A new bill on the equalisation tax, which has received the support of the Chamber of Deputies, could allow profits of large multinational companies based abroad but active on the Czech market to be taxed.

Under the plan, the new tax regulation would affect companies with consolidated revenues exceeding CZK 18 billion in two of the last four years. In addition,if the effective taxation of these companies in the Czech Republic does not exceed 15%, they will be obliged to pay an equalization tax that will ensure a minimum 15% taxation. The government is also considering an increase in the corporate tax rate from 19% to 21% as part of the consolidation package.

The law is intended to respond to a European directive that seeks to prevent competition between countries on taxation and set a minimum tax rate for businesses. The finance ministry estimates that the move could bring up to CZK 6 billion a year into the state budget if the current tax rate remains in place.

Despite these changes, the new law is expected to be more preventive in nature,as it could induce companies to minimise aggressive use of tax breaks and shift profits to other countries. The introduction of an equalization tax thus appears to be a step towards a more balanced taxation of large companies on the Czech market.

If it passes, the law is expected to come into force on the last day of this year.

Author: Lukáš Tománek

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