Page 25 - Central and Eastern European Transfer Pricing Review

Czech Republic | 25

Is there a preference, or Transfer pricing adjustments are May a taxpayer go to competent
requirement, by the tax authorities generally made before submitting a tax authority before paying tax?
for local comparables in a return. After this deadline, it could only No formal rules exist except for APAs.
benchmarking set? be done by submitting a supplementary
Yes. There is a preference to have local tax return based on new facts that are Advance pricing
comparables in a benchmarking set. fully documented. In practice, taxpayers
However, not having local comparables gradually adjust prices during the arrangements
does not automatically mean that the calendar year to minimize the need for What APA options are available,
benchmark will be rejected. Broader yearly transfer pricing adjustments. if any?
geographic sets can be used where An APA for transfer pricing methods is
relevant. Other unique attributes?
There is no safe harbor defned. available.
Do tax authorities have
requirements or preferences Other recent Is there a fling fee for APAs?
regarding databases for CZK10,000.
comparables? developments Does the tax authority publish APA
The Tax Authority usually uses the Specialized transfer pricing teams at tax data either in the form of an annual
Amadeus database. Other sources of directorate level have been established. report or through the disclosure of
information can be used as well. A specialized Tax Authority for both the data in public forums?
biggest clients and fnancial institutions
What level of interaction do tax was established on 1 January 2012. This Only information about the number of
authorities have with customs Authority has replaced the original APA applications is published.
authorities? local Tax Authorities for the biggest Please provide some information
Very close. clients and fnancial institutions. Transfer on how successful the APA program
pricing expertise is available under this
Are management fees deductible? supreme Tax Authority. is and whether there are any known
diffculties?
Generally yes. However, taxpayers In December 2012, the General Financial Tens of APAs are approved each
are often asked to document that the Directorate issued Decree D-10, which is year. The APA process usually takes
services were actually provided and an implementation of EU JTPF Report: between 6 and 9 months to conclude.
consumed for the beneft of the taxpayer. Guidelines on Low Value Adding Intra-
Group Services.
Are management fees subject to Language
withholding? In which language or languages can
A 35 percent withholding tax on services Tax treaty/double tax documentation be fled?
rendered in the Czech Republic by a resolution
company from a country with which What is the extent of the double tax Tax Authorities may require all
Czech Republic has not concluded a treaty network? documents in Czech. This is usually the
double taxation treaty or treaty about case if they want to scrutinize transfer
exchange of information. Permanent Extensive. prices. However, some Authorities also
establishment risk exists if the services If extensive, is the competent voluntarily accept documentation in
are physically rendered in the Czech authority effective in obtaining English, and taxpayers may agree with
Republic. the Tax Authorities on which documents
double tax relief? must be translated into Czech.
Are year-end transfer pricing Frequently.
adjustments permitted?
Yes. No specifc legal provisions on When may a taxpayer submit an KPMG in Czech Republic
adjustment to competent authority?
compensating adjustments exist in the
legislation. However, domestic legislation The taxpayer should submit an additional Marie Konečná
does not forbid taxpayers to make tax return by the end of the month Tel: +420 222 123 438
these adjustments. The Tax Authority following the month in which the Email: mkonecna@kpmg.cz
would frstly audit whether the original taxpayer discovered the reason for the
transaction was set in accordance with tax base increase or tax loss decrease.
the arms length principle. As email addresses and phone numbers
change frequently, please email us at
transferpricing@kpmg.com if you are unable
to contact us via the information noted above.
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