Transfer pricing in the Czech Republic

Transfer pricing in the Czech Republic at a glance

Regulation Type OECD
Are there specific transfer pricing regulations? Yes
Submission deadline N/A
Submission deadline upon request N/A
Annual update required (No)
Official language requirements Czech or Slovak (English only rarely accepted)
Potential impact of penalties N/A

 

Czech Republican tax law

Rules for transfer pricing in the Czech Republic are based upon:

  • Income Tax Act Section 23 paragraph 7
  • Income Tax Act Section 38nc
  • Decree D-332
  • Decree D-333
  • Decree D-334

OECD

Rules for transfer pricing in the Czech Republic are in line with the OECD Transfer Pricing Guidelines.

Methods

Accepted methods

Accepted methods are:

  • The comparable uncontrolled price method
  • The resale price method
  • The cost plus method
  • The profit split method
  • The transactional net margin method

Priority of methods

There is no priority of methods in the Czech Republic.

Comparables

In the Czech Republic, local comparables are preferred. However, foreign comparables might be acceptable when a sufficient number of local comparables is not available to establish a reliable economic reference. Despite the previous, Pan-European benchmark searches are generally accepted by the Czech tax authorities.

Documentation requirements

Information that should be included in the documentation:

Recently (2014) the Czech Tax Administration announced new rules regarding to the preparation of documentation. Previously it was not obligatory to prepare transfer pricing documentation. According to the renewed transfer pricing legislation, however, some taxpayers are obliged to disclose transfer pricing information at time of disclosing the annual corporate income tax.

The following taxpayers are obliged to report details about their related-party transactions:

  • Total assets exceeding CZK 40 million (EUR 1.5 million)
  • Net turnover exceeding CZK 80 million (EUR 3 million) per annum
  • Average number of employees exceeding 50

The above-mentioned taxpayers are obliged to disclose the information annually and the documentation should include basic information about the related party (name, place of residence, country) and should also include the following information:

  • Purchase / sale of long-term assets
  • Purchase / sale of stocks and / or materials
  • Sale of products, goods and services
  • Received services
  • Interests and royalties
  • Receivables and payables with related parties

Language

Rules for transfer pricing in the Czech Republic prescribe that all documentation should either be in Czech or in Slovak. English is only rarely accepted.

Requirements to prepare documentation annually

For the new annual information that should be provided by certain taxpayers it is obligatory to provide the information annually, namely at the time of the annual corporate income tax.

For taxpayers who do not meet the aforementioned requirements to submit the information, no annual obligation to update the transfer pricing documentation exists.

Submission deadline upon request by tax authorities

Rules for transfer pricing in the Czech Republic do not provide for regulations to provide the tax authorities with documentation upon a request.

Advance Pricing Agreements

General

Since 1st of January 2014 it is possible to obtain for an Advance Pricing Agreement (APA) in the Czech Republic

Terms

The term for an APA to be agreed upon cannot extent five years.

Penalties

Rules for transfer pricing in the Czech Republic do no provide for specific transfer pricing penalties.

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