Tax news. Tax news. May Deloitte Czech Republic

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1 Deloitte Czech Republic Tax liabilities

2 Tax liabilities Reporting of financial accounts becomes The Basis of the Common Standard for the Reporting of Financial Accounts On 6 April 2016, the Amendment to Act No. 164/2013 Coll., on Mutual International Assistance in Tax Matters, which implements the Common Reporting Standard ( CRS ) into the Czech legal environment, came into effect. As we already informed you, the CRS is a global platform that will facilitate an automatic exchange of information on financial accounts to be collected and reported by banks and other financial institutions with the aim of preventing tax evasion. The basic principle of the CRS involves acquiring information about the accounts of the tax non-residents - a physical person or entity and sending the information to relevant countries of residence via local financial institutions and tax administrations. The CRS primarily applies to deposit accounts (current, savings or term accounts), custodial accounts and insurance contracts with capital value (life insurance). Through its later implementation, the Czech Republic has joined the ranks of countries that have been implementing the CRS as a global concept. At present, the CRS has already been adopted by approximately 50 countries, including a number of states that are or were referred to as tax havens. While the CRS is expected to be gradually embraced by more countries, it is worth noting that, for example, Panama has recently revoked its intent to join the CRS. Will your account be reported? The reporting of accounts maintained by the relevant financial institution will always apply to the accounts of tax non-residents in the context of the country in which the account is held. That is to say, if a Czech tax resident opens (or had previously opened) an account with a Czech bank, this account will not be subject to reporting. However, if a Czech tax resident opens an account with a bank in Germany (including German branches of foreign banks), then this account will be subject to reporting. The process of verification and reporting applies to both accounts newly-opened subsequent to 1 January 2016 and accounts existing prior to that date. Since the tax residence for new accounts under the CRS is primarily established on the basis of a self-certification (both for individuals and entities), it has become common practice for banks both locally and abroad to make inquiries regarding tax residence or collect other documents relating to the verification of tax resident in opening accounts. In adopting the regulation, a number of banks have been additionally updating their client data, confirming the tax residence information also with their existing clients. How will the data be handled? The OECD s intent in pursuing the CRS is to put in place a truly global platform. While the full implementation of this intent will require that countries other than the original approximately 50 countries join in, the CRS should represent another instrument in combating global tax avoidance practices using mainly cross-border structures. Information on tax non-resident accounts that will be reported in individual countries under the CRS (and will thus be subsequently available to tax administration) principally includes: the account holder s identification data, tax residence country(ies), the account number and its balance at the relevant calendar year-end date and gross amount of interest/other income paid or credited to this account in the relevant year. 2

3 As part of entity reporting, information on the actual owner of the entity may be reported this may occur if the entity in question is a passive entity. If this is the case, the financial institution will report, in the manner indicated and to the extent given, not only the entity that is a foreign tax resident in itself, but it will also report the passive entities, the actual owners of which are not the tax residents of the country in question. One of the examples of passive entities are holding companies that generate most of their revenues from dividends or interest. This means that if, for example, a Czech physical person owns a holding company of this sort (ie it is its actual owner) in Luxembourg, the Luxembourgish bank that maintains the holding company s account will be obliged to report the account and the information about it regarding the actual owner of the entity to the local tax administrator that will, in turn, pass the information on to the Czech tax administrator. The first round of CRS reporting will take place by 30 June 2017 and will apply to the year 2016 irrespective of the fact that the relevant act is only taking effect now. 3 Tax liabilities

4 Updates Concerning Gratuitous Income Tax liabilities Gratuitous income has been treated by the Income Taxes Act (the ITA ) since 2014, when the inheritance and gift taxes were abolished and incorporated into various ITA provisions. In this context, multiple ambiguities arose interpretation-wise which, despite having been amended several times, still give rise to various issues in practice. As part of the Coordination Committee, which was attended by the representatives of the Czech Chamber of Tax Advisors and the General Financial Directorate (the GFD ), the experts submitted (as well as debated and concluded this March) a contribution addressing selected cases of the tax impacts of gratuitous income. This was also followed by the Statement of the General Financial Directorate clarifying certain selected areas of this issue. The first of the issues discussed as part of Contribution of the Coordination Committee No. 452/ on Certain Specific Cases of the Tax Impacts of Gratuitous Income was the impact of gratuitous income (eg a gift or a service), which has not been accounted for, on the tax payer s tax base. Pursuant to the ITA, it is necessary to increase the tax base by the amount of the gratuitous income (provided it is subject to taxation and it is not tax-exempt income); however, if the income is used in relation to securing, maintaining and attaining income, it is possible to deduct the amount from the tax base, resulting in a neutral impact. If a taxpayer receives gratuitous income but does not use it to attain further taxable income (as part of business activities), the impact on the tax base will only be upward. The GFD confirmed the conclusion reached by the submitters that, by analogy, a similar process may be applied to interest-free lending transactions and borrowings or precarious loans (including in the case of natural persons) however, in respect of the utilisation of gratuitous income, the tax base may not be increased or decreased by the same amount. In order to take into account the item reducing the base, it must be utilised in the tax return and, if necessary, evidenced by the taxpayer in the ongoing tax proceedings. The good news is that the GFD eventually confirmed that the provision stipulating the adjustment of the tax base to the arm s length price will not be applied to creditors (unless the actual status is being disguised) in respect of interest-free lending transactions, borrowings and precarious loans among related parties. Next, the contribution also addressed the issue of valuation ie how to determine the value namely of non-monetary gratuitous income. The GFD confirmed the conclusion of the submitters that appropriate provisions of the ITA are to be applied and that valuation is to be performed in line with the legal regulation governing asset valuation. Consequently, the tax payer must always be able to evidence the valuation amount. The last item of the contribution addressed the issue of whether all situations where payment is not made, must be treated as gratuitous income under the ITA. As the authors infer from the text of the statement of reasons (because, unfortunately, the ITA lacks any definition of gratuitous income as such), if, for example, a payable is secured through the transfer of a right and a subsequent lending transaction is made or if machinery, equipment, patterns and moulds are borrowed in order to secure contractual supplies for the lender, this does not constitute gratuitous income for the purposes of the ITA: in economic terms, no gratuitous income is generated as it is only one of the forms of asset acquisition or securing supplies under the contractual conditions applicable to the supply of goods. The GFD agrees that in these cases, no additional tax arising from gratuitous income will be assessed for the lender and the lender will be able to deduce the costs of repairs corresponding with ordinary use in the scope agreed on in a borrowing contract or when the liability for the 4

5 Tax liabilities performance of repairs arises from legal regulations. In practical terms, this is an important confirmation as the majority of the contractual producers or suppliers of components operate on the basis of similar contractual arrangements. In addition, the GFD confirmed that loans provided by an owner to a company (or a cooperative) do not constitute gratuitous income under the ITA and neither does an owner s guarantee for a corporation as the company does not derive any benefit in these cases asset-wise. This interpretation is in line with the established administrative practice whereby it has been assumed for a long time, including from the perspective of the legislation valid until the end of 2013 (ie still from the perspective of the gift tax), that this does not constitute a gratuitous transaction in respect of which the company would need to tax the asset benefit. The GFD also confirmed the proposition whereby income will not be considered as gratuitous unless a guarantee obligation is directly stipulated by a legal regulation, ie unless the guarantee arises directly from the law (eg a debt guarantee in the case of a company demerger, a guarantee for the tax on the acquisition of an immovable asset or upon a transfer of business). In mid-march, probably also as a follow-up to the Coordination s Committee contribution, the GFD posted the Statement of the General Financial Directorate on Selected Issues Concerning the Taxation of Gratuitous Income on its website. In addition to delineating the general characteristics of gratuitous income (the main feature of which should be the absence of any counter-consideration), the GFD s Statement addresses namely two areas of concern: asset transfers to publicly-funded organisations established by regional and local authorities (ie though trusts, borrowings or changes of ownership) and to investments and other considerations in favour of legal entities (corporate entities as well as public-interest taxpayers). In its Statement, the GFD clearly states that an owner s investments in a company and similar transfers of assets from an owner of a corporation, founder of a foundation or the establisher of a publicly-funded organisation etc into the assets of a legal entity do not constitute taxable income for corporate income tax purposes. Referring to the appropriate ITA provision, an investment from the perspective of corporate entities is an investment in the share capital including other considerations in favour of equity (ie an asset transfer in a monetary or non-monetary form from the investing entity to the legal entity in which the investing entity has an equity interest). In terms of public-interest tax payers, this may also be applied to the transfers of the establisher s assets to the foundation s assets and other funds and institutions or a member in favour of the association. However, this does not apply to membership contributions and specific situations eg gifts of charity. A question that still remains to be answered concerns the potentially gratuitous income generated by a natural person in performing activities for a legal entity unless a fee is provided for the activities. A contribution on this topic is yet to be concluded at the Coordination Committee s meeting. However, a highly likely conclusion is that the legal entity generates gratuitous income in the amount corresponding with the activities, even though the law stipulates the non-provision of remuneration (eg in respect of the members of the bodies of legal entities the remuneration of which has not been approved by the General Meeting). 5

6 Electronic Sales Records The Government-proposed Electronic Sales Records Act (the ESRA ), which has been discussed and passed by the Parliament, was signed by the President of the Czech Republic on 30 March The ESRA was published in the Collection of Acts and became on 13 April The obligation to keep sales records applies to entrepreneurs individuals and corporate entities, whose sales originate from business activities and are paid in cash, by credit card, cheque, bill of exchange or in another similar manner (eg meal ticket, gift voucher or token). Sales that will not be Phase Starting date Business segments 1 1 Dec 2016 Accommodation and catering services 2 1 Mar 2017 Retail and wholesale subject to electronic record-keeping will be direct bank account transfers, regular direct debiting and extraordinary payments (such as a transaction between an employer and an employee in a rare sale of asset disposals to employees). The concerned business segments have been divided into four groups, each of which is to begin keeping electronic records from a different date. The table below shows the four phases, the dates and businesses in chronological order: 3 1 Mar 2018 Other activities with activities that are subject to exceptions in the 4th phase (eg freelance jobs, transport and agriculture) 4 1 Jun 2018 Selected crafts and manufacturing activities 6 Tax liabilities Well ahead of time, each entrepreneur should therefore assess the activities and the form in which their sales are generated, and align the respective sales with the phases listed in the table above. The ESRA specifies the sales that are automatically excluded from the record-keeping obligation. These include, for example, sales generated by banks, insurance companies, pension fund and investment companies, sales from businesses in the energy industry using a licence granted based on the Energy Act, or sales from businesses performed using a permit granted by a regional office based on the Water and Sewage System Act. In selected cases, taxpayers are allowed to record certain sales in a simplified off-line mode. This exception allows the entities concerned to send the recorded sales data to the tax administrator within five days from receiving the recorded sale. This will apply, for example, to sales made in regular group transportation of persons. Apart from an internet connection, taxpayers will need a device (a cash register/counter, computer, tablet or mobile phone) that is able to send the required data on-line to the Financial Administration server, and a printer

7 to print receipts for customers. Before an entrepreneur starts keeping electronic sales records, they first have to obtain authentication data from the Financial Administration for gaining access to the portal, register their places of business, and generate certificates that are then installed into the device that serves as the cash register. Taxpayers (natural persons) will have an opportunity to deduct the costs of introducing electronic record-keeping using a one-time tax relief of up to CZK 5,000 for the first year in which the entrepreneur was obliged to keep electronic sales records. Providers of catering services will welcome the accompanying act that was passed along with the ESRA, which, among other things, stipulates a VAT decrease from the current 21 % to 15 % for catering services (with the exception of alcoholic beverages), from 1 December This should serve as a form of compensation for the costs that providers of catering services will incur in introducing electronic sales records. The main complications and risks that taxpayers are expected to face in the context of introducing electronic sales records are internet connection problems, either on the entrepreneur s part, or the Financial Administration s (in such cases, taxpayers must send the data on the recorded sale within 48 hours), failing to correctly identify the sales that are subject to the recording obligation, or not preparing for electronic record-keeping in time (such as late obtaining of the authentication data to the Financial Administration s portal). According to the latest information, opposition parties (ODS and TOP 09) have filed a complaint with the Constitutional Court concerning the session of the Chamber of Deputies at which the ESRA was passed. They are asking the Court to render null and void the resolutions based on which the Act was passed, as in their view, by putting an early end to discussion on the subject, the government coalition did not proceed strictly in line with the parliamentary rules of procedure. 7 Tax liabilities

8 Amendment to the Income Taxes Act Another amendment to the Income Taxes Act (ITA) has gone through the legislative process and is included in the draft act that changes and abolishes certain acts in the area of mutual international assistance in tax administration. The President signed the act on 14 April 2016 and the act is expected to be published in the Collections of Laws in the coming days. As we informed you in the previous issues of dreport, the ITA amendment contains the following changes and revisions: Limits on the exemptions related to hybrid loans (a share of profit accepted in one member state qualifies for exemption only in the event that it did not constitute a tax base-reducing item in another member state); Unification of the withholding tax treatment in respect of personal and corporate income taxes upon the payment of profits of business corporations; Certain provisions added in relation to the deduction of costs in reporting gratuitous income; Increase in the tax relief on a second child and on a third and every additional child (by CZK 300/CZK 600 per month) compared to the tax relief on a single child; and Individuals (non-businessmen) will, under certain conditions, tax income from operating electricity-generating units for their own consumption as other income rather than as income from business activities, which will lead to the impossibility of claiming tax depreciation charges. 8 Tax liabilities

9 Amendment to the VAT Act likely to be The amendment to the VAT Act supposed to have extended, as of this May, the reverse-charge treatment to include all local supplies of goods performed by an entity not residing and not registered in the Czech Republic, is likely to become in August 2016 at the earliest. Along Local Sales/Purchases Reporting In relation to the April deadline for VAT payers (natural persons with a quarterly taxation period) to submit Local Sales/Purchases Reports ( kontrolní hlášení ), the Financial Administration posted yet another brief manual on its website on how the Local Sales/Purchases Report form should be filled in and submitted. In respect of the review of the data presented in the Local Sales/Purchases Report, the General Financial Directorate ( GFD ) has prepared internal methodical guidance intended for individual tax administrators. If a Local Sales/ Purchases Report contains discrepancies, tax administrators are instructed to C-11/15 Czech Radio with this, the transfer of local competency from the Tax Authority for the Capital City of Prague to the Tax Authority of the Moravian-Silesian Region in respect of entities not residing in the Czech Republic but registered to Czech VAT has also been postponed. contact the tax payer primarily through unofficial (informal) channels. Our experience shows that the cases where a tax entity is called on by the tax administrator either by phone or to take a series of various steps and to submit necessary documents (tax documents etc) is indeed rather frequent. Furthermore, the GFD s internal guidance instructs tax administrators on how to inform tax payers, during the call or in the , of the possible origination of a liability for VAT unpaid by the supplier. We recommend that VAT payers carefully consider how to respond to informal calls and whether to do so at all. In certain cases, it is advisable, or indeed necessary, to wait for the delivery of a notice as prescribed by law. 9 Tax liabilities Regarding this case, the Advocate-General of the Court of Justice of the EU addressed the issue of the radio fee exemption pursuant to Section 53 of the VAT Act. The Advocate-General concluded that a radio fee does not constitute a consideration for radio broadcast and as such cannot be subordinated to the VAT treatment (and thus it cannot be exempt either). According to the Advocate-General, this fact has a profound impact on the obligation to decrease an input VAT deduction: Czech Radio should not be entitled to a VAT deduction for inputs used solely for radio broadcast and the tax deduction for overhead costs should be reduced. This view may primarily affect entities in a similar position, ie those making supplies freeof-charge and receiving the necessary funds from the state. The decisive view will be that of the Court of Justice of the EU itself.

10 Tax liabilities C 546/14 Degano The ruling issued by the Court of Justice of the EU upheld that receivables from bankrupt debtors have, following a permission to reorganise, the status of outstanding receivables (in respect of the part which the debtor is no longer obliged to pay, ie the creditor is no longer entitled to collect, based on the reorganisation plan). It may be inferred that approving the reorganisation of a debtor in the insolvency proceedings does not allow for the correction/decrease of the tax from registered receivables pursuant Carousel VAT Fraud May Relate to Each There has been recently much debate in the media about fraudulent chains of traders dealing in certain commodities which either make only fictitious deliveries of goods or keep selling the same goods within a closed chain of companies. However, carousel frauds, or more generally VAT frauds, also include deliveries of goods that follow one another in a chain in which one of the involved traders does supply the required goods as appropriate but does not declare and pay VAT on the goods and the other traders in the chain then make VAT deduction claims. These cases may apply to any businessmen irrespective of what commodity they deal in and even in circumstances where they process the relevant commodity but no longer sell it onwards. Current approach of the financial administration bodies in this area We have witnessed several trends in the efforts of financial administration bodies to detect carousel fraud that alter the view of the established to Section 42 of the VAT Act. However, if the creditor decides to correct/ decrease VAT after all, they expose themselves to the risk of an additional tax assessment owing to the introduction of Local Sales/Purchases Reporting, the tax administrator immediately obtains accurate information on the fact that the debtor is being reorganised and that the tax correction/decrease has not been performed in compliance with VAT legislation. perception of this type of fraud. In the first place, it holds that VAT fraud may occur in relation to the supplies of almost any goods. As such, it is not possible to believe that the duty to check one s business partners applies only to the companies that deal in risky commodities (the term was historically applied to refer to gold or fuel). After all, the concept of referring to certain commodities as risky was rejected even by the Supreme Administrative Court in one of its significant rulings on the case of EON Energie dated 10 June 2015, ref. no. 2 Afs 15/ It also applies that the responsibility for carousel fraud may be derived not only in respect of a company that did not declare and pay VAT or its direct business partner but also any company within the chain. There are often paradoxical situations where a suspicion of VAT fraud does not lead to an inspection of the company that committed the fraud but the company that had no direct relation to the businessman that did not 10

11 Tax liabilities pay VAT and does not even know that this company is part of the same customer-supplier chain. Least but not last, we have seen the growing tendency of the financial administration bodies to examine business decisions of the inspected company in detecting carousel fraud. In terms of the above-mentioned ruling of the Supreme Administrative Court in the EON Energie case, the financial administration bodies have been seeking to prove that the relevant transactions were concluded under such irregular terms that the company must have known that the supply had been subjected to this type of fraud. However, this procedure can be treated as fairly controversial since this intervention into the freedom of business is completely impermissible and the financial administration bodies do not possess sufficient expertise to examine business activities of tax entities. Prevention through the internal control system In order for a businessman to be liable for the tax not paid by another company within the same customer-supplier chain, the financial administration bodies need to prove that, in view of all the circumstances of the relevant transaction, the businessman was aware, or should and may have been aware, of the fact that this fraud may have occurred. Should this conclusion be proven, they will not uphold the company s claim for a VAT deduction generated in respect of such transactions. For a company to prove as part of a tax audit that it acted in good faith in conducting the audited transactions, it must have appropriate controls in place in relation to its business partners. Our experience suggests that there is no strictly-defined list of measures to maintain good faith of a company in the proper nature of the business activities of its business partners. Established judicial practice indicates the requirement that companies take measures in response to the current development and available information. Only in circumstances where companies act with a sufficient level of caution while making ongoing assessments of the warning signals relating to both suppliers and customers, their good faith remains uncontested. A company wishing to prove it was not aware, and may not have been aware, of a fraudulent activity in the customer-supplier chain, should therefore include in its internal policies a standardised system of checking their business partners in terms of their tax compliance credibility. The results of such checks should be kept on record as appropriate for their use in a potential tax audit. The relating measures should be also reflected in the contracts with business partners and employment (or any other) contracts with business representatives being in contact with new suppliers. A set of such control measures should be part of each company s risk management endeavours. 11

12 Tax liabilities Totalisation Agreements Albania and The Senate gave its consent with the ratification of totalisation agreements with Albania and. Before they come into effect, the agreements will have to be approved by the president and signed by the counterparty. Both agreements cover the same issues sickness, retirement and health insurance, and insurance for job-related injuries and occupational diseases. What differs is the scope of persons they apply to: while the Albanian agreement applies to all persons under the insurance system of one participating country and the persons deriving their rights from them, the n agreement only applies to nationals of the two countries. However, in compliance with the rulings of the Court of Justice of the European Union, the Czech Republic will also apply it to nationals of other EU member states. Preparation of a Tax Evasion Defined as The Chamber of Deputies has recently passed a proposed amendment to the Criminal Code which defines the preparation of a tax evasion (or the evasion of another fee/similar obligatory payment) as a criminal offence. Let us take a look at what this change will mean for taxpayers in practice. What does the preparation of a criminal offence mean? The preparation of a criminal offence refers to an offender s intentional behaviour with the purpose of preparing the conditions for committing a crime. In the case of tax evasions, it means making preparatory steps Both the agreements with Albania and will guarantee that the affected parties will participate in the insurance system only in the country of the performance of their activities. If an employee is seconded from one of the countries to the other country, the employee will continue to participate in their insurance scheme in the country of origin if they work for the employer, its subsidiary or branch and if the secondment period does not exceed 24 months (in the case of the agreement with Albania) or 36 months (in the case of the agreement with ). We will keep you informed on further developments in the ratification process. before submitting offender s tax return with the aim of (i) paying no tax at all, (ii) paying a lower amount of tax, or (iii) gaining a benefit from the state to which the offender is not entitled (such as an excessive VAT deduction). In this context, it is necessary to distinguish between the individual stages of committing a crime, which are the preparation, attempt, and completion of a crime. Referring to tax evasions, this means the following. As mentioned above, when preparing for committing a crime, the offender is only preparing the conditions and has not yet begun committing the crime. This may mean, for example, obtaining fake invoices, fake contracts or 12

13 Tax liabilities other legal documents that proves claim for different taxation, ensuring of help of other people with committing the crime or setting of other artificial legal relations so that they meet the claim for different taxation). As soon as the offender fills in and submits a tax return, which does not correspond with the actual tax liability, we are dealing with an attempt of a crime. That means a situation when the offender has already begun committing the crime, but may not necessarily manage to complete it (for example, the tax authority may reveal the fraud before deciding on the tax liability, or the tax subject may submit a remedial tax return and pay the taxes due). Once the tax authority confirms the unlawfully lower tax or the unlawful claim for excessive tax deduction, we are dealing with completion of a crime. In respect of the potential punishment stipulated by the relevant provision of the Criminal Code, there is no difference between the individual stages of committing a crime. However, when punishment is imposed in concrete case, the judge must consider the stage of committing a crime as each of the stages brings a different degree of social harm to the crime, and, therefore, it must be taken into account whether the offender is being punished for preparing, attempt or completion of the crime. Offenders are never punished for all the three stages of the crime at the same time, but only for the latest stage committed. This means that the offender will be punished for preparation of a crime only, if an attempt (typically submission a fraudulent tax return) is never committed, and, at the same time, no conditions, which would cause extinction of the criminal liability for preparation of a crime, were met. The Amendment to the Criminal Code Up until now, only an attempted or completed tax evasion was considered a criminal offence; in other words, any steps taken in preparation for submitting a fraudulent tax return were not punishable (unless another crime was committed in the process, related e.g. to incorrect bookkeeping). From now on, it will be possible to punish offenders even for the preparation of a crime, although not every case of preparations will be considered criminal behaviour. This would be the case only when the offender faces the risk of a prison sentence, the maximum extent of which is at least 10 years. This means a preparation of a tax evasion will only be punishable if (i) the crime is intended to cause a difference between the declared and the real tax liability in amount of at least CZK 5 million or (ii) the tax evasion is committed within an organised group operating on the territory of more than one state. According to the author of the amendment, its purpose is to combat tax frauds, in particular carousel VAT frauds. The change should primarily enable the police to intervene faster, especially by using operative methods such as wiretapping, surveillance, taking over and opening parcels, searches of business premises etc. It should also enable earlier prosecutions, during which the period for tax assessment do not run. However, the change may also present problems in context of interpretation and application of tax legislation. Even though the Supreme Administrative Court has repeatedly claimed that entrepreneurs do not have an obligation to carry out their businesses in a manner that would lead to them paying the highest taxes possible, and that tax optimisations not breaching the respective legislation or its purpose are legal, the dividing line between legal and illegal interpretation and application of tax legislation is thin, and will certainly prove problematic in respect of criminal liability for preparation of a crime in this field. This objection was raised when the amendment was debated in the Chamber of Deputies, however, the proposed change to the amendment was not passed. The amendment introducing the preparation of a crime as a criminal offence will be discussed in the Senate on 27 April If passed, it should become one month after its publishing in the Collection of Laws of the Czech Republic. 13

14 The Tax Information Exchange Agreement with Monaco was published in the On 18 April 2016, the Statement of the Ministry of Foreign Affairs regarding the conclusion of the Tax Information Exchange Agreement between the Czech Republic and the Principality of Monaco was published in the. The agreement, which was signed on 31 July 2014 in Monaco, enables exchanging information between the tax administrations of both countries. As a result, the financial administration has the possibility of obtaining information required to determine tax or to conduct criminal proceedings in relation to tax offences. Tax liabilities BEPS developments EU Member States Economic and Financial Affairs ministers have reached agreement on the automatic exchange of CbC reporting information. EU the Parliament s committee on Tax Rulings and Other Measures Similar in Nature or Effect (the TAXE II committee) has heard from Andorra, Guernsey, Jersey, Liechtenstein and Monaco who were requested to provide an overview of their tax policies and discuss commitments to multinational projects such as the BEPS proposals and the European Commission s anti-tax-avoidance proposals. Representatives of Apple, Google, IKEA and McDonald s also appeared before the committee and expressed concern that public CbC reporting for large companies would create unfair competition as smaller companies would not be covered by the provisions. EU a leaked European Commission draft proposal would require resident parent companies and some subsidiaries of multinational groups with annual turnover exceeding 750 million to make CbC reporting information public. Italy for fiscal years beginning or after 1 January 2016, parent companies of multinational groups with a consolidated turnover exceeding 750 million in the prior tax period are required to submit CbC reports. Jersey the government has launched consultations on: (1) BEPS and the introduction of CbC reporting and (2) the automatic updating of the companies registry upon change of beneficial ownership and control over the 25% threshold and the introduction of a central register of directors. Portugal measures adopted in the budget for 2016 and applied from 1 April 2016 include amendments to the partial exemption regime for income from patents and the introduction of CbC reporting for multinational companies with consolidated group turnover of 750 million. Canada the budget contains several BEPS measures, including adopting country-by-country (CbC) reporting for years beginning after 2015 or addressing treaty shopping. OECD has released an XML schema and accompanying user guide to provide a standardised electronic format for the exchange of CbC reports between jurisdictions. The guide explains how to create and use the schema, and specifies the information that must be provided in each CbC report. South Korea it has been reported that Korea intends to implement CbC reporting from Turkey the Turkish Revenue Administration has released proposed regulations that would require CbC reporting. 14

15 Other tax news Belgium appeals European Commission s decision on excess profit scheme As widely expected, Belgium has filed an appeal with the European Union General Court against the European Commission s decision that the scheme constitutes incompatible state aid. The text of the appeal is not yet available. UK register of people with significant control comes into effect From 6 April 2016 UK companies and LLPs will be required to hold a register of People with Significant Control (PSC). The PSC register will include information about the individuals who own or control companies and details of their interest in the company or LLP. A person with significant control is someone who holds more than 25% of shares or voting rights in a company, or who has the right to appoint or remove the majority of the board of directors. China announces detailed rules for VAT reform rollout to cover all industries The Ministry of Finance and State Administration of Taxation have issued joint implementation guidance on the further roll-out of VAT reforms. From 1, VAT will replace business tax to cover all the sectors that previously fell under the business tax regime. Denmark proposes changes to participation exemption A bill would make several changes to the Danish participation exemption for shareholdings in subsidiaries and enable Danish holding companies to reclaim corporate taxes pertaining to certain foreign shareholdings since Italian tax authorities clarify tax treatment of LBO transactions New guidance clarifies the tax treatment applicable to the acquisition of Italian targets by private equity funds through leveraged buyout (LBO) and merger leveraged buyout transactions. The authorities have confirmed that interest expense related to loans granted to an Italian special purpose vehicle incorporated for the purpose of acquiring the target is deductible under the ordinary rules. Japan reduces corporation tax rate The 2016 tax reform proposals have been enacted, including a reduction in the standard corporate income tax rate to % for fiscal years beginning on or after 1 April 2016 and % for fiscal years beginning on or after 1 April Tax liabilities

16 Tax liabilities Tax liabilities Monday 2 Income tax payment of special-rate withholding tax for March 2016 Tuesday 10 Consumption tax tax maturity for March 2016 (except the consumption tax on alcohol) Friday 13 Intrastat submission of statements for intrastat za April 2016, paper form Tuesday 17 Intrastat submission of statements for intrastat za April 2016, electronic form Friday 20 Income tax monthly payment of deducted advance payments on personal income tax from employment Wednesday 25 Value added tax Energy taxes Consumption tax tax return and tax for April 2016 recapitulative statement for April 2016 VAT control statement for April 2016 tax return and tax maturity on gas, solid fuels and electricity for April 2016 tax maturity for March 2016 (only the consumption tax on alcohol) tax return for April 2016 tax return for claiming of refund of consumption tax, for example on fuel oil, other petrol (benzine) for April 2016 (if applicable) Tuesday 31 Real estate tax full tax maturity (tax payers with tax liability to CZK 5,000; including) Income tax tax maturity of 1. tax payment (tax payers with tax greater then CZK 5,000 (excluding taxpayers engaged in agricultural production and fish farming) payment of special-rate withholding tax for April

17 June 2016 Tax liabilities Thursday 9 Consumption tax tax maturity for April 2016 (except the consumption tax on alcohol) Tuesday 14 Intrastat submission of statements for intrastat for, paper form Wednesday 15 Income tax quarter or half-year tax advance payment Friday 17 Intrastat submission of statements for intrastat for, electronic form Monday 20 Income tax monthly payment of deducted advance payments on personal income tax from employment Friday 24 Monday 27 Consumption tax Value added tax Energy taxes Consumption tax tax maturity for April 2016 (only the consumption tax on alcohol) tax return and tax for recapitulative statement for May 2016 VAT control statement for tax return and tax maturity on gas, solid fuels and electricity for May 2016 tax return for tax return for claiming of refund of consumption tax, for example on fuel oil, other petrol (benzine) for (if applicable) Thursday 30 Income tax payment of special-rate withholding tax for FATCA announcement submission of announcement according to the Act No. 330/2014 Coll 17

18 Tax liabilities Contacts If you have any questions concerning the items in this publication, please contact your regular Deloitte Tax contact or one of the following experts: Jaroslav Škvrna Zbyněk Brtinský Miroslav Svoboda Marek Romancov LaDana Edwards Tomas Seidl Adham Hafoudh Radka Mašková Local Sales / Purchases Report Jaroslav Beneš jbenes@deloittece.com Subscribe to dreport and other newsletters and invitations here Deloitte Advisory s.r.o. Nile House Karolinská 654/ Prague 8 - Karlín Czech Republic Tel.: Fax: Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see for a more detailed description of DTTL and its member firms. Deloitte provides audit, tax, consulting, financial advisory and legal services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte s more than 225,000 professionals are committed to becoming the standard of excellence Deloitte Czech Republic