As of December 31, 2023, Act No. 416/2023 Coll., on top-up taxes for large multinational groups and large domestic groups comes into effect. This act implements European directive and OECD rules. Currently, a bill to this act is being discussed in the Chamber of Deputies (see our earlier article here).

Although the bill stipulates that the first information reports and top-up tax returns should be filed no earlier than in 2026 (for calendar-year accounting periods, the 2024 information report is due by the end of June 2026, and the return by the end of October 2026), it is necessary to consider top-up taxes already now.

Companies subject to top-up taxes are required to disclose in their financial statements for 2024 whether and, if so, to what extent they will be liable to pay these taxes. This includes both the Czech domestic top-up tax and the GLOBE top-up tax.

While a company may be a taxpayer of top-up tax, this does not automatically mean that it must calculate the tax. In many cases, exemptions or so-called safe harbours can be used to simplify the administrative burden (e.g., relying on data prepared for Country-by-Country Reporting).

Are You Subject to Top-Up Taxes? Key Considerations for the 2024 Financial Statements.

According to the Section 39 (5) of Decree No. 500/2002 Coll., implementing certain provisions of Act No. 563/1991 Coll., on accounting (as amended), for accounting units that are entrepreneurs using double-entry bookkeeping, it is required that the accounting unit, which is a top-up tax taxpayer and accounts for deferred tax, discloses in the notes to the financial statements:

1. Information that it is a taxpayer of top-up tax.
2. Information that the top-up tax was not considered in the calculation of deferred tax.
3. The portion of current tax expense attributable to the top-up tax.

Beyond the above, we recommend providing additional supplementary information in the notes to the financial statements, considering the complexity of the rules for determining top-up taxes (e.g., use of safe harbours, application of alternative procedures, etc.).

The actual calculation of top-up taxes (if safe harbours are not used) is relatively complex and time-consuming. It often requires information about other group entities in the Czech Republic and is usually not based on accounting under the Czech accounting standards. If only a preliminary calculation of top-up taxes is performed for the purposes of the financial statements, the expense for the top-up tax would likely be accounted for through an income tax provision (reserve). In contrast, a detailed final calculation would be directly accounted for as current income tax.

Need Support with Top-Up Taxes?

If you are subject to top-up taxes, we are ready to assist you (e.g., with safe harbour calculations or preliminary top-up tax calculations). Given the complexity of calculations and numerous conditions specified for top-up taxes, we recommend reaching out to your Grant Thornton contact or our specialists in the Centre of Excellence for top-up taxes in the Czech Republic and Slovakia, Petr Němec or Martin Hahn. More information about top-up taxes can be found at the following link.