Česká implementace Pilíře 2 – další vybraná zjednodušení

Czech implementation of Pillar 2 - further selected simplifications

Recently, the draft Czech implementation of the Pillar 2 rules was published - i.e. the draft law on equalisation taxes for the purpose of ensuring a minimum level of taxation of large multinational or domestic groups (the TT Act).

In previous articles (to Safe harbours or exception for the initial phase) we have presented several exceptions (or simplifications) to the general application of the Pillar 2 rules and today we bring you two more.

De minimis exception (Section 81 of the TT Act; Article 30 of the EU Directive on ensuring a global minimum level of taxation for large multinational or national groups)

Simply put, jurisdictional top-up tax (“TT”) is zero if

• the average of the qualifying receipts of all member entities in the jurisdiction for that and the two preceding periods is no more than EUR 10 million and
• the average of the qualifying gains/losses of all member entities in the jurisdiction for the relevant and two preceding periods is below EUR 1 million (or represents a loss).

This exemption is optional and generally does not apply to investment and 'stateless' entities.

Qualified domestic top-up tax exception (Section 82 of the TT Act; Article 11 of the Directive)

Simplistically, jurisdictional TT in an EU Member State is generally zero if qualified domestic TT has been calculated in that State for the period under an acceptable accounting standard followed by the ultimate parent entity (UPE) or IFRS.

Let's say we have a German group (consolidating under IFRS) with a Czech subsidiary. If the Czech entity chooses to calculate the domestic TT according to the Czech accounting rules (see Section 31 of the TT Act), in principle the above exception cannot be used and generally the Czech figures will have to be recalculated at the level of the German parent for the purposes of the income inclusion rule (IIR) using IFRS.

We will bring you more interesting insights on interesting exemptions and other aspects next time.

If you have any questions, please contact the author of this article or the EY tax team with whom you regularly work.

Author:

Karel Hronek