4. 8. 2025
4. 8.
2025
Public country-by-country reporting quickly approaching - Czech companies running out of time
Major Czech corporate groups and Czech companies operating within large multinational corporate groups are facing a new challenge. They will have to disclose sensitive financial information under the EU Directive 2021/2101 as early as 2025. Until now, similar information has only been disclosed to the tax authorities. The new obligation imposes the disclosure of information both in the public register and on the company's website.
What is it about and who will be affected?
Companies will be obliged to publish reports on income tax (country-by-country reporting) containing, among other things, information about revenues, assets, current income tax, deferred tax, and the number of employees. This data will be reported in aggregate for the jurisdiction and published for the first time for periods beginning after 22 June 2024. The report must be published within 12 months after the end of the relevant accounting period.
In the Czech Republic, the obligation applies to two groups of companies.
- Standalone Czech companies that are not part of any multinational group, have a net turnover of CZK 19 billion and have a branch or permanent establishment abroad. These are large Czech companies that operate independently but have an international presence, for example in the form of a foreign branch or subsidiary. All three criteria must be met simultaneously.
- Czech companies that are part of a multinational group with consolidated revenues of EUR 750 million. The key here is that the turnover is monitored for the whole group, not just for the Czech entity. This means that even a relatively small Czech subsidiary may become subject to this obligation if it is part of a large foreign group. The EUR 750 million threshold is in line with OECD standards for large multinational groups and significantly lower than the requirement for standalone Czech companies.
For both groups, the financial threshold is tested for two consecutive periods, and the obligation to prepare and disclose the report only arises for the second period in which the threshold is exceeded. Where the accounting period of the ultimate parent company is a calendar year, the first year to which the obligation applies is 2025. The last day by which the 2025 report must be disclosed is therefore 31 December 2026.
What obligations do Czech companies have?
There are two basic obligations - to prepare a report on income tax and to make the report available. The obligation to prepare the report will primarily lie with the ultimate parent companies and standalone companies meeting the above threshold. In the Czech Republic, the number of companies involved is in the low tens.
The obligation to disclose the report is more complex as it depends on the structure of the group and the location of the parent company. Companies in groups with a parent company in the Czech Republic, in the EU, or outside the EU will have different obligations. If a Czech company has the obligation to disclose the report, it must publish it in the Czech public register and at the same time provide a link to the report on its website.
Although the report format is uniform throughout the European Union, the disclosure method and the language vary significantly from country to country. This may lead to a situation where a Czech company is forced to follow not only domestic requirements but also the rules of the countries where the corporate group operates.
Penalties – what are the consequences of non-compliance?
Czech companies that underestimate their obligations face substantial fines of up to 3% of their net asset value. For consolidating entities, the penalty can be very high, as these 3% will be calculated on the consolidated net assets.
How to prepare?
A company’s preparation will depend on its position in the group. Czech ultimate parent companies will face the most challenging task, as they must analyse the entire group and map all entities and jurisdictions, set up systems to collect data across the group, create a uniform reporting process, and ensure proper disclosure in all countries of operation.
Czech subsidiaries will have a simpler but no less important task. They must make sure that their parent company prepares the report and that Czech disclosure requirements are met, all the while coordinating with the parent company to deliver the necessary data on time.
In addition to fulfilling formal obligations, it will be important to assess the reputational impact of the disclosed data. Companies should be clear about the image the disclosed figures will create, how the public will interpret them and what questions the media may raise. From a competitive perspective, it is important to consider what information competitors will gain, how to minimise any negative impact and, where appropriate, how to use transparency as a competitive advantage.
With deadline approaching, preparations need to start now
The new public country-by-country reporting rules will bring both greater transparency and greater pressure on Czech companies and multinational groups. They can mean a significant administrative burden but also an opportunity to demonstrate a responsible approach to tax compliance.
The deadline for the first-time disclosure is inexorably approaching. Companies that start preparing now will have a significant advantage over those that wait. Hesitation can not only be costly in terms of penalties but also damaging to reputation.
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