News in Brief, March 2025

BRIEFLY FROM HOME

• The Minister of Finance has decided to waive the interest incurred as a result of the tax payment deferment connected with the floods in the autumn of 2024. It will not be necessary to apply for the waiver of interest or to provide the reasons, as these were already considered when the decision about the tax payment deferment or the spreading of the tax into instalments was made.

• The chamber of deputies has sent to the second reading a government bill amending Act No. 563/1991 Coll., on Accounting, Act No. 93/2009 Coll., on Auditors, and Act No. 416/2023 Coll., on Top-Up Taxes for Large Multinational Groups and Large Domestic Groups. The bill increases the limits for the categorisation of entities, extends the range of entities liable to sustainability reporting, and amends the Act on Top-Up Taxes, e.g., postpones the deadlines for filing tax returns and incorporates changes to ensure the qualified status of the Czech top-up tax in the future.

• An amendment to the Act on Certain Measures in Connection with the Armed Conflict on the Territory of Ukraine Induced by the Invasion of the Troops of the Russian Federation (No. 24/2025 Coll.) has been published in the Collection of Laws, regulating certain immigration aspects and tax relief in respect of donations. The amendment is effective from 11 February 2025.

• Act No. 32/2025 Coll., amending certain laws in connection with the implementation of EU regulations concerning financial market digitalisation and sustainability financing, has been published in the Collection of Laws, which, among other things, introduces the possibility to exempt income from the sale of crypto assets from personal income tax. This amendment is effective from 15 February 2025.

• GFD Instruction No. D-67 on the waiver of tax-related interest and penalties has been published in Financial Bulletin No. 5/2025.

• The financial administration has launched the Tax Echo II project, which focuses on incorrectly claimed spouse's tax credit for 2022. A total of 3,502 taxpayers are being contacted, both via data box and by post. This measure is expected to bring up to CZK 80 million to the state budget.

• The approved Act on the Legal Profession has been submitted to the president for signature. Among other things, it increases the protection of attorney–client privilege and addresses the issue of an attorney's escrow to minimise the possibility of their abuse and misappropriation.  There has also been a shift in the digitisation of juridical acts by attorneys and trainee attorneys. The law also provides for more flexible conditions (part-time) for trainee attorneys.

• The Ministry of Industry and Trade has launched an on-line database of information obligations in which entrepreneurs can find an overview of their legislative obligations. All information is available as an open database with the possibility of free export, and for each obligation there is information on how it can be fulfilled. The individual obligations will regularly be updated by the relevant ministries. The database is available at https://dip.gov.cz.

BRIEFLY FROM ABROAD

• The Supreme Administrative Court (SAC) has referred to the Court of Justice of the EU (CJEU) a request for a preliminary ruling concerning the compliance of the Czech implementation of the Interest and Royalties Directive with EU law. The involved dispute concerns a company whose retrospective exemption from withholding tax on royalties for the 2014-2016 period was denied by the Czech tax authorities. Only an exemption for the years 2017 and 2018 was granted based on the interpretation of the time limit set out in the EU directive (not in the Czech legislation). The question is whether a decision on exemption can be issued retrospectively. If so, then by when the taxpayer must apply for the exemption, i.e. for how long a period preceding the application the exemption can be granted.

• The EU Council has updated the list of non-cooperative tax jurisdictions, removing Costa Rica and Curaçao from this list.

• The European Commission has presented its work programme that aims to reduce the administrative burden on companies by 25% and introduce a single ‘28th regime’ for innovative companies, which should simplify and harmonise their operations across the EU, including taxation. The plan includes several tax-related directives, which, with the exception of DAC 9 (exchange of information under Pillar 2), will not be prioritised.

• The German Ministry of Finance has published the final administrative principles for transfer pricing applicable from 2024. The update includes major changes to the rules for financing between related parties. It also simplifies and unifies the application of the arm’s length principle for basic marketing and distribution activities provided in connection with the sale of goods. Based on the new administrative principles, the German tax authorities will treat as correct those transfer pricing transactions that comply with the approach set out in the OECD report Pillar One – Amount B of 19 February 2024.

Developments in Pillar 2 (minimum taxation)

• France is proposing modifications to the Pillar 2 rule based on OECD regulations published since the law was passed, such as ensuring the qualified domestic top-up tax status and modifying the safe harbour rules.
• Denmark is preparing modifications to its domestic law based on OECD regulations published after the law came into effect and further extends the tax payment deadline.
• The United Arab Emirates has put in place a legislative framework to implement the Pillar 2 rules, joining other countries with such regulation.

The KPMG EU Tax Center regularly monitors changes in direct taxes in the EU and internationally. For a complete overview of the latest news, please see the 7 February and 26 February 2025 issues.