Global minimum tax

Global minimum tax will be applied from the tax period starting on 1 January 2024 and it will concern all companies within a group whose consolidated revenues have exceeded EUR 750 million (CZK 18 billion) in at least two of four of the immediately preceding tax periods.

Global minimum tax at the rate of 15 per cent should be implemented at the OECD and EU level. The EU member states are obliged to adopt legislation during 2023 implementing this rate, but in some cases its implementation can be postponed. The Czech bill has not been published yet.

The global minimum tax will be applied if the effective tax rate does not reach 15 per cent; whereby the effective tax is determined as a ratio of (i) taxes (current and deferred), which the group records withing the given jurisdiction, and (ii) the pre-tax profit determined according to the international accounting standards. The effective tax can significantly differ from the statutory tax rate - for example owing to the application of various forms of tax relief.

The rules for calculating the effective tax and deferred tax will be the same for all jurisdictions. Deferred tax will normally be collected from the subsidiaries by the country of the parent company; however, the country of the subsidiary can decide that it will collect the tax. In such cases, the compensatory tax paid by the subsidiary will be set off against the tax obligation of the parent company. It is expected that the Czech Republic will decide either to collect the compensatory tax that would arise in respect of Czech subsidiaries or to impose on such subsidiaries the obligation to prove that no compensatory tax has arisen. If it does not, the compensatory tax will become the revenue of the state budget of the parent company's country - even if it relates to economic activities of a subsidiary that has its seat in the Czech Republic. In any event, this new regulation requires that companies seeking to avoid this measure meet a number of obligations related to proving that an obligation to pay compensatory tax has not arisen.