax audit, shifting the burden of proof penalty and interest).
from the taxpayer to the Tax Authority No strict rules apply. OECD Guidelines Companies with investment incentives
and the consequent reduction of are followed. granted in the form of tax holidays may
probability of additional tax assessment forfeit the right to the tax holidays (even
and the related penalty as a result of If there is no priority of methods, retroactively).
improper transfer pricing. is there a best method rule?
Nothing is explicitly mentioned in the To what extent are transfer pricing
To satisfy the requirement and/or legislation. penalties enforced?
obtain the benefts, are there any
requirements on when the transfer Transfer pricing audit and Tax sanctions are automatically enforced.
pricing study must be prepared What defenses are available with
and submitted? penalties
respect to penalties?
During a tax inspection, the Tax Authority When the tax authority requests Only shifting the burden of proof through
can ask that the taxpayer justify prices a taxpayer s transfer pricing using proper documentation or defense
used in transactions with related documentation, how long does fles.
parties. In this situation it is practically the taxpayer have to submit its
expected that the taxpayer will provide documentation? What trends are being observed
transfer pricing documentation. The The Tax Authority commonly expects currently?
usual deadline set by the Tax Authority documentation as a basic tool, assisting The number of tax audits with a
is within 15 days of the request. Tax the taxpayer to justify its prices, within transfer pricing focus has increased
Authorities may provide a longer deadline 15 days of request. This deadline can be considerably. The main focus is on
if requested by the taxpayer. extended by the Tax Authority upon the services (beneft test) and proftability
taxpayer s request. ratios. Interest rates and fnancial
When a transfer pricing study is
prepared, should its content follow If an adjustment is proposed by the transactions are also being challenged
Chapter V of the OECD Guidelines? tax authority, are dispute resolution by Tax Authorities.
Yes. All elements according to the options available to the taxpayer The Tax Authorities cross-check the
OECD transfer pricing documentation outside of competent authority? local documentation and its link to local
requirements are usually included. The Yes. The taxpayer can initiate an appeal to accounting information and require a
recommended scope is included in the the Appeal Financial Directorate before high level of detail during tax inspections.
Ministry of Finance Regulation D-334. going to a regional court. Investigating transfer pricing within a
tax inspection is the rule rather than the
Does the tax authority require an If an adjustment is sustained, can exception for multinationals.
advisor/tax practitioner to have penalties be assessed? If so, what
specifc designation in order to rates are applied and under what The Tax Authorities have specialized
prepare or submit a transfer pricing conditions? teams for transfer pricing and
study? international tax. The Ministry of Finance
Yes. General tax penalties apply. regularly attends EU JTPF meetings and
No specifc designation is is part of the international information
necessary. Taxpayers can prepare A penalty of 20 percent of the avoided exchange within the EU.
transfer pricing documentation on their tax or 1 percent (5 percent for tax
own or via their advisors. On the other liabilities before 2011) of the overstated
hand, it is possible to have it offcially tax loss is assessed when a transfer Special considerations
prepared by a designated expert pricing adjustment is made by the Tax Are secret comparables used by tax
approved by the Interior Ministry. KPMG Authority. Furthermore, interest for late authorities?
in the Czech Republic is one of a few payment of approximately 15 percent is
companies with this authorization. Yes.

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