- The amendment to the Accounting Act, which was adopted as part of the so-called consolidation package, transposed the EU directive introducing Public Country-by-Country Reporting (PCbCR) into Czech law. In general, the Directive introduces an obligation for multinational enterprise groups with consolidated revenues of at least EUR 750 million to prepare and publish a report containing information on the amount of income taxes and related economic information on individual group companies.
- As the name implies, this is partly an analogy to the “classic” Country-by-Country Reporting (CbCR), as was mentioned in our previous newsletters. In fact, however, this is not a simply “publication” of the CbCR, as the name might suggest, but a completely new but very similar information obligation.
- The Accounting Act implements the PCbCR in the so-called income tax report. This is subsequently divided into two versions, which are (i) a consolidated income tax report and (ii) an income tax report. The related amendment to the Accounting Act has already come into force, and companies are thus obliged to prepare and publish income tax reports for the period starting after 22 June 2024 included.
- The consolidated income tax report will primarily be prepared and disclosed by the company, which is the highest consolidating entity, but only if its consolidated unit does not include only Czech companies that have no foreign branches (e.g. a spin-off plant) or permanent establishments. In other words, the cross-border element of the consolidated unit is an important factor in the obligation to prepare a consolidated income tax report. Furthermore, the condition of reaching an annual consolidated net turnover of CZK 19 billion (EUR 750 million) in two following accounting periods must be met.
- The obligation to prepare and disclose a consolidated income tax report may also apply to (i) a company that is a large or medium-sized accounting entity, or (ii) a branch in the Czech Republic that reaches an annual net turnover of CZK 200 million (EUR 8 million) in two following accounting periods. One of the conditions for this situation, however, is that the ultimate consolidating entity is a company established under a law other than that of EU countries and whose consolidated revenues amounted to EUR 750 million in two consecutive fiscal years.
- The Income Tax Report will be prepared and made available by a company that is an independent accounting entity, has a foreign branch or a permanent establishment, and at the same time its total annual net turnover reaches CZK 19 billion (EUR 750 million) in two consecutive accounting periods. The obligation may also apply to a branch in the Czech Republic whose founder is an independent accounting entity established under a law other than that of EU countries and whose revenues amounted to EUR 750 million in two consecutive fiscal periods. Even in this situation, the minimum annual net turnover of the branch is set at CZK 200 million (EUR 8 million) in two consecutive accounting periods.
- Income tax reports should primarily contain information on the ultimate consolidating entity and all controlled entities included in the consolidated financial statements (this applies to the consolidated version). Other published data also include company information, such as its name, a brief description of its activities, the accounting period concerned, the number of employees and other economic and financial information, for example the amount of income tax paid.
- The format of income tax reports should follow a common template based on European Union regulations, in electronic form. The template itself has not yet been published. Further, the Accounting Act states that income tax reports may be prepared by following the instructions for completing the CbCR. This must be mentioned in the Income Tax Report.
- Companies required to disclose income tax reports must do so within 12 months of the reporting date. The income tax reports will be made available in a way similar to the publication of the financial statements, i.e. by depositing them in the Collection of Documents of the Czech Republic, with the company providing a link to the Collection of Documents of the Czech Republic on its website.
Please do not hesitate to contact our experts if you are unsure as to whether this obligation applies to your company.
Author: Veronika Kdolská, David Hlava
