Natalia Pryhoda
In 2024, we commented on a series of Czech tax case law, including one1 dealing with a decision made by a company's management to change the product portfolio and the subsequent request made by the tax authorities for compensation of costs related with the change in the production program from the parent entity.
Noteworthy are also numerous transfer pricing focused tax audits aiming on potential additional tax assessments based on business and corporate restructurings (i.e., the transfer of functions or changes in the functional-risk profile of the Czech taxpayer).
Therefore, a prudent approach is recommended if significant changes occur between related parties in terms of contractual terms, the transfer of assets, processes and activities, contracts, or employees. Ideally, each case at hand should be analyzed, and substantive arguments prepared to fend off any potential scrutiny made by the tax authority presuming that such a change in the set-up between related parties triggers an "exit charge" (i.e., compensation for the Czech taxpayer).
We can anticipate that 2025 will bring an increasing trend in TP focused tax audits and potential additional tax assessments related to the concept of the so-called "exit charge."
For more details or a consultation if appropriate, please contact your PwC team or the authors of this article.
[1] See Regional Court decision 15 Af 10/2023-76 released on 10 July 2024
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