First filing for top-up taxes is coming
First filing for top-up taxes is coming
The rules of the so-called top-up taxes (Pillar 2) represent one of the most significant changes in the field of international taxation for multinational groups in recent years. The Czech Republic has reflected these rules in its legislation, and many Czech companies are thus creating new reporting and payment obligations. The first submissions for 2024 are expected at the end of June this year, so we definitely do not recommend postponing the preparation. Practical experience shows that most of the time is taken by working with data and coordination within the group.
The rules apply to groups with consolidated revenues of at least EUR 750 million. If your Czech company is part of such a group, you are very likely to be subject to top-up taxes – regardless of whether the top parent company is based in the Czech Republic or abroad.
Even the Czech subsidiary of a foreign group is thus obliged to file its own reports in the Czech Republic and, if necessary, to pay a top-up tax there.
For 2024, Czech companies will file:
If the group uses a different accounting period than the calendar year, the deadlines will be based on the consolidated period of the group.
Let's imagine a Czech manufacturing company that belongs to an international group based in Germany. The group prepares a calculation of the effective tax rate at the central level and concludes that no top-up tax will be incurred due to the application of the safe harbor.
However, Czech society will not receive a detailed explanation of the methodology or a breakdown of the data used. At the same time, they must submit their own information overview in the Czech Republic. If it only adopts the conclusion of the parent company without control, it risks that its submission will not fully comply with Czech requirements.
In practice, it may then happen that just before filing, documents will be searched for, profit adjustments will be recalculated and it may be re-evaluated whether it will actually be possible to use the safe harbour from the point of view of the Czech regulation.
1. Data is not prepared in the required quality
The calculation of the effective tax rate requires detailed information about the accounting result, included taxes and adjustments to the so-called qualified profit or loss. It may happen that:
Without quality inputs, the whole process is unnecessarily complicated.
2. Group communication does not work smoothly
A Czech company often waits for documents or instructions from the parent company, and the next steps depend on information from abroad. If the group does not clarify responsibilities and timelines in advance, last-minute pressure arises.
3. States implement the rules differently
Not all jurisdictions have introduced rules at the same time and in the same form. Therefore, the group interpretation of safe harbours or transitional rules may not fully correspond to the Czech legislation. Czech society should verify that the global approach really covers local requirements.
4. There is no (yet) automatic exchange of information
Unlike country-by-country reporting, there is not yet a fully automatic exchange of information for the purposes of matching taxes. Therefore, a Czech company cannot rely on the fact that the filing of another company in the group will be automatically shared with the Czech tax administration. All the more emphasis needs to be placed on local control and documentation.
The statutory body of the Czech company is responsible for the correctness and timeliness of the submission. Even if the group prepares the calculations centrally, the final submission to the Czech tax administration remains the responsibility of the specific Czech company.
The CFO or executive should therefore actively verify that:
How to Meet Your Obligations
If your company is affected by top-up taxes, start by clarifying how your top parent company handles this agenda.
The GloBE Information Return is usually prepared centrally by the group and used for multiple jurisdictions. Therefore, we recommend contacting the company in the group that processes the global overview as soon as possible and verify that it contains all the information required by Czech legislation.
Then focus on the data for the Czech Republic. In particular, verify:
Based on this verification, you can decide whether the outputs of the parent company will be sufficient for Czech obligations, or whether it will be necessary to supplement local calculations or modify the presented data.
If the highest parent company is based in the Czech Republic, the situation is even more challenging. As a rule, the Czech parent company coordinates the calculation at the global level and may be responsible for the application of the IIR rule. This requires detailed knowledge of foreign rules, strong coordination across the group and high-quality technological support.
Top-up taxes are not just another form. They require systematic work with data, open communication in the group and the active involvement of the company's management.
We recommend that you start preparing early, clarify your company's role in the group and verify that the global approach also meets Czech requirements. We will be happy to go through your specific situation with you and help set up a procedure that is understandable, practical and proportionate to the scope of your group.
Who is affected by the Czech regulation
The rules apply to groups with consolidated revenues of at least EUR 750 million. If your Czech company is part of such a group, you are very likely to be subject to top-up taxes – regardless of whether the top parent company is based in the Czech Republic or abroad. Even the Czech subsidiary of a foreign group is thus obliged to file its own reports in the Czech Republic and, if necessary, to pay a top-up tax there.
What obligations arise and on what dates
For 2024, Czech companies will file:
- until 30.6.2026 an information sheet on the allocated top-up tax and an information sheet on the Czech top-up tax (or their notification)
- until 31.10.2026 the tax return for the attributable top-up tax and the tax return for the Czech top-up tax
If the group uses a different accounting period than the calendar year, the deadlines will be based on the consolidated period of the group.
Practical example from practice
Let's imagine a Czech manufacturing company that belongs to an international group based in Germany. The group prepares a calculation of the effective tax rate at the central level and concludes that no top-up tax will be incurred due to the application of the safe harbor. However, Czech society will not receive a detailed explanation of the methodology or a breakdown of the data used. At the same time, they must submit their own information overview in the Czech Republic. If it only adopts the conclusion of the parent company without control, it risks that its submission will not fully comply with Czech requirements.
In practice, it may then happen that just before filing, documents will be searched for, profit adjustments will be recalculated and it may be re-evaluated whether it will actually be possible to use the safe harbour from the point of view of the Czech regulation.
What problems can we expect
1. Data is not prepared in the required quality The calculation of the effective tax rate requires detailed information about the accounting result, included taxes and adjustments to the so-called qualified profit or loss. It may happen that:
- Data is not available in the required structure
- Accounting and tax teams use different approaches
- The local company does not have an overview of the group methodology
Without quality inputs, the whole process is unnecessarily complicated.
2. Group communication does not work smoothly
A Czech company often waits for documents or instructions from the parent company, and the next steps depend on information from abroad. If the group does not clarify responsibilities and timelines in advance, last-minute pressure arises.
3. States implement the rules differently
Not all jurisdictions have introduced rules at the same time and in the same form. Therefore, the group interpretation of safe harbours or transitional rules may not fully correspond to the Czech legislation. Czech society should verify that the global approach really covers local requirements.
4. There is no (yet) automatic exchange of information
Unlike country-by-country reporting, there is not yet a fully automatic exchange of information for the purposes of matching taxes. Therefore, a Czech company cannot rely on the fact that the filing of another company in the group will be automatically shared with the Czech tax administration. All the more emphasis needs to be placed on local control and documentation.
Liability of the company's management
The statutory body of the Czech company is responsible for the correctness and timeliness of the submission. Even if the group prepares the calculations centrally, the final submission to the Czech tax administration remains the responsibility of the specific Czech company. The CFO or executive should therefore actively verify that:
- understands the methodology used
- has enough information about the group calculation
- the submission is based on verified and defensible data
How to Meet Your Obligations
If your company is affected by top-up taxes, start by clarifying how your top parent company handles this agenda.
The GloBE Information Return is usually prepared centrally by the group and used for multiple jurisdictions. Therefore, we recommend contacting the company in the group that processes the global overview as soon as possible and verify that it contains all the information required by Czech legislation.
Then focus on the data for the Czech Republic. In particular, verify:
- the amount of qualifying profit or loss
- the amount of taxes included
- modifications made and use of safe harbors
Based on this verification, you can decide whether the outputs of the parent company will be sufficient for Czech obligations, or whether it will be necessary to supplement local calculations or modify the presented data.
Specific situation of groups with the highest parent company in the Czech Republic
If the highest parent company is based in the Czech Republic, the situation is even more challenging. As a rule, the Czech parent company coordinates the calculation at the global level and may be responsible for the application of the IIR rule. This requires detailed knowledge of foreign rules, strong coordination across the group and high-quality technological support.
Conclusion
Top-up taxes are not just another form. They require systematic work with data, open communication in the group and the active involvement of the company's management. We recommend that you start preparing early, clarify your company's role in the group and verify that the global approach also meets Czech requirements. We will be happy to go through your specific situation with you and help set up a procedure that is understandable, practical and proportionate to the scope of your group.