Complex tax and accounting advice

Tax audit – defense of tax deductibility of services

A client with a turnover of more than a billion turned to us for help with a tax audit. The tax administrator questioned tax deductibility and the right to deduct input VAT for received in-house services in the amount of approximately CZK 25 million. As part of the tax audit, we guided the client through the process of compiling documentation proving the range of services received and their benefit to the company, including the justification of the fair value of invoiced amounts. We initiated a personal meeting with the tax administrator for the purpose of explaining the individual performance and invoicing methodology. The result was the conclusion of the tax audit without any assessment.

Acquisition of real estate companies – due diligence

A group of real estate companies asked us to perform tax and accounting due diligence on the acquisition of ten companies, each of which owned and leased commercial real estate. As part of tax and accounting due diligence, we not only performed standard tests and reviewed the correctness and sufficiency of the documentation provided, but we were also involved in the calculation of the purchase prices of individual companies. Based on our findings during accounting and tax due diligence, our client was able to negotiate a discount on the purchase price and, in addition, set up the tax planning of individual real estate companies more effectively.

Foreign investment in a Czech IT company

A client with a turnover exceeding CZK 500 million in the field of software development acquired a significant investor in order to finance the further development of the company. In this context, it was necessary to tax-treat the individual steps of the investor’s entry, which also involved the spin-off of part of the business. The subject of our analyzes was also the assessment of the tax effects on the private owner of the group, the analysis of individual variants of the investor’s entry from the point of view of tax effects, or the tax revision of related contracts with the investor. Work on the project took place in close cooperation with a law office, with which we have long-term cooperation on a number of projects.

New companies were also established within the project and our office was responsible for ensuring all tax registrations. The result of the project was the successful conclusion of contracts with the investor, the creation of an appropriate company structure, including the capture of related tax impacts.

Holding structure

For a cliet operating in the field of production and IT services with an annual turnover of half a billion CZK, together with legal advisors, we ensured the creation of a new holding structure in the form of a division in the form of a split by merger. The project included the creation of a new holding company, the deposit of shares and the spin-off of the service and real estate parts into separate companies. We analyzed and described in detail for the client the tax and accounting effects of deposits, spin-offs, including registration obligations. We assisted in the accounting of related accounting operations and the setting of transfer prices between the new companies of the group.

Investment incentives – maximizing tax credit

Client operating in the manufacturing industry received a decision on the promise of a tax credit in the form of an investment incentive. As part of our consultancy, we focused with the client on the possibilities of minimizing the tax base for all tax periods, which will affect the base for drawing tax credits in the future. It was possible to achieve a reduction of the tax base in the order of higher units of millions of CZK in each tax period, as a result of which the company also significantly reduced the resulting income tax in the following 10 years of using incentives, as all additional profits will be covered by a discount in the form of an investment incentive.

Shared services center – VAT

An important global manufacturer with a turnover of several billion CZK turned to us with a request to provide regular consulting services in the field of VAT for its European shared services center. The Shared Services Center is based in the Czech Republic and covers the accounting and tax agenda of companies based in the EU and outside the EU. In cooperation with us, we set up VAT processes, submit VAT returns for all foreign entities, identify tax savings in the VAT area and train our client’s internal VAT team.

Review of TP set-up and preparation of supporting documentation

For a company operating in the automotive sector with an annual turnover exceeding CZK 10 billion, we performed an analysis of the current setting of transfer prices. Since the price setting of some transactions was identified as risky, we proposed a change in the price setting methodology. At the same time, we assisted the management of the Czech company in negotiations with the parent company abroad, so that the change was accepted at the group level as well. Subsequently, a complete documentation of transfer prices was prepared, including the compilation of more than 10 benchmarks, which the client will use in any defense before the tax administrator as part of a tax audit.

Transfer pricing – obtaining a binding assessment

For newly created holding structures, it is necessary to set the transfer prices correctly. However, the goal of this project for a client in the automotive field was not only to propose a transfer pricing methodology, but also to help the client to obtain binding approval of this TP setting from the tax authority. We thus prepared four requests for a binding assessment of transfer pricing settings, in which the tax administrator approved our proposed methodology. The binding assessment also required active communication with the General Financial Directorate. The result of our work is an effectively structured group with correctly set transfer prices. Thanks to the binding assessment, the client has the highest possible certainty that the tax administrator will not question the transfer pricing set-up in any way for the following next three years.