Will measures against the transfer of profits tighten?

Jaroslava Karafiátová Jaroslava Karafiátová

The Ministry of Finance following the international initiative and the draft of the EU directive against the evasion of direct taxes has prepared a working paper on the possible introduction of selected measures in the Czech Republic. The material briefly informs one about the respective areas of the initiative, which is aimed at primarily preventing the transfer of profits to other, more favourable tax states.

The basic issues to which attention will be given are: schemes that can lead to double non-taxation, taxation of controlled foreign companies (CFC), the deductibility of interest on loans and the restrictions of the achieved operating profit and avoiding the creation of a permanent establishment.

Furthermore, the European Commission is considering mandatory reporting of tax optimisation schemes as instruments used for tax optimisation. Also, the proposal of exit taxation is worth mentioning, i.e. during a change of tax residence, when such a change would be considered as a sale and would be subject to tax.

There is now no doubt that the directive will be approved by the EU member states, and it is therefore necessary to count with its implementation into Czech legislation. With a quick approval process, it may be used in the Czech Republic from 2017.

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