What Lies Ahead in the Area of Transfer Pricing

• Focusing on transfer pricing as part of the control of profit shifting from the Czech Republic.
• Introducing the obligation to have pre-declared documentation on how the transfer price is determined.
• The introduction of a special task force (digital tax cobra), utilising advanced analytical tools and artificial intelligence to detect fictitious transactions and illegal tax optimisation.

We regularly address the topic of transfer pricing in our newsletter, and our experience shows that even now, this is not an area that is left behind. Conversely, it is one of the primary targets of tax audits in the context of corporate income tax (the rate of which the incoming government plans to reduce). In addition to introducing a legal requirement for the existence of documentation itself, the above changes may also mean that this area will be even more prioritised in tax audits and other proceedings, or that financial authority will take a more aggressive approach when assessing compliance with the arm's length principle.

We therefore strongly advise you to pay attention to transfer pricing issues within your company and ensure, among other things, that you have transfer pricing documentation available that is complies with the requirements of the Czech tax administration and will stand up to scrutiny in the event of a tax audit.

Author:

Ivo Žilka, Tax Department Manager