A Review of the Czech Draft Top-Up Tax Act

  1. General
  2. Domestic Groups
  3. QDMTT
  4. Model Rules
  5. Administrative Guidance
  6. Elections
  7. Offset of QDMTT
  8. Safe Harbours
  9. Registration
  10. Filing


On May 15, 2023, the Czech Republic issued the Draft Top-up Tax Act, (along with Explanatory Notes) to give effect to the GloBE rules.

The draft legislation includes an Income Inclusion Rule (IIR), an Under-Taxed Profits Rule (UTPR) and a domestic minimum tax (intended to be a QDMTT). Whilst the IIR and the domestic minimum tax apply for reporting periods beginning on or after December 31,  2023, the UTPR will apply to reporting periods beginning on or after December 31, 2024. This is subject to an exception for UPEs located in Member States that decide to defer the application of the IIR and UTPR until 2030.

The draft law closely follows the EU Minimum Tax Directive and reflects the latest guidance, including aspects of the Commentary and OECD Safe Harbours Guidance and some aspects of the Administrative Guidance.

The Czech Republic’s approach to drafting the draft law is similar to Sweden and the UK in that it redrafts the OECD Model Rules (and aspects of other OECD relevant guidance) into domestic law.

There are some interesting drafting approaches in the Czech draft law  – particularly with respect to the GloBE elections.

It is proposed to approve the draft law at first reading so that the law can enter into force no later than 31 December 2023. The explanatory notes to the draft law state that given that the draft law is purely transposing the EU Global Minimum Tax Directive, approval of the law at first reading is an appropriate solution.

The rapid approval of the draft law is also necessary in order to provide sufficient time for multinational and domestic groups to become familiar with the rules that will be applied under Czech legislation.

Based on CbC data for 2019 and 2020 it is estimated that the revenue benefit from the IIR and UTPR will be in the ‘low tens of millions CZK per year’ whereas the domestic top-up tax, is estimated to generate around CZK 4-6 billion per year. Approximately 3,200 Czech entities will be impacted.

[UPDATE: On August 16, 2023, the Czech Cabinet approved the Draft Top-up Tax Act to give effect to the GloBE rules. The Draft law now requires Parliamentary approval.

This replaced the previous Draft Top-Up Tax Bill. The new proposed legislation is more comprehensive than the previous Bill and includes additional aspects of the OECD Administrative Guidance. 

See our Czech Republic: GloBE Country Guide]

Domestic Groups

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