Prevodni ceny pod drobnohledem ceske financni spravy

Transfer pricing under the scrutiny of the Czech tax authorities

Czech Tax authorities recently published statistics on tax audits focused on compliance with the arm's length rules for negotiating prices between related parties for previous years[1]. We have compared the currently published data with the statistics on tax audits focused on corporate income tax[2] in general.

The comparison shows that the share of tax audits in the area of transfer pricing and the related total additional tax assessment has been increasing significantly since 2014. Whereas in 2014 transfer pricing tax audits  accounted for 5.76% of completed CIT tax audits, by 2021 one in three completed CIT audits related to transfer pricing.

The share of transfer pricing tax audits in total CIT audits shows a high year-on-year variation, but a clear upward trend can also be observed. In 2020, their share of the CIT assessed in tax audits was even close to 70%.

At the same time, the average tax additionally assessed within transfer pricing audits are generally above the average for CIT in general - see chart below.

These figures clearly confirm that the issue of transfer pricing is a significant point of interest for the audit activities of the Czech tax authorities . Moreover, it can be assumed that this trend will continue to strengthen with the increasing use of analytical tools. Taxpayers should therefore clearly pay due attention to this issue as well.

If you have any questions, please do not hesitate to contact the authors of this article or the EY team members with whom you usually work.

Authors:

Jakub Tměj

Petr Sedláček

[1] See Information provided pursuant to Act No. 106/199 Coll., (0031/2023), available HERE.

[2] See published reports on the activities of the Financial Administration of the Czech Republic on the website of the Ministry of Finance of the Czech Republic, available HERE.