Česká implementace Pilíře 2 – správní aspekty

Czech implementation of Pillar 2 - administrative aspects

Last week, the draft Czech implementation of Pillar 2 rules was published, i.e. the draft law on top-up taxes for the purpose of ensuring a minimum level of taxation of large multinational and national groups.

Below are selected observations on the related administrative aspects.

• The taxpayer of the top-up tax (TT) - both domestic top-up tax and top-up tax based on Income Inclusion Rule (IIR TT) - is a Czech constituent entity and a foreign constituent entity with a Czech permanent establishment.
• The Specialised Tax Office is the administrator of the TT.
• A taxable person liable for TT with a registered office outside the EU/EEA is obliged to choose a representative agent that has a registered office in an EU Member State.
• There will be an exclusively electronic form of filing (via the tax portal).
• The application for registration for TT will have to be submitted within 15 days from the date on which the entity became a TT taxpayer (the MoF has already indicated that this deadline is likely to be extended).
• Domestic TT returns will be filed within 10 months, while IIR TT returns will be filed within 22 months (deadlines cannot be extended).
• The information sheet for the domestic TT will be filed within the deadline for the domestic DD return (i.e. 10 months) - the deadline cannot be extended.
• The information return for IIR TT will be submitted within 15 months (18 months for the first period) - again the deadline cannot be extended. This return may be filed by the ultimate parent (or designated) entity in the qualifying state if the content is identical and filed within the same deadline (but this will need to be disclosed).
• The details of the information return will be set out in the implementing regulations.
• The self-measurement regime will apply.
• The statute of limitations is different from the general one - generally 4 periods after the due date (the statute of limitations does not run during the related court proceedings).
• A supplemental information return for a lower TT cannot be filed in the last year of the statute of limitations.
• Non-monetary penalty will be applied up to CZK 1.5 million.

It may seem that there is enough time to prepare. After all, the first return will not be filed until October 2025. Nevertheless, we recommend making an initial assessment of the rules' outcome now and thinking through, for example, the operation of various elections, the effect of the transitional provisions themselves, the regime of material items that may affect the effective tax rate, etc. We then recommend implementing a process to calculate the top-up tax and think about e.g. where to get the data, how to verify the collected data, how to calculate the effective tax rate, etc. In many cases, it may be that the first figures will need to be included in the first quarter 2024 financial statements (i.e. April 2024).

If you have any questions, please contact the author of this article or the EY tax team you regularly work with.

Author:

Karel Hronek