Investor Presentaiton

There is currently no legal obligation to have transfer pricing documentation prepared. However, the tax authorities regularly requires transfer pricing documentation to be provided during tax inspections with the usual deadline of 15-30 days. Thin capitalisation Thin capitalisation provisions act to restrict the deductibility of interest and other loan expens- es where the borrower has insufficient equity. The rules can be summarised as follows. - Financial expenses (including interest) arising from loans and credits received from related parties in excess of four times (six times for banks and insurance companies) the borrower's equity are not tax deductible. - Interest on loans and credits received from unrelated parties, or those secured by a related party, is fully deductible on general principle, except for interest on "back-to-back" loans (i.e. where a related party provides a loan, credit or deposit to an unrelated party which then provides the funds to the borrower), which is treated as interest on related party debt. - Where interest or other revenue is derived from the borrower's profit, all financial expenses on the loans or credits received are non-deductible. Any upward adjustment of profit resulting from a transfer pricing or thin capitalisation adjust- ment relating to a non-EU or EEA resident counterparty may be treated as a dividend, i.e. is subject to dividend withholding tax, as reduced by the provisions of any applicable double taxation treaty. Taxation of individuals Individuals are subject to income tax, social se curity, health insurance, and taxes on land and buildings. The taxation of individuals primarily depends on their residence status. Residents of the Czech Republic are subject to tax on world- wide income, whereas non-residents are sub- ject to tax on Czech source income only. Czech tax residence is defined as either: - having a permanent home in the Czech Republic; - spending 183 days or more in the Czech Republic during the tax year (the year to 31 December). Personal income tax is charged on: employment income; business income; ― investment income; - rental income; 58

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