Implementation of minimum tax in Czech Republic: Who will be affected by top-up tax?

The bill implements the EU directive on global minimum tax.

Domestic top-up tax and top-up tax allocated under the EU regulation

The bill provides for both a top-up tax allocated under the EU regulation and a comparable national (domestic) top-up tax. The domestic top-up tax will have to be paid by Czech companies that are part of corporate groups qualifying for the top-up tax; the top-up tax allocated under the EU regulation will have to be paid by a Czech parent entity of corporate groups qualifying for the top-up tax on behalf of its subsidiaries in another member state. The obligation to pay the allocated top-up tax does not arise if the state of the subsidiaries decides to introduce and collect the domestic top-up tax determined under similar conditions.

Taxpayers and registration obligation

Payers of both top-up taxes will be Czech constituent entities as well as the main entity (headquarters) of a permanent establishment located in the Czech Republic of the qualifying corporate groups.

Taxpayers will have to register within 15 days after fulfilling the group membership condition (considering the group membership and the expected effectiveness of the law on 1 January 2024, this means by 15 January 2024). The Specialised Tax Authority will be responsible for the administration of the top-up tax regardless of the size of the constituent entity.

Top-up tax information return and top-up tax return, top-up tax due date

The top-up tax information return will serve as a notification of the taxpayer's participation in a specific group and a summary of the fulfilment of the taxpayer's obligations irrespective of whether the limit for the payment of the top-up tax itself was reached. The top-up tax information return for the domestic top-up tax shall be submitted within 10 months of the end of the taxable period; and the top-up tax return shall be filed within the same period. This deadline cannot be extended.

The top-up tax information return for the allocated top-up tax shall be filed within 15 months of the end of the taxable period (18 months for the first filing), and the top-up tax return will have to be filed within the same deadline. It will be sufficient for another constituent entity of the group to file the top-up tax information return in a state with which the Czech Republic has concluded an information exchange agreement.

The top-up tax will be payable within the deadline for filing the tax return. The bill also provides for the possibility of not filing a top-up tax return, in which case a tax of CZK 0 will be determined by fiction, and penalty for late tax assertion will not apply. 

Limitation period – deadline for determining the top-up tax

The bill stipulates the deadline for determining the top-up tax, which is also the deadline for its payment, differently from the Tax Procedure Code. The deadline is four years, running from the top-up tax due date. The general rules on the interruption and suspension do not apply: the deadline shall only be suspended (not run) during court proceedings. An additional tax return for a lower tax can only be filed within a three-year deadline.

Safe harbours – exemptions from the obligation to calculate the top-up tax using standard rules

The bill follows the EU regulation in allowing the simplification or exemption from the obligation to calculate the top-up tax using standard rules. While permanent exemptions have not yet been precisely defined, temporary exemptions already have a legal framework in place and may lead to temporary relief from the envisaged extensive administrative obligations (see here).

The bill is currently undergoing its external comment procedure and may still be further amended.