Transfer Pricing in the Czech Republic

The tax base is adjusted where prices between connected persons depart from those independent persons would agree in ordinary commercial relations under the same or similar conditions and the difference is not satisfactorily substantiated. There is no standalone Czech transfer pricing statute.

A distinctively Czech feature: the second sentence of § 23(7) directs that the price be determined under the legislation on valuation of property (cena určená podle právního předpisu upravujícího oceňování majetku, the current wording — not the older cena zjištěná), displacing a market benchmark where comparables genuinely do not exist. It is not the closing sentence: sentence three carries the výprosa, výpůjčka and low-interest proviso, the definition of connected persons follows, and the paragraph ends by providing that membership of a supervisory or similar control body, and performing control for a fee, is not participation in control.

Capital association is only one limb. 'Otherwise connected persons' also captures participation in management or control, controlling/controlled persons, close persons under § 22 of the Civil Code, and relationships created predominantly to reduce a tax base or increase a tax loss. Common membership of two supervisory boards alone does not create association.

GFŘ unifies its approach across both. Narrow statutory carve-outs exist for výprosa and výpůjčka arrangements and for below-market interest on credit financial instruments where the creditor is a non-resident, a Czech-resident member of the corporation, or a personal income tax payer.

GFŘ states expressly that no Czech statute references the TPG. Treaty authority derives from Article 31(2) of the Vienna Convention (Decree No. 15/1988 Sb.); domestic use is described by GFŘ as an administrative practice sui generis. Czech translations of the 2017 and 2022 Guidelines are published by the Financial Administration.

The Specialised Tax Office (Specializovaný finanční úřad) receives country-by-country filings; the Appellate Financial Directorate (Odvolací finanční ředitelství) decides tax appeals. GFŘ also handles bilateral and multilateral advance pricing agreements.

Section 23(11) sets a floor rather than an attribution methodology: a PE's tax base may not be lower, nor its loss higher, than a comparable Czech resident would reach. Internal management fees, licence fees and interest between head office and PE are generally not recognised (banks excepted). Detail sits in Methodical Instruction No. 79599/19 of 17 December 2019.

D-34 goes only so far as the five basic methods and combinations of them, and expects the choice to follow the comparability analysis; it contains no alternative-method rule. The admissibility of another method where none of the five can be applied, provided it rests on logical and rational reasoning — and the point that the methods sit in methodological guidance rather than in the Income Taxes Act — comes from the OECD country profile.

Where several methods could apply, D-34 recommends proceeding from CUP, through the other traditional transactional methods, to the profit methods. Profit methods are indicated where both parties make unique and valuable contributions or where gross-margin data on independents is thin. The choice should emerge from the comparability analysis, not precede it.

Independence tracks the § 23(7) threshold — no owner above 25% of capital or votes — and may be widened to listed or individually owned companies where the pool is thin. Entities within roughly three years of start-up are excluded; loss-makers may not be rejected on the sole ground of losses, and every exclusion must be reasoned. Secret comparables cannot be used: all evidence must be disclosed to the taxpayer and be judicially reviewable.

GFŘ describes the IQR as agreed administrative practice where exact comparability cannot be assured. Multi-year data of three to five years is endorsed, usually averaged; search strategies should be refreshed at least every three years with annual independence testing and annual range updates.

The operative sentence closes D-34 ch. 2.3.2: where the group entity's actual mark-up falls outside the current range found for comparable independents and the difference is not satisfactorily substantiated, the adjustment is made so that the adjusted mark-up lies within that range. Chapter 2.4 deals only with how the range is constructed, full range against interquartile, and says nothing about the adjustment point or the median. Taxpayers who concede a median adjustment without argument give away value that the guidance does not require.

Pokyn GFŘ D-10 (2012) applies where services are not the main activity, are routine, and are not material — total value not exceeding both 10% of turnover and CZK 50m at the provider, and both 20% of operating costs and CZK 50m at the recipient. A different mark-up remains possible under § 23(7) if substantiated. D-10 predates the OECD Chapter VII simplified approach and GFŘ has not reconciled the two.

GFŘ adopted the OECD February 2020 financial transactions guidance by information notice of 9 August 2021, with a Czech translation. The BEPS Action 4 interest limitation in § 23e operates independently of any arm's length analysis, as does thin capitalisation under § 25(1)(w).

HTVI transactions are analysed under Chapters I and VI like any other, with no distinct compliance rules and no special limitation period. Multiple adjustments to the same HTVI transaction are possible, but an open year cannot be used to adjust amounts belonging to closed years. Bilateral and multilateral APAs are available for HTVI.

GFŘ states plainly that no Czech provision requires a taxpayer to submit transfer pricing documentation. The effective duty flows from §§ 92(3)–(4) of Act No. 280/2009 Sb. (Tax Procedure Code) read with the 'satisfactorily substantiated' test in § 23(7). The OECD profile's 'No' answer is accurate but incomplete without this.

Guidance D-334 (in effect from 1 January 2011) adopts the EU TPD two-tier model and states expressly that its application is voluntary. D-34 (2019) announced a replacement instruction, Pokyn GFŘ D-35, which has still not been issued as at 2026 — so 2011 guidance sits alongside a 2019 instruction describing the OECD three-tier model as applicable. Document to the three-tier standard.

Filed with the corporate income tax return, one schedule per related party, in whole thousands of CZK. Summaries based only on the OECD profile — which leaves the 'specific transfer pricing return' box unticked — are wrong: this schedule has been compulsory since the 2014 tax year. Return deadlines under § 136 of the Tax Procedure Code: three months, four if filed electronically thereafter, six with a tax adviser or statutory audit.

Meeting any one size criterion, the schedule is due if the taxpayer transacted with a foreign related party (schedule for those parties only), reported a tax loss on line 200 while transacting with any related party, or holds a tax-credit investment incentive under Act No. 72/2000 Sb. (schedule for all related parties). PEs of non-residents are exempt. GFŘ announced it openly as a risk-analysis instrument.

Governed by Act No. 164/2013 Sb. as amended by Act No. 305/2017 Sb. (DAC4). A one-off Ohlášení notification must be filed first, by the last day of the first reporting period, identifying the reporting entity. Both filings go only through the EPO portal with authenticated access, in OECD CbC XML schema, to the Specialised Tax Office.

Where no period is fixed by law, the tax administrator sets one by decision under § 32 of the Tax Procedure Code; shorter than eight days only exceptionally, for simple and urgent acts, with reasons. Deadlines of 15–30 days in a výzva are practice, not law, and are extendable under § 36. Retain for the assessment period under § 148 and the accounting retention period under Act No. 563/1991 Sb. Proceedings are conducted in Czech (§ 76).

No transfer pricing-specific penalty exists — § 251 of the Tax Procedure Code applies generally, with late payment interest under § 252 running from the fourth day after the original due date. The corporate rate rose from 19% to 21% for periods beginning in 2024, raising the cost of every adjustment.

Section 251(4) removes the penalty on tax additionally declared by the taxpayer itself, unless the supplementary return was inadmissible. It is not the only relief: § 259a allows the administrator, on request and after the assessed tax is paid, to remit up to 75% of the penalty by reference to the taxpayer's cooperation during the ex officio procedure, with full or partial remission for an excusable cause and anti-double-punishment remission under § 259a(5); the request must be made within three months of the payment assessment becoming final. § 259aa (late-filing penalty) and § 259b (late-payment interest) give further relief. A § 259a application is in practice the main post-assessment lever in a Czech transfer pricing case.

Failure without sufficient excuse to comply within the set period with a výzva to perform a non-monetary procedural duty — including a call to produce documents in an audit — is a pořádková pokuta of up to CZK 500,000 under § 247(2). Section 247a carries the same ceiling but catches registration, notification and record-keeping duties, the limb used for CbCR record-keeping breaches. Late filing of the return, and hence of the transfer pricing schedule, attracts the § 250 penalty of 0.05% of tax per day, capped at 5% of tax and CZK 300,000; no penalty arises where the delay does not exceed five working days or the amount computes to under CZK 1,000, and it is halved only where the return is filed within 30 days of the missed deadline and no other filing delay was found for that taxpayer in the same calendar year.

Under § 13zp of Act No. 164/2013 Sb., for breach of reporting duties including record-keeping and failure to seek parent assistance. The CZK 600,000 fine is unavailable where the entity shows it requested but did not receive information, reported all it had, and disclosed the refusal. Breach of the separate Ohlášení notification duty is described in the government service catalogue as attracting up to CZK 500,000 under the Tax Procedure Code — the two figures are frequently conflated.

There is no transfer pricing-specific period. Two distinct mechanisms sit in § 148 and are routinely conflated. Section 148(3) restarts the three-year period from scratch when a tax audit is commenced, a regular return is filed, or a call to file one is notified — at any time before expiry, not only in the final 12 months. Section 148(2) separately extends the period by one year where a listed act occurs in its last 12 months: a supplementary return or a call leading to assessment, notification of an assessment decision, extraordinary or supervisory remedy proceedings, a decision on such a remedy, or a declaration of nullity. The ten-year cap in § 148(5) is not watertight: § 148(6) permits assessment until the end of the second year after a final court decision on a tax offence, and § 148(7) permits it regardless of expiry where the taxpayer files and pays to secure effective repentance.

Section 22(1)(g) point 3 treats the § 23(7) difference, and interest non-deductible under § 25(1)(w), as Czech-source profit shares. GFŘ notes it does not apply to related parties in another EU or EEA state, and that treaty text must be considered. Section 23(3)(a) point 17 requires an add-back unless the amount is settled between the parties.

Unilateral, bilateral and multilateral forms are available under Pokyn GFŘ D-32. The fee is charged per transaction or aggregated set — five transactions require five applications and CZK 50,000. Filed in Czech with the locally competent administrator, or with GFŘ where several administrators or a bilateral process are involved. In 2025 the Financial Administration received 27 applications, seven of them bilateral.

Section 133(3) of the Tax Procedure Code sets the limit, so the practical span can exceed three calendar years from application. There is no appeal (§ 132(3)) and the decision lapses if the facts diverge from those stated. Czech APAs have no legal rollback — D-32 offers only an expectation that the same method, never the same amount, will be respected for comparable earlier periods.

Access runs through treaty MAP articles, the EU Arbitration Convention (No. 93/2006 Sb.m.s.) and Act No. 335/2020 Sb. implementing Directive (EU) 2017/1852, effective from 15 September 2020. Act No. 335/2020 Sb. does not displace procedures conducted under treaties. Unilateral downward corresponding adjustments are possible outside MAP.

Appeals are lodged with the issuing administrator and decided by the Appellate Financial Directorate. The Financial Administration maintains its own annotated public register of NSS transfer pricing judgments by year — the authoritative starting point for Czech case law.

In 7 Afs 31/2024 (28 May 2025) the NSS rejected an interest adjustment because the authority neither built an adequate comparable sample nor explained why it could not. In 8 Afs 229/2024 (27 February 2026) it annulled findings as partly unreviewable on the reference period, interquartile methodology and value chain analysis. A separate, heavily litigated strand concerns advertising and sponsorship purchased through intermediary chains under § 23(7)(b) point 5.

The Financial Administration reports a similar audit volume to 2024, continued specialisation of transfer pricing staff, and audit attention on the realism of the functional and risk profile, group restructurings, intangibles and financial transactions between related persons. It publishes no discrete figure for transfer pricing assessments in 2025.

A September 2025 amendment aligned the GloBE information return deadline with the OECD standard, refined the Czech top-up tax to qualify as a QDMTT and added a permanent safe harbour for non-material constituent entities. For a calendar 2024 first period the information return is due 30 June 2026 and the tax return 31 October 2026.

Czechia answers 'No' to applying the simplified and streamlined approach and 'N/A' to implementation and the OES ceiling. It will respect Amount B outcomes applied by covered jurisdictions, but not by others. No Czech guidance, form or instruction on Amount B has been published.