Danove pobidky a Pilir 2

Tax incentives and Pillar 2

The Pillar 2 rules introducing (simplistically) a minimum level of global effective tax rate are fast approaching.

One area where this has the potential to have a significant impact is investment incentives in the form of tax credits - simplistically because tax credits as we know them in the Czech Republic generally reduce the level of tax and therefore have the potential to significantly affect the effective tax rate downwards.

Whether (and how) the Czech Republic will react to this fact in relation to the future setting of investment and other incentives remains to be seen. However, it makes sense to ask what impact these new rules will have on those entities that have already been promised incentives.

In this context, we find the following two aspects particularly important:

• How are incentives reflected in the relevant financial statements in the context of deferred tax?
• How are these items affected by the transitional provisions of the new rules (Article 47 of the EU Global Minimum Tax Directive)?

Depending on the answers to the above questions, the impact of these new rules on incentives already promised may not be as negative as it may seem at first sight.

We would be happy to assist you with an analysis of the potential impact of these new rules on your particular situation.

If you have any questions, please contact the authors of this article or the EY team you are working with.

Authors:

Ondřej Janeček

Karel Hronek