Taxes
12 April 2017

What will country-by-country reporting bring in practice?

The proposed amendment to the Act on International Cooperation requires multinational groups with an annual consolidated turnover exceeding EUR 750 million to prepare a country-by-country report. The amendment is currently on the agenda of the next deputies’ meeting. At the same time, the prescribed forms Czech parent entities will have to complete with information on their subsidiaries are being presented. At this point, it seems that the Czech Republic will not manage to pass the amendment within the obligatory implementation deadline, i.e. by 4 June 2017. The budget committee has thus proposed to change the effective date to “the date of promulgation in the Collection of Laws”.

Daniel Szmaragowski
Veronika Červenková
Soňa Saidlová

Soon, numerous Czech companies will face two new duties: the first is to notify the Specialised Financial Authority (SFA), stating who will be filing the report under the act on their behalf, in which country and in what scope. Because of the expected late effectiveness of the act, it is expected that for all reported periods ending before 30 September 2017, notifications will have to be given by 30 September 2017 (or 31 October 2017, if the budgetary committee’s amending proposal is passed). Thereafter, the last day of the reporting period will be the notification deadline. A new notification will only have to be made if the reported data change, always within 15 days from when the change took place.

Secondly, Czech companies that are part of a qualifying multinational group will have to provide relevant data to their ultimate parent, which will then be filing the country-by-country report on their behalf with its competent local tax administrator, in a format and structure prescribed by the tax administration at the parent’s registered office. Czech parent entities will be handing the filled-in forms to the SFA. They may use local financial statements and consolidated statements as a source for the reported data. According to the Czech financial administration’s estimates, the duty will only concern a maximum of 10 to 15 Czech parent companies.

The following information will be reported in the country-by-country report, for instance:

  • Revenues generated from transactions with related parties and other revenues; however, the definition of a related party for this purpose does not correspond to the definition of a related party under the Income Tax Act.
  • Profit (loss) before tax, including all extraordinary expenses and revenues.
  • Income tax paid, including tax prepayments, settlements, or tax additionally assessed (on cash basis).
  • Current income tax, or income tax expenses not including deferred tax or tax provision.
  • Retained earnings (accumulated losses).
  • Number of employees at the end of the reporting period or an average recalculated headcount for the period; independent contractors involved in a company’s ordinary operating activities may be included at discretion.
  • Net book value of tangible assets other than cash and cash equivalents, intangible or financial assets. Assets of a branch will be reported separately.

As the content of some of the reported categories is currently ambiguous, KPMG has provided comments on the instructions that are part of the country-by-country report form.

 

 

Share article
LinkedIn
Webdesign