The Supreme Administrative Court has again addressed the issue of the tax deductibility of management services. In August it decided in another case (9 Afs 42/2023 - 46, following the judgment of the Regional Court in Brno No. 30 Af 57/2021 -76) that they are not tax deductible.
We have already warned you several times about this issue, which is the focus of the tax administration during tax audits and quite easily leads to tax evasion.
Unfortunately, companies are not able to sustain their burden of proof in tax audits. They cannot satisfactorily prove what specific services were involved and cannot justify the extent and amount of the costs of these management services. Of course, the time lag in tracking down documents from previous years also plays a significant role.
In the above case, it is interesting to consider the costs of the activities of the foreign CEO of the company, which were part of the invoiced remuneration for management services.
The company's CEO was also an employee of the parent company that provided the management services. In the tax administrator's view, this expense cannot be tax deductible because the work of the CEO cannot, by its nature, be part of the management services.
If this situation applies to you, we recommend that you examine this issue thoroughly to avoid potential tax avoidance.