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| November 23, 2017

The first experiences with drawing up and submitting the Country – by Country Report

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At the end of October, the deadline for submission of Country – by Country Report expired for some Czech companies, which are part of a supranational group of companies (hereinafter a “group”), whose consolidated revenues for the entire group exceed the sum of EUR 750m. Czech companies, which are part of a group, whose consolidated accounting period, for which the group must submit a Country – by – Country Report, has ended by October 31, 2017 at the latest and at the same time in the consolidated accounting period, the group posted consolidated revenues exceeding the above-mentioned limit, were obliged to submit the report to a Specialised Financial Office by October 31, 2017. Most frequently, the case was the following: The group has a consolidated accounting period, which corresponds to the calendar year, with consolidated revenues exceeding the sum of EUR 750m for the year 2015 already, whereby a duty arose for the group to submit a Country-by-Country Report for the period of the year 2016 already. At the same time, a duty arose for the Czech Republic, which is part of such a group, to submit a report by October 31, 2017.

It can thus be claimed at the end of October, the deadline for submitting the so-called “first round” of the Report expired.  The second round for submitting the Report awaits us once again this year, though, although it can be expected not to be so extensive anymore. The second round will apply to Czech companies, which need to submit the Report by December 31, 2017 at the latest. More specifically, these are companies, which belong to groups, whose consolidated revenues exceeded the limit of EUR 750m for the period of 2016 for the first time. Such groups are obliged to submit the first Country-by-Country Report for the year 2017.

Our experience with drawing up and submitting the report

Filling in the form of the Report is not difficult with regard to the information required. The following data are needed:

  1. Data about the Czech company;
  2. The period, for which the group will submit the Country-by-Country Report;
  3. Data about the parent company;
  4. Data about the company submitting the Country-by-Country report, if different from the highest parent company.

Although filling in the form is not difficult, finding out all the necessary information for correctly filling in the form is very time-consuming, according to our experience, because in many cases, Czech companies did not have the necessary information available. They mainly did not have the data as to the period, for which the group will submit the Country-by-Country Report, or about who will submit the Country-by-Country Report on behalf of the group. We also came across cases, where the financial department of the group did not tell us precisely the period, for which the group should submit the first Country-by-Country Report. This period thus did not correspond to the law, or to the period, in which the group exceeded the turnover of EUR 750m.

In connection with the first round of submitted Reports, the financial administration issued a press release, pointing out frequent mistakes. According to the Financial Administration, in the first round, a total of 3,500 Reports were submitted, with two types of mistakes prevailing. The first type was that the Report was not submitted via the EPO application (the so-called tax portal). The second type of mistakes was that several companies belonging to one group stated that they will submit the Country-by-Country Report.

In the press release, the Financial Administration further states that until the end of the year 2017, it will not impose fines on Reports submitted late due to ambiguities, with the final list of jurisdictions that have joined Country – by Country Reporting not having been published yet, and is may thus not be clear, which of the entities within a group of companies thus has the reporting duty. The tax administrator will proceed in the same way in case of correction of already submitted Reports.

To conclude, we would like to note to our experience with the Report that the duty of submitting the Report only via the EPO electronic application seems somewhat unfortunate to us. It can be expected that a taxpayer, who in all other cases communicates with the tax administrator via the data box (in electronic form), because of having the option, will do so in the case of submitting the Report as well. We are of the opinion that the lawgiver should mainly contribute to simplifying communication with the tax administrator, and not make it more complicated for taxpayers.