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out in the period when the loss arose. Achange of at least 25 percent in the ownership of reg- istered capital or the voting rights, or a change resulting in a person obtaining a controlling in- fluence in the company, is always considered a substantial change. Restrictions also apply in the case of certain corporate restructuring. A ruling may be obtained from the tax authority to confirm whether a loss may be utilized after a substantial change or restructuring. Transfer pricing As has been the case in other OECD countries, the review of transfer pricing policies has be- come one of the biggest priorities of the Czech tax authorities. The focus is not only driven by global BEPS (Base Erosion and Profit Shifting) initiatives, but also by the general focus of the state administration on increasing the compli- ance of companies with valid regulations and arm's length principles. Czech legislation is relatively simple in this area. Transfer pricing is dealt with in a short provision that states that if prices agreed in transactions between related parties are not at arm's length and the difference is not prop- erly justified, the tax base should be adjusted. It is possible to request unilateral or bilateral advance pricing agreements from the tax au- thorities regarding the method of setting the transfer price between related parties. No ret- roactive agreements are possible. In addition to the provisions of the Income Taxes Act, the Ministry of Finance has issued guidelines providing more detailed informa- tion especially on transfer pricing documen- tation (e.g. Decrees D-332, D-333, D-334 and D-10). These are not legally binding, but given that the tax authorities usually follow them, they represent useful guidance for taxpayers. Companies are also required to disclose vari- ous types of related party transactions, includ- ing the volumes realized with each related par- ty, in an appendix to the corporate income tax return. This disclosure obligation falls upon Czech tax payers who meet one of the three criteria listed below: assets totalling more than CZK 40 million; a net turnover of more than CZK 80 million; ― a recalculated headcount exceeding 50 employees. The obligation is further limited to companies meeting the above criteria, which either: - performed transactions with related parties abroad; incurred tax losses; ― are recipients of investment incentives. 57 40

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