The top-up tax in more detail

26. 6. 2023
The top-up tax in more detail

As we informed you earlier this week, on May 15, 2023, the Ministry of Finance submitted a draft (bill) of the new law on top-up taxes for external comments. The bill itself contains 138 sections and 13 parts on 77 pages.

In part one of the Act we can find the definition of terms such as what is the top-up tax, including its division into two variants - the assigned top-up tax and the national domestic top-up tax), description of the rules for assigning the top-up tax, the definition of entities and groups. Part 4 defines terms such as consolidated financial statements, refundable income tax and others.

Part two of the Act deals with the taxpayer and the tax period itself.

According to this bill, the taxpayer of the assigned top-up tax should be

a)         a Czech member entity that

1.         is not a permanent establishment and

2.         is part of a large-scale domestic group or a large-scale multinational group, and

b)         the main entity of which the permanent establishment is part, if the this establishment is

1.         a Czech member entity and

2.         part of a large-scale domestic group or a large-scale multinational group.

The tax period for which the assigned top-up tax should be

a)         the fiscal period in respect of which the ultimate parent entity of the multinational group or domestic group prepares its consolidated financial statements, or

b)         the calendar year if the ultimate parent entity does not prepare consolidated financial statements.

Part three focuses on the domestic top-up tax.

In part four we find the rules for the assigned top-up tax.

Part five contains definitions of terms for determining qualified gain or loss and included taxes or allocations of qualified gain or loss,

Part six sets out the findings of the assigned top-up tax as well as the exceptions to the obligation to calculate the top-up tax.

Part seven deals with the special regime for transformations and holding arrangements, and part eight with the tax neutrality or transparency regime and the distributed profits tax.

In part nine we read about special provisions, from which we find out, for example, that the Specialized Tax Authority is the administrator of the top-up tax, that form-based submissions can only be made electronically via the public administration information system managed for this purpose by the Financial Administration of the Czech Republic, and everything about tax registration from the filing of the application, the tax return to the determination of the tax and the deadlines for determining and paying the tax. The final issue discussed in part nine is the amount of the penalty for non-compliance with or breach of obligation. The tax administrator may impose a penalty of up to CZK 1,500,000. The self-assessment regime applies to the top-up tax..

Part ten contains special provisions for the determination and administration of the top-up tax in the initial periods.  Part eleven contains the common provisions and Part twelve the transitional and final provisions. Part thirteen includes only the effective date of this Act, which would be December 31, 2023.

The website of the Chamber of Commerce of the Czech Republic includes the last deadline for submitting comments on this bill until June 5, 2023. We will inform you about the latest changes on our website

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