Income Tax Report – A New Obligation for Accounting Entities and Its Impact

Legislative Basis and Implementation

The amendment to the Accounting Act establishes the obligation for selected entities to prepare and make accessible a consolidated or non-consolidated Income Tax Report for the first time for accounting periods starting after 22 June 2024, inclusive.

The obligation to prepare and/or make accessible a consolidated Report applies to the following entities:

• Ultimate consolidating entities, if their consolidation groups include entities also other than Czech companies without foreign branches or permanent establishments and if their annual consolidated net turnover reaches CZK 19 billion in two consecutive accounting periods – obligation to prepare and disclose the Report.
• Large and medium-sized accounting entities, if their ultimate consolidating entity is established outside the EU and the consolidated revenue of their group reaches EUR 750 million in two consecutive accounting periods – obligation to prepare and make accessible the Report.
• Czech branches of ultimate consolidating entity or accounting entity with such ultimate consolidating entity established outside the EU, whose consolidated revenue reaches EUR 750 million in two consecutive accounting periods and which do not control (except for joint control) any large or medium-sized EU accounting entity, provided the revenue of the Czech branch reaches CZK 200 million in two consecutive accounting periods – obligation to make accessible the Report (and possibly to prepare it).

The obligation to prepare and/or make accessible a non-consolidated Report applies to the following entities:

• Independent accounting entities that are business companies and have a foreign branch or permanent establishment in the accounting period, provided their annual net turnover reaches CZK 19 billion in two consecutive accounting periods – obligation to prepare and make accessible the Report.
• Czech branches of independent accounting entities established outside the EU, whose revenue reaches EUR 750 million in two consecutive accounting periods, provided the revenue of the Czech branch reaches CZK 200 million in two consecutive accounting periods – obligation to make accessible the Report (and possibly to prepare it).

The mandatory content of the Report includes identification details of the accounting entity, such as its name and registered office, the currency of the Report, a description of main activities, the number of employees, revenue, profit before tax, income tax expense, income tax paid, and cumulative profit or loss (in the case of consolidated Reports, also data on all controlled entities, etc.).

The Report must be made accessible by filing it in the public registry (in the Czech Republic, in the Collection of Deeds if the obligation to make the Report accessible arises in the Czech Republic), with a link to this registry published on the affected entity’s website. It must remain accessible for at least five years.

The law provides the following exemptions from the obligation to disclose the Income Tax Report:

• Equivalent Report: The accounting entity is not obliged to prepare the Report if it already submits an equivalent report under other European legislation (e.g., Directive 2013/36/EU).
• Protection of Sensitive Information: If disclosing certain information could significantly harm the entity’s market position, this information may be temporarily omitted. The omission must be properly justified in the Report, and the information must be disclosed no later than five years afterward.

Deadlines for Disclosure

The Income Tax Report must be disclosed within 12 months from the balance sheet date of the respective accounting period. For accounting periods starting after 22 June 2024, the first Report will be for the period ending in 2025, with the disclosure obligation due within 12 months from the balance sheet date, i.e., in 2026.

Failure to disclose the Report may result in a fine of up to 3% of the entity's total assets.

Practical Example

A company based in the Czech Republic is part of a multinational group. Its accounting period is set from October 1, 2024, to September 30, 2025. Although the company's turnover in the Czech Republic does not reach CZK 19 billion, the group's total consolidated turnover for the last two accounting periods exceeds EUR 750 million. The ultimate consolidating entity is established under German law.

The group, specifically the German consolidating entity, is obliged to prepare and disclose the Income Tax Report for the accounting period starting on October 1, 2024. The Report must be disclosed within 12 months of the balance sheet date (September 30, 2025), i.e., by September 30, 2026, and published on the German company’s website and filed in the relevant German public registry.

However, if the consolidating entity were, for example, a company from the USA (and the total consolidated revenue reached EUR 750 million in two consecutive periods) and the Czech company were its branch with revenue reaching CZK 200 million in two consecutive periods, then the Czech branch would be obliged to make the Report accessible in the Collection of Deeds (and publish a link to it on its website). If the US company did not prepare the Report, the Czech branch (or its authorized representative, e.g., the managing director) would have to prepare it.

Conclusion

The new obligation to prepare and disclose the Income Tax Report represents a significant change, particularly for large accounting entities and consolidating entities. This obligation arises from European directives, aiming to enhance transparency and help prevent tax evasion. For affected entities, it is crucial to focus on proper preparation and timely disclosure of the Report to avoid potential sanctions and reputational risks.

Authors:

Pavla Vítková, Tax Department Manager

Olga Těhlová, Senior Consultant, Tax Department