Top-up taxes: first-time filing deadline is approaching. Are you ready?
In the coming months, Czech companies that are part of large multinational groups will be required to prepare and submit for the first time their top up tax returns and related information returns for the 2024 reporting period.
As the Act on Top-Up Taxes introduced two types of tax – the Czech top-up tax and the allocated top-up tax – companies are required to fulfil their obligations in respect of both. In practice, this means they must file two tax returns. In the case of information returns, there is a certain exemption from this obligation, the application of which is discussed in more detail below.
Information returns
Information returns for the Czech and allocated top-up tax for the first period must be filed within 18 months of the end of the first reporting period (or within 15 months of the end of subsequent reporting periods). The deadline for filing the first-time information returns (for the reporting period corresponding to the calendar year 2024) is therefore 1 July 2026.
The obligation to file the Czech and allocated top-up tax information return in the Czech Republic may be deemed to have been fulfilled if:
- another company within the group has filed a GloBe Information Return (GIR) in another country that exchanges GIR information with the Czech Republic,
- the Czech company has notified the Czech tax authority of this fact and
- this information return will contain all the details on top-up taxes required by the Czech law.
According to preliminary information from the financial administration, this currently applies only to situations where another company within the group has filed a GloBe Information Return in another European Union member state even though the Czech Republic has not yet implemented the relevant Directive on the Exchange of Information (known as DAC 9). Once the Czech Republic accedes to the multilateral agreement on the exchange of GloBE information, it will be possible to apply this simplification to GloBe Information Returns filed in countries that have also acceded to this agreement.
Therefore, if a GIR for the 2024 reporting period is filed outside the EU, or is not filed at all, it will be necessary for a Czech company to file a separate information return in the Czech Republic for the allocated top-up tax. However, this information return should contain only information relating to the Czech jurisdiction, i.e. information that the Czech Republic would obtain through international exchange of information. In addition, the Czech company will also have to notify the tax authority that the obligation to file an information return for Czech top-up tax has been fulfilled by filing a separate information return for the allocated top-up tax.
In practice, therefore, every Czech company subject to top-up taxes will likely have to file either two GIR notifications or one information return and one GIR notification. In this context, we would like to point out that a regulation governing filings using prescribed forms relating to top-up taxes has not yet been approved, and therefore it is not entirely clear at present what exactly the related guidelines for this regulation will ultimately contain.
Tax returns
Czech top-up tax and allocated top-up tax returns must be filed within 22 months of the end of the reporting period. The deadline for filing the first-time tax returns (for the reporting period corresponding to the calendar year 2024) is set for 2 November 2026. Tax returns for both taxes must always be filed, even if the top-up tax is zero – that is, where the effective tax rate for the group in the relevant jurisdiction either exceeds 15 per cent or where the conditions of one of the safe harbours have been met.
Under the Top-Up Taxes Act, if a tax return is not filed within the prescribed time limit, the tax liability is deemed to be zero, and no penalties for late filing apply. However, even though a company that fails to file such a “zero” tax return faces no penalties, it may be recorded by the tax authority as an entity that is not properly fulfilling its tax obligations. This may influence the tax authority’s approach to the taxpayer in the future: for example, when assessing their application for the waiver of default interest. From a purely practical perspective, we recommend always filing even zero tax returns.
Should you be interested, we would be happy to assist you with the preparation of information returns or notifications of GIR submissions, and top-up tax returns. Please do not hesitate to contact us.