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Czech Republic: Activities give rise to “dependent agent” permanent establishment

Czech Republic: Activities give rise to dependent agent

A regional court of České Budejovice held that if an agent’s activities are a separate and essential part of a non-resident taxpayer’s business activity, these give rise to a permanent establishment of the taxpayer in the Czech Republic.


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The court held the activities of the agent do not necessarily have to be carried out under a power of attorney, and that it is irrelevant whether the agent conducts the activity for multiple entities.

Activities of agent for German company gave rise to permanent establishment

The taxpayer (a German company) claimed that:

  • All of its business activities were managed and carried out in Germany.
  • The activities of the Czech company (the agent) were solely of a preparatory or auxiliary nature.
  • The Czech agent was not authorized to conclude contracts or place orders for the sale of goods in the taxpayer’s name; it did it have a power of attorney from the taxpayer; and it only provided administrative and call centre services for the taxpayer.

The taxpayer thus asserted that it had no permanent establishment in the Czech Republic under either the Czech income tax law or the income tax between the Czech Republic and Germany. 

The tax authority, however, contended that there was a permanent establishment because the agent’s activities formed a separate essential part of the taxpayer’s business and that it was irrelevant that the Czech agent did not have a power of attorney. 

The regional court agreed with the tax authority and upheld a finding of a permanent establishment.  


Read a May 2018 report prepared by the KPMG member firm in the Czech Republic

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