What will tax audits of holding companies focus on?

The tax administration is tightening its supervision of holding companies. According to information from the General financial directorate, approximately 130 holding companies are currently under review, with an expected additional tax assessment of around three billion CZK.

What will the audits focus on? Not on holding companies as such - these have a legitimate role in both commercial and family law - but on distinguishing between a genuine business structure and a purpose-built arrangement lacking economic substance.

As our partner Ondřej Trubač points out in an interview for Česká justice, a strong indicator for tax authorities may be a holding company that functions as an empty shell with a single subsidiary underneath it. The key factors will therefore be the economic rationale of the overall structure, the actual management of the group, and timely documentation - ideally prepared before the transaction rather than after the start of a tax audit.

Patrik Koželuha further notes that in addition to the tax assessments themselves, companies may also face significant penalties in the form of fines and late-payment interest. In extreme cases, they may even face criminal consequences.

The full article in Česká justice can be read HERE.