Tax Newsletter - Archive
Forvis Mazars Tax View - archive of tax articles
Cross-border Remote Work and the Creation of a Permanent Establishment
In November 2025, the OECD published a long-anticipated update to the Commentary on Article 5 of the OECD Model Tax Convention on Income and on Capital (the “Commentary”). The update, among other things, significantly affects the assessment of the existence of a permanent establishment in connection with work performed from home (so-called home office arrangements) in another contracting state and responds to the increasing prevalence of flexible working arrangements in the international environment. For the first time, it provides more specific guidance intended to contribute to a higher level of legal certainty in the application of double taxation treaties.
Penalties for Failure to Notify Tax-Exempt Income in the Case Law of the Supreme Administrative Court
Tax-exempt income does not mean that no tax-related obligations arise in connection with it. Where an individual receives tax-exempt income exceeding CZK 5,000,000 in aggregate, an obligation arises under Section 38v of the Czech Income Taxes Act to notify such income to the tax authority. The notification must be submitted no later than till the end of the deadline for filing the personal income tax return for the tax period in which the income was received, regardless of whether the taxpayer is otherwise required to file a tax return.
Key Changes in Old-Age Pensions as of 2026
In 2024, a pension reform was adopted, with its individual measures being gradually implemented between 2025 and 2027. The primary objective of the legislative changes is to strengthen the financial sustainability of the pension system. At the same time, the reform was designed to preserve continuity with the existing legal framework and to avoid significant structural interventions. The reform is therefore primarily based on adjustments to specific system parameters. Below we provide an overview of the most significant changes that have already entered into force and whose effects will become more pronounced, in particular for insured persons and applicants for an old-age pension as of 1 January 2026, together with an outline of measures planned for 2027.
Changes in the Categorization of Accounting Entities and New Statutory Audit Thresholds
The recent amendment to Act No. 563/1991 Coll., on accounting introduces substantial changes intended primarily to reduce the administrative burden on small and medium-sized enterprises. The legislative initiative was largely driven by the significant inflationary pressures observed in 2021 and 2022, which resulted in nominal increases in companies’ revenues and asset values without a corresponding proportional expansion in their actual economic scale or operational activity. Consequently, many entities were formally reclassified into higher statutory categories and became subject to more stringent regulatory requirements, despite the absence of genuine structural growth.
Is the Reimbursement of Costs for Legal Representation by an Attorney Subject to VAT?
In its recent judgment in case C 744/23 Zlakov, the Court of Justice of the European Union stated that the reimbursement of legal costs by the opposing party, in a situation where a party to the proceedings is represented pro bono by an attorney, constitutes a taxable transaction for VAT purposes.
Information of the GFD on the Application of VAT to Real Estate
The General Financial Directorate (hereinafter as ‘the GFD’) published in January 2026 the long awaited Information on the application of VAT to real estate as of 1 July 2025 (hereinafter as ‘the Information’), which reflects legislative and interpretative changes in VAT rules effective from 1 July 2025. Below, we provide our comments on selected changes.
What Lies Ahead in the Area of Transfer Pricing
In early November, the newly elected government unveiled a draft policy statement, setting out its objectives for the upcoming year. One of these priorities, aimed at ensuring healthy finances, should include measures to reduce the grey economy and streamline tax collection. Alongside the widely debated reintroduction of EET 2.0, the following measures should be implemented:
Court of Justice Ruling on the Application of VAT to Factoring Fees
In its recent decision C-232/24 Kosmiro, the Court of Justice of the European Union (hereinafter as ‘the Court of Justice’) ruled on the VAT treatment of factoring fees. This is an important decision that has an impact on current practice, where remuneration for factoring services is, at least in part, commonly considered to be interest on financing provided, i.e. a financial service exempt from VAT.
When are Transfer Prices Subject to VAT?
The Court of Justice of the European Union (hereinafter as ‘the Court of Justice’) recently ruled on the application of VAT in the case of transfer prices between related parties in its decision C-726/23 Arcomet Towercranes. However, the decision has brought rather uncertainty to the area of VAT on transfer prices.
Division by Spin-Off – Clarification of Tax Implications
By an amendment to the Act on Transformations of Commercial Companies and Cooperatives, a new form of transformation of business corporations – division by spin-off – was introduced into Czech law effective from 19 July 2024.