Investor Presentaiton
New rules designed to counteract so-called "hybrid
mismatches" between associated entities or arising from
"structured arrangements" were introduced in 2019.
Hybrid mismatches may take the form of a double deduction
when one amount reduces the tax base in both the source
state and the recipient state, or the form of the non-inclusion
of income in the tax base in the recipient state while
deducting expenses in the source state. The tax base has to
be increased by the amount corresponding to the amount
which decreased tax base.
Mergers and divisions of companies can generally be carried
out on a tax neutral basis.
The EU Mergers Directive and the EU Cross-Border Merger
Directive have been broadly assimilated into Czech law. In
general, domestic legislation maintains the tax neutrality
of mergers and allows the transfer of unused tax losses for
transactions satisfying certain legal conditions (transfers
of business and mergers), provided that tax avoidance is
not the main purpose of the transaction. Additionally, there
is a "same activity" rule, under which tax losses can only
be offset against income earned from the same economic
activity that generated the tax loss.
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