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11.1. Acquisition and Exit Strategies

Exit Tax Rules

In line with the EU Anti-Tax Avoidance Directive (ATAD),effective 1 January 2020,the Czech Republic has introduced exit tax measures on hidden reserves arising on the transfer of business activities or assets.

Exit tax is applicable on the following transactions:

  • Assets transferred from a head office/ permanent establishment of an enterprise in the Czech Republic to a permanent establishment or to another part of the same enterprise in another country, if a double taxation relief under the exemption method is available or if the subsequent transfer of the asset is not taxable in the Czech Republic; and
  • Tax residence of a Czech Republic enterprise is transferred to another country.

Exit tax on the above transactions will be calculated at the rate of 19% based on the market value of the assets transferred at the time of transfer less their value considered for tax purposes.

However, exit tax rules will not be applicable to assets transferred abroad pertaining to securities financing, financial collateral, or in compliance with statutory capital requirements or for liquidity risk management, if such assets are expected to be returned to the Czech Republic within 12 months.  

Further, the payment of exit tax may be deferred and paid in installments over five years if the transfer is to another EU Member State or EEA state with which the Czech Republic has an agreement for mutual assistance in the recovery of taxes. The deferral payment will cease to apply in case the taxpayer loses ownership of assets or if the assets are transferred to a third state violating the conditions of deferral.