Czech Republic: MLI deposited with OECD

Czech Republic: MLI deposited with OECD

The Czech Republic has deposited with the OECD its instruments of ratification for the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting” (often referred to as the multilateral instrument or MLI).


Related content

The MLI will enter into force for the Czech Republic on 1 September 2020.

The MLI is an outcome of the OECD’s base erosion and profit shifting (BEPS) initiative and aims to implement, collectively and swiftly, new measures to prevent the shifting of profits to countries with low or zero taxation. Adoption of the MLI automatically amends the wording of the relevant tax treaties.

Treaties covered

The MLI covers 52 of 88 income tax treaties entered into by the Czech Republic. The 52 treaty partners are those that like the Czech Republic, have signed the MLI or are negotiating joining the convention and incorporating the changes, and include Slovakia, Austria, Germany, Belgium, Poland, and Switzerland.

Except for Germany, all neighboring countries bordering the Czech Republic have already ratified the MLI.

Effective date

The moment from which the measures adopted by the MLI apply within specific treaties will depend on the date when the MLI enters into effect for such treaties. As regards treaties with states for whom the MLI entered into effect at the same time as for the Czech Republic or before, the new measures concerning withholding tax will apply from 1 January 2021—that is, from the calendar year following the date the MLI entered into effect for both states; for other taxes, after six calendar months (or less, if mutually agreed) from the last of the dates on which the convention entered into effect for each of the contracting jurisdictions covered by the treaty, such as for tax periods beginning after 28 February 2021.


The Czech Republic will only join the convention to the extent of the minimum standard—that is, the rule to prevent treaty abuse (principal purpose test or PPT) and the rule to allow for effective resolution of disputes by mutual agreement (dispute resolution).

  • The substance of the principal purpose test is to prevent the application of tax treaties in situations that originated primarily for the purpose of obtaining a treaty benefit and that have no other substance.
  • The dispute resolution rule is intended to speed up the process of resolving tax disputes by mutual agreement between competent authorities of the individual contracting states. Cases must be presented within three years from the first notification of an action resulting in taxation not in accordance with the provisions of a tax treaty. The time limit for resolving the case by mutual agreement procedure (MAP) is two years from a case’s initial date, unless the jurisdictions have agreed otherwise. The possibility to resolve disputes by MAP under the MLI is to apply to cases submitted to the competent authorities of a contracting state after the MLI has entered into effect for both states.

Read a June 2020 report prepared by the KPMG member firm in the Czech Republic

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal