A key date for certain entities with respect to the first phase of country-by-country (CbC) reporting, as introduced in the Czech Republic, was 31 October 2017. Czech entities whose first reporting period ended before 31 October 2017 had to file a notification by 31 October 2017 informing the “specialised financial authority” which company of the group of companies would be filing the CbC report for the group.
Given that the CbC notification date has passed, a review of the filings reveals certain common errors during the first phase of the CbC reporting process.
In examining entities’ compliance with this requirement, tax professionals have noted that there were diverse and challenging situations involving multinational entity groups. In some situations, it was observed to be relatively difficult to determine the identity of the ultimate parent company. In other situations, it was challenging to initiate communication with group members unknown until that time. Consequently, the second most frequent error concerning the CbC notification process was an unclear identification of the reporting entity (i.e., the entity that would file the CbC report for the entire multinational group of companies). Although only one company—typically, the ultimate parent company—would be filing a CbC report for a group of companies, according to information from those CbC notifications received, for some groups, CbC reporting would be completed by several entities at the same time.
Another mistake that was observed was the inability of entities to distinguish the terms of ohlášení (notification) from oznámení (country-by-country report) in Czech, and thus caused an incorrect notification by a Czech entity as being the reporting entity.
Owing to the fact that CbC reporting is an entirely new duty for Czech taxpayers, the tax administrators decided to be relatively benevolent. Based on information received from the financial administration’s representatives, when the tax administrators identified errors or faults similar to those described above or of another nature, they will informally call the taxpayer to rectify the situation. If the taxpayer removes the error by the end of the calendar year, the tax authority will not penalize the taxpayers for a late filing of a notification. Still, the filing of a CbC notification is a one-off duty, as opposed to the submission of CbC reports. A new notification is only required to be filed when the notified information changes. Consequently, notifications are not required to be filed every year.
Read a December 2017 report prepared by the KPMG member firm in the Czech Republic
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