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13.4.2. Specific TP Issues

The Czech tax authorities have exponentially increased their focus on transfer pricing and put in place dedicated transfer pricing expert teams.

Intangible Property

The domestic law does not specifically provide for transfer pricing rules or special measures for determining the arm’s length price for transactions involving the license or transfer of intangible property and consequently, the general transfer pricing regulations apply to transactions involving intangibles.

Intra-group Services

The domestic law does not specifically provide for transfer pricing rules or special measures for determining the arm’s length price for transactions involving  intra-group services and consequently, the general transfer pricing regulations apply to intra-group services transactions. However, the tax authorities have issued a special guideline for low value adding intra group services, which inter alia provides that if a taxpayer meets certain prescribed criteria in respect of the provision of low value adding intra group services, a mark-up of 3% to 7% on costs is considered at arm’s length.

Permanent Establishment (‘AOA Approach’)

The Czech Republic does not follow the Authorized OECD Approach for permanent establishment profit attribution in all of its tax treaties. However, the domestic law provides that though the AOA approach is not applied it is possible to make an adjustment of the profit after the end of the taxation period in order to provide a true and fair outcome respecting the real situation (taking into consideration the functions and risks borne by the permanent establishments and the taxpayer itself).