Adjustments to top-up taxes: what will forthcoming amendment change?

Here is an overview of selected proposed changes:

• Instead of a taxable period, a reporting period is to be used, i.e., the period for which the consolidated financial statements are prepared. If the constituent entity’s accounting period or taxable period for the tax concerned differs from the reporting period, for top-up tax purposes, data shall be allocated to the reporting period in the manner used for the preparation of the consolidated financial statements.
• The amendment specifies what revenues from the consolidated financial statements shall be relevant for determining the threshold of EUR 750 million. The threshold is vital for determining which corporate groups are subject to the top-up tax. 
• The amendment clarifies the definition of an investment fund, replacing the condition of "a large number of investors" by the condition of "at least two investors".
• The possibility of using the medium-term decision on the application of the taxable profit split method for investment entities is to be extended to insurance investment entities.
• A medium-term decision on the inclusion of all profit shares shall be introduced. If this option is used, qualifying profit or loss is not adjusted for excluded profit shares.
• The possibility to apply safe harbour rules to joint ventures is to be extended to all types of safe harbours.
• The taxpayer that is the ultimate parent entity shall have the obligation to file a Czech top-up tax return if no low-taxed Czech constituent entity within a large domestic or large multinational corporate group exists or no low-taxed Czech constituent entity has generated excess profit. 
• A top-up tax information return shall be filed by the payer of Czech top-up tax or allocated top-up tax regardless of whether there is a low-taxed constituent entity within a large national or multinational group or whether such constituent entity has generated excess profit.
• Under the transitional provision, the deadline for filing the top-up tax information return cannot end before 30 June 2026. The same rule could apply to the top-up tax return.
• Exceptions from the obligation to file top-up tax information returns remain in application. They can only be used if the information obligation has been fulfilled by another entity in the corporate group.
• The provision governing the transfer of assets in connection with the group’s opening period is to be extended to transactions similar to asset transfers. The explanatory report provides examples of such transactions.
• The amendment extensively modifies the transitional safe harbour rule deriving from the information contained in country-by-country reports. This follows the OECD's Safe Harbours and Sanctions Relief and Methodological Guidance from December 2023.
• A permanent safe harbour rule based on simplified calculations of routine profits, de minimis (revenue and profit), and the effective tax rate has also been added. However, it should only be possible to apply these safe harbours in relation to non-material constituent entities (i.e., those not included in the consolidated financial statements and whose revenue does not exceed EUR 50 million).

A special transitional provision provides for a mixed tax regime for controlled foreign operations.
The amendment is only at the beginning of the legislative process. The proposed effective date is the day it is promulgated in the Collection of Laws. It should already apply to periods beginning after 31 December 2023.