Transactions with affiliated entities

Czech Republic: Mandatory disclosure of transactions with affiliated entities as of the 2014 assessment period

A new schedule to the corporate income tax return has been introduced in the Czech Republic for the 2014 assessment period. As a part of their tax return, selected legal entities must now provide further information regarding transactions with affiliated entities, and must do so separately for each affiliated entity. The schedule must be filled in by any legal entity (other than financial institutions) which meets at least one of the following criteria:

– net asset value in excess of CZK 40 million, or
– net turnover in excess of CZK 80 million, or
– average number of staff (converted to full-time employees) of more than 50.

A company that reports a loss in its tax return or that has been awarded investment incentives must fill in the schedule for any affiliated entity with which it engaged in business at any time during the assessment period. In all other cases, it must report merely transactions with affiliated entities whose seat is abroad. Transactions must be broken down by type: provision of services, sale of goods, license fees, etc. The schedule must make it possible to identify the affiliated entities (by name and country of establishment) and provide information on the transaction volume. The tax authorities have thus laid down a methodology which is aimed at identifying transactions and/or entities that represent a transfer pricing risk.

Source: Ministry of Finance of the Czech Republic

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