New rules for presentation of top-up tax in accounting
Entrepreneurs, banks, and insurance companies accounting for deferred tax will not have to consider the top-up tax when calculating deferred tax. However, they will be obliged to provide information about the top-up tax in the required extent in the notes to the financial statements, already for the periods in which they expect to become liable to the top-up tax.
The Ministry of Finance has published a draft amendment to the accounting decree for entrepreneurs, banks, and insurance companies. The proposed changes derive from the Act on Top-up Taxes (global minimum tax under Pillar 2), which has already been passed by the chamber of deputies and which should become effective for taxable periods starting after 31 December 2023. Czech companies and permanent establishments of multinational groups with a turnover exceeding EUR 750 million will be the payers of the top-up tax even if their liability to pay top-up tax does not arise.
Given the uncertainty regarding the exact amount of the top-up tax, it is proposed that entities that account for deferred tax should not consider any top-up tax when calculating the deferred tax.
The impact of the top-up tax may be significant; therefore, entities will be required to disclose information on the top-up tax and its impact on the entity (including its quantification) in the notes to the financial statements. Entities will have to disclose the following:
information that the entity is a payer of top-up tax or expects to become one in the immediately following accounting period
- information that the top-up tax was not considered in the calculation of deferred tax
- the portion of current tax payable attributable to the top-up tax
- a description and quantification of the expected impacts of the top-up tax on the entity.
The draft decree does not contain any simplifications for the accounting period preceding the effective date of the top-up tax. The new regulation will already apply to the financial statements prepared after the effective date of the new decree, i.e., to the financial statements with the date of preparation on or after 1 January 2024 prepared for accounting periods commenced before this date.