The Czech Republic, as a member of the European Union and a participant in the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, has implemented the Country-by-Country Reporting (CbCR) obligations under BEPS Action 13. These regulations are designed to provide tax authorities with a comprehensive view of the global allocation of income, taxes, and business activities within multinational enterprises (MNEs). This guide provides Chief Financial Officers (CFOs) and financial executives in the Czech Republic with an overview of the CbCR requirements, including who is affected, reporting procedures, penalties for non-compliance, and relevant resources.

Applicability of CbCR in the Czech Republic

Criteria for Reporting:

• CbCR applies to multinational enterprise (MNE) groups with consolidated group revenue of €750 million or more in the preceding fiscal year.
• The obligation to file the CbC report falls on the ultimate parent entity of the MNE group if it is tax resident in the Czech Republic.
• If the parent company is located outside the Czech Republic in a jurisdiction that does not require CbCR or does not exchange reports, a surrogate parent entity within the Czech Republic may need to file the report.

Relevant Legislation:

• The Czech Republic implemented CbCR as part of its tax legislation in line with Council Directive (EU) 2016/881, which amended Directive 2011/16/EU. The key provisions are included in the Income Tax Act and Act No. 164/2013 Coll. on International Cooperation in Tax Administration.
• More details can be found on the Czech Ministry of Finance website.

Reporting Requirements

Information to be Reported:

• The CbC report must include key financial data for each jurisdiction in which the MNE group operates, including revenue, profit (or loss) before tax, income taxes paid and accrued, capital, accumulated earnings, number of employees, and tangible assets.
• The report must also list all constituent entities within the MNE group, identifying the jurisdiction of tax residence and primary business activities of each entity.

Form and Submission:

• The CbC report must be submitted in XML format, following the OECD’s standard electronic format for CbCR submissions.
• The report must be filed electronically through the Czech Financial Administration’s ePodání system.
  • Detailed submission instructions can be found on the Czech Tax Administration’s website.

Filing Deadlines

• The CbC report must be submitted within 12 months after the end of the fiscal year. For example, if the MNE group’s fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.
• MNE entities in the Czech Republic that are not responsible for filing the CbC report must notify the tax authorities about which entity will submit the report and where it will be filed.

Penalties for Non-Compliance

Penalties:

• Non-compliance with CbCR obligations, including failing to submit the report, providing incomplete or inaccurate information, or failing to notify authorities about the reporting entity, can result in significant penalties.
• The Czech Republic imposes fines up to CZK 3,000,000 (approximately €120,000) for non-compliance, depending on the nature and severity of the violation.

Defences:

• MNEs may be able to avoid penalties if they can demonstrate that the failure to comply was due to reasonable cause, such as technical difficulties or other unforeseen circumstances.

Confidentiality and Use of Information

Data Protection:

• The Czech Republic adheres to the OECD’s confidentiality standards for CbCR. The information provided in the CbC reports is shared only with tax authorities in jurisdictions with which the Czech Republic has a competent authority agreement for the automatic exchange of information.
• The data collected through CbCR is used exclusively for assessing transfer pricing risks and detecting base erosion and profit shifting practices. It is not made publicly available.

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