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Petra Pospíšilová
Partner | Head of Tax • Tax
In 2024, a new tax obligation related to the implementation of global minimum taxation rules (Pillar II) became part of Czech legislation.
The new law applies to groups with consolidated turnover exceeding EUR 750 million, both international and purely Czech, if they reach the specified size. If the tax burden of a group falls below 15% in a given country, the difference – known as the top-up – will be paid.
Its purpose is to limit competition between countries for the most favorable tax regime (the so-called race to the bottom), prevent the transfer of profits to tax havens, and ensure that even the largest companies pay a fair share of taxes where they actually do business. It is a step towards fairer tax competition between countries.
The top-up tax can be applied in the Czech Republic in two forms: either as a domestic tax paid directly by a Czech entity, or as an "assigned tax" collected by the Czech Republic on profits from abroad if the country of origin has not implemented Pillar 2 rules.
The effective tax rate is not calculated according to the classic tax return, but on the basis of international accounting standards – e.g., IFRS or US GAAP. Both current and deferred taxes are included in the calculation. This brings a number of technical and data challenges. For Czech companies, this will mean the need for deeper cooperation with the parent company, unification of data sources, and the introduction of new control mechanisms.
When does the obligation arise and what is it?
- Czech top-up tax: if a Czech group of companies as a whole reports an effective tax rate of less than 15% at the Czech jurisdiction level, only low-taxed Czech companies will pay the tax in the Czech Republic.
- Attributable equalization tax: if another low-taxed entity in the group is based in a country that has not introduced the rules, the obligation may be transferred to the Czech entity.
- Information reports: these must be submitted even if no tax is incurred.
What to watch out for? Ten practical tips and recommendations
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The equalization tax is not an income tax.
It is a separate tax based on an international directive and transposed into Czech law. It is therefore not a classic corporate income tax. -
The equalization tax applies only to groups with consolidated turnover exceeding EUR 750 million.
Please note: this is calculated differently than for country-by-country reporting. Entities excluded from consolidation are also included in the calculation. -
Distinguish between two types of equalization tax:
Czech equalization tax – It applies to Czech entities if they have an effective rate below the minimum threshold.
Assigned equalization tax – applies to foreign entities whose country has not introduced the rules. -
Adjustment tax rate = difference between the minimum rate and your effective rate.
For example, if your effective rate is 12% and the minimum rate is 15%, you will pay 3% of your qualifying profit. -
The change in the deadline is crucial! The amendment proposes a postponement from October 2025 to June 2026.
Without this change, it would be necessary to submit an information report and a Czech equalization tax return. before country-by-country reporting data is available.
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The effective tax rate cannot be calculated simply from financial statements.
Requires adjustments to accounting data. The profit or loss and taxes (current and deferred) must be converted into so-called included taxes and qualified profit. -
The decision to apply the "safe harbor" exception or the procedure for determining the top-up tax
must be stated in the first information report on the Czech top-up tax and must be consistent
with the decision stated in the information report submitted by the ultimate parent entity.
If the decision is not listed in the overview, this cannot be changed later. It is most important practical point. -
Necessary coordination within the group (e.g., the "three sisters" in the Czech Republic):
Reports must be consistent – It is recommended that one entity be designated to submit on behalf of the entire group. -
Don't forget your obligation to submit an information report.
Even if you do not incur a tax liability, You must submit the overview. Either on your own or through a designated representative within the group. -
Software tools are practically indispensable.
Calculating the apportioned tax without automation is extremely complex and almost impossible to do manually.
How we can help you
Our experts in international taxation, transfer pricing, and reporting for multinational groups will help you:
Impact analysis and initial screening
- Assessment of whether you are affected by the equalization tax
- Identification of entities with low taxation risk
- Assessment of the possibility of using exceptions
Calculation of effective rate and adjustment
- Calculation of taxes included and qualified profit
- Determination of the amount of the equalization tax and tax return
Processing and submission of information reports
- Compilation of reports in accordance with OECD and EU legislation
- Coordination between entities and the parent company
Support in using software tools
- Selection and deployment of appropriate solutions (e.g., OECD GloBE tool, Excel models, or integrated platforms)
- Automation of calculations and control mechanisms
Training and internal methodological support
- Customized training for tax, accounting, and legal teams
- Internal guidelines and methodological materials
Support with Country-by-Country Reporting (CbCR)
- Checking and preparing reports in accordance with OECD rules
- Comparison of CbCR with calculations for adjustment tax
- Assistance in transferring data between entities and authorities
