What is Act No. 416 / 2023 Coll.?

Act No. 416 / 2023 Coll., on comparative taxes for large multinational groups and large national groups — Law on top-up taxes for large multinational groups and large national groups.

When it became Act No. 416 / 2023 Coll. effectiveness?

Act No. 416 / 2023 Coll. became effective 31.12.2023.

Is Act No. 416 / 2023 Coll. still valid?

Yes, Act No. 416 / 2023 Coll. is still valid and effective.

Act No. 416 / 2023 Coll.

Law on top-up taxes for large multinational groups and large national groups

Valid Law Effective from 31.12.2023

ČÁST PRVNÍ HLAVA I § 1 § 2 HLAVA II § 3 § 4 § 5 § 6 § 7 § 8 § 9 § 10 § 11 § 12 § 13 § 14 § 15 § 16 § 17 § 18 § 19 § 20 HLAVA III § 21 § 22 § 23 § 24 § 25 HLAVA IV § 26 § 27 § 28 § 29 § 30 HLAVA V § 32 § 33 § 34 HLAVA VI § 35 § 36 § 37 § 37a ČÁST DRUHÁ HLAVA I Díl 1 § 38 § 39 § 40 Díl 2 § 41 § 42 § 43 § 44 § 45 § 46 § 47 § 48 Díl 3 § 49 § 50 § 51 § 52 § 53 § 54 § 54a § 54b Díl 4 § 55 § 56 HLAVA II Díl 1 § 57 § 58 Díl 2 § 59 § 60 § 61 § 62 § 63 Díl 3 § 64 § 65 Díl 4 § 66 § 67 § 68 HLAVA III Díl 1 § 69 § 70 Díl 2 § 71 § 72 § 73 § 74 § 75 § 76 § 76a HLAVA IV Díl 1 § 77 § 78 Díl 2 Oddíl 1 § 79 § 80 Oddíl 2 § 81 § 82 § 83 § 84 § 85 § 86 Oddíl 3 § 87 § 88 Oddíl 4 § 89 § 90 Oddíl 5 Pododdíl 1 § 91 § 92 Pododdíl 2 § 92a Pododdíl 3 § 92b § 92c Pododdíl 4 § 92d § 92e § 92f § 92g § 92h § 92i § 92j § 92k § 92l Pododdíl 5 § 92m HLAVA V Díl 1 Oddíl 1 § 93 § 94 § 95 Oddíl 2 § 96 § 97 § 98 Díl 2 § 99 § 100 § 101 § 102 § 103 § 104 § 105 HLAVA VI Díl 1 § 106 § 107 § 108 § 109 Díl 2 § 110 Díl 3 § 111 ČÁST TŘETÍ HLAVA I § 112 § 113 § 114 § 115 § 116 HLAVA II § 117 § 118 § 119 § 120 § 121 § 122 § 123 ČÁST ČTVRTÁ HLAVA I § 125 § 126 § 127 § 128 § 128a HLAVA II § 129 § 129a § 129b § 129c § 130 § 131 § 132 § 133 HLAVA III § 134 § 135 § 136 § 137 HLAVA IV § 138 § 139 HLAVA V § 140 ČÁST PÁTÁ § 141 § 141a § 142 ČÁST ŠESTÁ § 147 § 148 § 149 § 150 § 151 § 151a § 151b ČÁST SEDMÁ § 152

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416

THE LAW

of 30 November 2023

on comparative taxes on large multinational groups and large national groups

Parliament has decided on this law of the Czech Republic:

ČÁST PRVNÍ

INTRODUCTORY PROVISIONS

HLAVA I

BASIC PROVISIONS

§ 1

Subject matter

This law implements the relevant European Union1 regulation and regulates the top-up taxes provided for in the Czech Republic.

§ 2

Global rules against tax base erosion

(1) The provisions of this Act, based on the model rules of the Organisation for Economic Cooperation and Development, are applied in accordance with these model rules and the implementing framework for the model rules of the Organisation for Economic Cooperation and Development, so as not to create unjustified derogations in their application in the Czech Republic against foreign States which have introduced top-up taxes under those model rules.

(2) The concept used in this Act or in the Decree governing forms relating to top-up taxes is relevant under the model rules of the Organisation for Economic Cooperation and Development and their implementation framework to the extent that these documents are interpreted in accordance with European Union law.

(3) The model rules of the Organisation for Economic Cooperation and Development are, for the purposes of top-up taxes, the model rules contained in the document adopted by the Inclusive Framework for a project to avoid erosion of the tax base and profit-making (BOPS) of the Organisation for Economic Cooperation and Development on 14 December 2021, under the name of the tax challenges arising from the digitisation of the economy - the global model rules against erosion of the tax base (Pillar Two), as amended.

(4) The implementation framework for the model rules of the Organisation for Economic Cooperation and Development shall be understood as the explanatory notes and examples contained in the document adopted by the Inclusive Framework for the project to avoid erosion of the tax base and profit-making (BOPS) of the Organisation for Economic Cooperation and Development.

(a) under the heading Tax challenges arising from the digitisation of the economy - a comment on the global model rules against the erosion of the tax base (Pillar Two) of 11 March 2022, or similar document adopted later to replace it,

(b) providing examples of the application of the model rules of the Organisation for Economic Cooperation and Development;

(c) the simplified application of the model rules of the Organisation for Economic Cooperation and Development (safe harbour rules);

(d) amending or supplementing documents referred to in points (a) to (c).

HLAVA II

DEFINITION OF CONSIDERATIONS

§ 3

Complementary duty

(1) The countervailing duty is:

(a) the additional tax allocated;

(b) national top-up tax.

(2) The amount of the top-up tax allocated shall be broken down for the purposes of its determination according to the level at which it is determined.

(a) the group's jurisdictional top-up tax determined at State level; and

(b) a partial top-up tax determined at the level of the member body.

(3) The national top-up tax is:

(a) Czech top-up tax;

(b) the tax provided for in the legal order of another State on the basis of which the profits of the Member States from that State are taxed so as to achieve a certain minimum level of taxation of those profits.

(4) Qualified national top-up tax is a national top-up tax,

(a) which is provided for in the legal order of a State where that State or an integral part thereof do not confer any benefit in respect of that tax;

(b) for which a procedure is laid down for determining the excess profits of Member States from that State, in accordance with the rules for determining the excess profits laid down in:

1. this Act, if these entities are from the Czech Republic,

2. the legal order of another Member State which is equivalent to the rules laid down by that law, where such entities are from another Member State; or

3. model rules of the Organisation for Economic Cooperation and Development, if these entities are from a third State;

(c) for which the procedure on the basis of which excess profits referred to in point (b) are taxed on Member States from that State in accordance with the rules on taxation of excess profits laid down in:

1. this Act, if these entities are from the Czech Republic,

2. the legal order of another Member State which is equivalent to the rules laid down by that law, where such entities are from another Member State; or

3. model rules of the Organisation for Economic Cooperation and Development, where these entities are from a third State; and

(d) which is applied according to:

1. this Act in the case of the Czech Republic,

2. the rules laid down in the legal order of another Member State which are equivalent to those laid down by that law; or

3. model rules of the Organisation for Economic Cooperation and Development for a third State.

§ 4

Rule to include profit

(1) The rule on the inclusion of profits for the purposes of top-up taxes is that the parent entity of a large multinational group or large national group shall calculate and pay its share of the allocated top-up tax in relation to the low-taxed members of that group.

(2) A qualifying rule for the inclusion of profits for the purposes of top-up taxes means a rule for the inclusion of profits

(a) under this Act, where the Czech Republic or an integral part thereof does not confer any advantages in connection with this rule; or

(b) provided for in the legal order of another State where:

1. that State or an integral part thereof does not confer any advantages in connection with this rule;

2. is equivalent to the rule for the inclusion of profits under this law in the case of another Member State or the model rules of the Organisation for Economic Cooperation and Development in the case of a third State; and

3. is applied in accordance with the rules laid down in the legal order of another Member State which are equivalent to the rule for the inclusion of profits under this law or in accordance with the model rules of the Organisation for Economic Cooperation and Development for a third State.

§ 5

Rule for undertaxed profit

(1) The rule on insufficiently taxed profits for the purposes of top-up taxes is the procedure whereby, for a given reporting period, a member entity of a multinational group incurs an additional tax due equivalent to that entity's share of the allocated top-up tax which was not established under the rules on the inclusion of profits in relation to the low-taxed members of that group.

(2) A qualifying rule for undertaxed profits for the purposes of top-up taxes means a rule for undertaxed profits

(a) under this law, if the Czech Republic or its integral part do not confer any advantages in connection with this rule; or

(b) provided for in the legal order of another State where:

1. that State or an integral part thereof does not confer any advantages in connection with this rule;

2. is equivalent to the rule for insufficiently taxed profits under this law in the case of another Member State or the model rules of the Organisation for Economic Cooperation and Development in the case of a third State; and

3. it is applied in accordance with the rules laid down in the legal order of another Member State which are equivalent to the rule for insufficiently taxed profits under this law or in accordance with the model rules of the Organisation for Economic Cooperation and Development for a third State.

§ 6

Basic entities

(1) For the purposes of the top-up taxes:

(a) entity

1. legal person,

2. a unit without a legal personality which compiles separate financial statements,

(b) a member body

1. an entity which is part of a multinational group or national group and is not excluded by an entity;

2. permanent establishment of the main entity, which is part of a multinational group and is not excluded by the entity;

c) Czech member entity member entity from the Czech Republic,

(d) the principal entity which includes in its financial statements the accounting profit or loss of a permanent establishment;

(e) the highest maternal body

1. an entity which holds, directly or indirectly, a control interest in any other entity and in which, directly or indirectly, a control interest is not held by another entity;

2. the main entity referred to in § 8 (1) (a) (2);

(f) a permanent place of business for the performance of activities or an alleged place of activity

1. located in a State where they are treated as a permanent establishment under an international agreement providing for the avoidance of double taxation of income which is carried out where that State taxes the income which can be attributed to it under the provisions of an international agreement similar to Article 7 of the Model Agreement of the Organisation for Economic Cooperation and Development on the avoidance of double taxation of income and property;

2. located in a State which taxes income which can be assigned to such places to carry out activities, in the same way as it taxes the income of its tax residents, if there is no international agreement to prevent double taxation of income being carried out,

3. located in a State which does not have a corporate income tax system in place which would be treated as a permanent establishment if such a system and an international agreement were to be concluded to prevent double taxation of income based on the Model Agreement of the Organisation for Economic Cooperation and Development on the Prevention of Double Taxation of Income and Property, if that State were to have the right to tax income that could be assigned to such sites for the purpose of carrying out their activities under the provisions of such an International Agreement in accordance with Article 7 of the Model Agreement of the Organisation for Economic Cooperation and Development on the Prevention of Double Taxation of Income and Property; or

4. other than those referred to in points 1 to 3, through which an activity is carried out outside the State of which the principal entity is, where the income attributable to that activity is not taxed or exempt in that State,

(g) by the central parent body of the member entity which:

1. holds directly or indirectly a ownership interest in another member entity from the same transnational group or national group; and

2. is not the highest parent entity, partly owned by the parent entity, a permanent establishment, an investment entity or an insurance investment entity;

(h) partly owned by a parent entity,

1. which directly or indirectly holds a ownership interest in another member entity of the same transnational group or national group;

2. holding, directly or indirectly, a share of the capital with which the right to a profit participation is linked, of more than 20% by one or more persons who are not members of a multinational group or national group referred to in point 1; and

3. which is not the highest parent, permanent establishment, investment entity or insurance investment entity,

(i) the parent body

1. the highest parent entity not excluded by the entity,

2. the middle parent entity,

3. a partially owned parent entity,

(j) a member entity owned by a member entity that holds, directly or indirectly, a ownership interest in another member entity of the same transnational group or national group;

(k) a low-tax membership entity

1. member entity of a multinational group or national group from a low-tax State;

2. a member entity which is not of any State which has generated a qualifying profit in the reporting period and which has an effective tax rate lower than the minimum tax rate;

(l) submitting a member body

1. the highest parent entity or designated submitting entity, provided that they have submitted an information summary for the top-up tax;

2. a taxpayer who is obliged to submit an information summary unless submitted by an entity in accordance with point 1;

(m) designated by the submitting entity of a member entity, which is not the highest parent entity and which is appointed by a multinational group or national group, in order to fulfil on their behalf the obligation to provide an information summary according to:

1. this Act in the case of an entity from the Czech Republic,

2. rules equivalent to those laid down for the submission of an information summary to the attributed top-up tax under this Act in the case of an entity from another Member State; or

3. the model rules of the Organisation for Economic Cooperation and Development for an entity from a third State,

(n) a non-significant member entity which is not included in the consolidated financial statements referred to in points (a) to (c) of Article 15 (1) certified by the auditor because of small size, insignificance or because it is owned or controlled for sale.

(2) The entity referred to in paragraph 1 (a) is not a State or an integral part of it exercising public authority.

(3) A member entity whose yield exceeds EUR 50 000 000 is not a minor member entity as referred to in paragraph 1 (n) where the consolidated financial statements are not drawn up in accordance with an acceptable financial reporting framework or an approved financial reporting framework.

(4) A permanent establishment is not a minor member entity unless its main entity is a minor member entity.

(5) The State Fund and any other similar fund managing the State's assets or its integral parts are not the highest parent entity, if they are a public body.

§ 7

Excluded entity

(1) The entity excluded for the purposes of top-up taxes is:

(a) a public body;

(b) international organisations;

(d) the pension fund;

(e) an investment fund which is the highest parent entity;

(f) the entity of investment in immovable property, which is the highest parent entity;

(g) an entity in which at least 95% of its value is owned by one or more of the excluded entities referred to in points (a) to (f) which are not the entities of pension services, directly or through one or more of the excluded entities; and

1. whose sole or almost exclusive purpose is to hold assets or invest funds for the benefit of the excluded entity referred to in points (a) to (f); or

2. which carries out exclusively an activity which complements the activity carried out by the excluded entity under points (a) to (f);

(h) entity,

1. in which at least 85% of its value is owned by one or more of the excluded entities referred to in points (a) to (f) which are not pension services entities, directly or through one or more excluded entities; and

2. whose almost all income constitutes excluded interests in profits or excluded capital gains or losses.

(2) The submitting member entity may make a mid-term decision in relation to a particular entity as referred to in paragraph 1 (g) or (h) concerning the exclusion of the member entity from the excluded entities.

(3) If the submitting member body makes the decisions referred to in paragraph 2, it shall be viewed as not excluded by the entity for the purposes of calculating and managing the top-up taxes.

§ 8

Groups

(1) For the purposes of the top-up taxes:

(a) group

1. a set of entities which are linked by the ownership or control relationship defined in the acceptable financial reporting framework for the preparation of consolidated financial statements by the ultimate parent entity, including entities which are excluded from the consolidated financial statements of the ultimate parent entity solely because of small size, insignificance or because they are owned or controlled for sale;

2. an entity which is not part of the group referred to in point 1 and all permanent establishments of that entity which are from a State other than that entity;

(b) a large group of groups whose consolidated annual income recorded in the consolidated financial statements of the highest parent entity in at least 2 of the 4 reporting periods immediately preceding the reporting period, including the revenues excluded, shall be at least EUR 750 000; where any of those reporting periods is of a different duration than 12 months, the consolidated income threshold shall be adjusted pro rata for each of those reporting periods;

(c) a multinational group of a group comprising at least one entity or permanent establishment other than the highest parent entity;

(d) a national group of groups comprising only members from a single Member State.

(2) In determining the amount of consolidated annual income referred to in paragraph 1 (b):

(a) take into account only the proceeds and profits resulting from the supply or production of goods, the provision of services or other activity which is the subject of the group's normal activities, provided that such income and profits are recognised in accordance with the relevant accounting standard, which may allow the deduction of discounts, refunds and adjustments, but always before deduction of the costs of sales and other operating costs;

(b) they shall aggregate all types of income recognised in the consolidated financial statements where those types of income are shown separately;

1. net profit from realised and unrealised investments; and

2. income or income recognised separately as exceptional or one-off items;

(d) in the case of a financial entity which is not required to report gross amounts in its financial statements from transactions in respect of certain items, it shall be based on items similar to those reported according to accounting standards generally recognised in the State of which the parent entity is the highest,

(e) deducts the positive difference between the total gross losses on investments and the total gross gains on investments where gross investment gains and gross investment losses are shown separately in the consolidated financial statements.

§ 9

Entites with tax transparency element

(1) For the purposes of the top-up taxes:

(a) an entity with an element of tax transparency of an entity which is considered transparent in the State in which it is established, unless it is a tax resident in another State in which its income or profits are subject to the tax included;

(b) a tax-transparent entity with an element of tax transparency which is considered to be transparent in the State of which the entity or the natural person who holds the ownership interest in it is the entity;

(c) the reverse hybrid entity of an entity with an element of tax transparency which is not considered to be transparent in the State of which the entity or the natural person holds a ownership interest in it;

(d) a hybrid entity which is:

1. from the State in which he is liable for income tax; and

2. deemed to be tax-transparent in the State of which the entity or natural person holding the ownership interest is incorporated;

(e) the tax-transparent structure of the organisation of tax-transparent entities through which it is indirectly held a ownership interest in an entity or a permanent establishment which is a member entity.

(2) A member entity which is not a tax resident in any State and is not subject to any of the taxes included or to a qualified national top-up tax on the basis of its registered office, place of management or a similar criterion shall be considered to be an entity with an element of tax transparency and a tax-transparent entity in relation to its income, expenditure, profits or losses, provided that:

(a) all entities or natural persons holding a ownership interest in it are from a State which treats that entity as a transparent entity;

(b) has no place to pursue activities in the State under whose law it is established; and

(3) For the purposes of top-up taxes, the entity shall be treated as being considered transparent in a State where its revenue, expenditure, profits or losses are treated in the same way as if they were incurred by an entity or a natural person who directly holds its ownership in that State, in proportion to their share in that entity. Where only part of the income, expenditure, profits or losses of an entity is treated in that State in that way, it shall be regarded as being tax-transparent only in respect of that part of the income, expenditure, profits or losses of the entity.

§ 10

Investment entity

(1) An investment entity shall be:

(a) investment fund or real estate investment entity;

(b) an entity which, at least 95% of its value, is owned by the entity referred to in (a) directly or indirectly through the organisation of such entities and which operates exclusively or almost exclusively for the purpose of holding assets or investing funds in favour of entities referred to in (a);

(c) an entity which is at least 85% of its value owned by an entity referred to in (a) where almost all of its income comes from a share in a profit or capital gain or loss which is excluded from the calculation of a qualifying profit or loss.

(2) The investment fund is an entity for the purposes of top-up taxes,

(a) the purpose of which is to pool assets from at least two investors, some of which are not linked;

(b) which invests in accordance with a defined investment policy;

(d) which is primarily intended to generate income or profits from investment or to protect against a particular or general event or result;

(e) whose investors are entitled, on the basis of their contribution, to a return on the assets of that entity or of a non-legal entity which is not an entity or to income derived from those assets;

(f) which itself or its administrator is subject to the regulatory requirements laid down for investment funds and the regulation of measures against the legalisation of proceeds from crime and terrorist financing and investor protection in the State in which it was established or managed; and

(g) which is managed by investment fund management experts for investors.

(3) Management of investment fund management experts means activity for the purposes of top-up taxes,

(a) they perform independently of investors;

(b) in which such experts are subject to the regulatory requirements laid down for investment funds and the regulation of the area of action against the legalisation of proceeds from crime and terrorist financing and investor protection and have the necessary knowledge and capabilities necessary for the proper performance of such activities; and

(4) An entity with a large number of investors that are not linked, which holds predominantly real estate and whose income is subject to taxation only at the level of:

(a) this entity; or

(b) its investors, not later than one year after being subject to taxation at the level of the entity referred to in (a), should that entity be subject to taxation.

(5) Interconnected investors as referred to in paragraph 2 (a) and paragraph 4 are investors meeting the conditions laid down in Article 5 (8) of the Model Agreement of the Organisation for Economic Cooperation and Development to avoid double taxation of income and property.

(6) For the purposes of top-up taxes, an insurance investment entity shall mean an entity which would be considered to be an investment fund or an investment entity in real estate if it was not based on obligations arising from an insurance contract or an annuity contract and if it was not wholly owned by an entity which is subject to the regulatory requirements laid down for the insurance sector by the State of that entity.

§ 11

Public entity

(1) A public body means an entity for the purposes of top-up taxes,

(a) which is part of a State or an integral part thereof or the ownership of which is held exclusively by the State or an integral part thereof;

(b) which is not engaged in a business activity and whose main purpose is:

1. the performance of State functions; or

2. the management or investment of the assets of that State or of an integral part thereof through the implementation and holding of investments, asset management and related investment activities for the assets of that State or its integral part;

(c) which is responsible to the State or its integral part for its overall results and shall report thereon annually to that State or its integral part;

(d) whose assets are transferred to or an integral part of the State in the event of the cancellation of that entity; and

(e) the profits of which, if paid, are paid solely to the State or to an integral part of the entity in the event of cancellation, and no part of it is passed on to a private person.

(2) An integral part of a State means, for the purposes of the top-up taxes, in respect of an individual State

(a) the authority or organisational body, regardless of how they are designated;

Zobrazit všechna ustanovení (1941)

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Regulation Information

Citation	Act No. 416 / 2023 Coll., on comparative taxes for large multinational groups and large national groups
Regulation Type	Law
Author	-
Collection	Code of Laws

Date of Promulgation	29.12.2023
Effective from	31.12.2023
Effective until	-
Status	Valid

Legal Areas: Taxes European law Finance

Parliamentary Paper: Paper No. 515

Public Contracts 1

inominátní smlouva, není-li v tomto seznamu zvláštní kód § 1746 odst. 2 NOZ: smlouva o převodu podíl...

Hlavní město Praha Komerční banka, a.s.

4 286 092 139 CZK

21.06.2024

Source: Hlídač státu (CC BY 3.0 CZ)

The regulation text is for informational purposes only.

Act No. 416 / 2023 Coll.

Law on top-up taxes for large multinational groups and large national groups

Contents

ČÁST PRVNÍ

HLAVA I

§ 1

§ 2

HLAVA II

§ 3

§ 4

§ 5

§ 6

§ 7

§ 8

§ 9

§ 10

§ 11

Contents

Comments 0

Regulation Information

Public Contracts 1

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