Transfer Pricing guide: Czech Republic
Read below for more detailed information on transfer pricing regulations, document requirements, and other considerations for the Czech Republic, as well as recent industry hot topics and key developments in the country's business landscape.
Page updated 1st July 2026
Transfer Pricing regulations
Is the jurisdiction part of OECD/G20 Inclusive Framework on BEPS?
Yes. Czech Republic is an OECD and EU member and follows OECD principles.s
Relevant Transfer Pricing regulation
The main domestic transfer pricing rule is the arm's length principle in Section 23(7) of the Czech Income Taxes Act No. 586/1992 Coll. Relevant administrative guidance includes GFD Guidance D-34/D-59 and Ministry of Finance Guidance D-334 on TP documentation. APAs/binding rulings are governed by Sections 38nc and 38nd of the Income Taxes Act. CbCR is regulated in Act No. 164/2013 Coll.
Is this regulation aligned with the OECD Guidelines
Yes. Czech rules are generally aligned with the OECD Transfer Pricing Guidelines. The OECD TPG serve as an interpretative source for Czech domestic and treaty-based TP rules and are reflected in Czech administrative guidance.
Transfer Pricing documentation requirements
Documentation Threshold for Preparation of Local File/ TP Documentation
No statutory threshold applies for preparing a Local File / transfer pricing documentation in the Czech Republic, as such documentation is not generally mandatory under Czech law. However, its preparation in line with Guidance D-334 and OECD-style documentation principles is strongly recommended. In the event of a tax audit, submitting robust TP documentation is highly desirable, as it supports the taxpayer’s position, substantiates the arm’s length nature of related-party transactions and may help shift the evidentiary burden back to the tax administrator.
Documentation Threshold for Preparation of Master File
No statutory threshold applies for preparing a Master File in the Czech Republic, and a Master File is not legally mandatory. Nevertheless, it is recommended for multinational groups in line with OECD / EU-style documentation practice. In a tax audit, a Master File may provide useful group-level context for the transfer pricing policy and, together with local documentation, strengthen the taxpayer’s evidentiary position and help shift the burden of proof to the tax administrator.
Documentation Threshold for Preparation of Country by Country Report
EUR 750 million consolidated group revenue threshold for Country-by-Country Reporting.
Submission of Local File, Master File, and CbC Report Required? If so, when?
Local File and Master File: no routine statutory filing with the corporate income tax return is required in the Czech Republic. However, transfer pricing documentation should be prepared and kept available for submission upon request by the tax authority, particularly in the course of a tax audit, an APA / binding ruling procedure or MAP / double taxation proceedings. Timely submission of robust documentation is desirable, as it supports the taxpayer’s position and may help shift the evidentiary burden back to the tax administrator. CbC Report: where applicable, the CbC notification / report must be submitted electronically; the CbC Report is generally filed within 12 months after the end of the MNE group’s reporting fiscal year.
If No Submission Required, any Other Deadline?
For Local File / Master File there is no fixed statutory filing deadline where no request has been made. In practice, documentation should be prepared contemporaneously enough to support the CIT return/TP annex and to meet deadlines set by the tax authority during audit or other proceedings.
Other Documentation Requirements
Selected corporate taxpayers must complete a mandatory annex to the corporate income tax return disclosing related-party transactions.
Does TP documentation / Local file Need to be Prepared Contemporaneously with Tax Return Filing (i.e., before filing the return)?
No. OECD-style TP documentation / Local File is not legally required to be prepared contemporaneously with the tax return. However, a contemporaneous file is strongly recommended because the taxpayer bears the burden of proof and the TP annex is filed with the CIT return.
Transfer Pricing Specific Returns
Preparation of TP Return Required?
Yes, in practice for selected taxpayers: not a separate TP return, but a specific mandatory annex to the corporate income tax return covering related-party transactions.
Deadline for TP Return Filing
The TP annex is filed together with the Czech corporate income tax return. Therefore, its deadline follows the CIT return deadline applicable to the taxpayer for the relevant tax period.
Key information to be included in the TP Return
The annex generally includes identification of related parties and amounts/categories of controlled transactions, including income, expenses, receivables/payables, loans/financing and other material related-party dealings, as applicable.
Benchmarking - Local Tax Authority Preferences
Local vs Regional Comparables Set
For a Czech tested party, Czech/domestic comparables should generally be considered first. If insufficient reliable Czech comparables are available, the search may be broadened on a step-by-step basis to comparable regional markets, such as V4, EU or Europe, provided that the selected companies operate in similar market conditions and are functionally comparable to the tested party. The search strategy and selection criteria should be objective, fair, reviewable and supported by appropriate qualitative screening.
Single-Year vs Multi-Year Analysis
No strict statutory rule applies. The tested result for the audited period remains relevant; however, multi-year data, typically covering 3–5 years, may be used to improve reliability, understand business or product life cycles, and smooth temporary fluctuations, particularly for profitability-based methods.
Public vs Private Comparables
Internal comparables should be considered first where reliable, sufficiently comparable and properly documented. For external benchmark analyses, commercial databases and publicly available information are typically used. Non-public or proprietary comparables should only be relied on where they are reliable, sufficiently documented and reviewable; undisclosed “secret” comparables should not be used as the sole basis for an assessment.
Interquartile Range or Full Range
Arm’s length ranges and statistical measures are accepted. A full range may be used where the comparables are highly reliable, similarly comparable and the range is narrow without extreme values. In practice, the interquartile range is commonly used for database benchmarks to improve reliability where comparability is less precise or the dataset includes extreme values; the use of the interquartile range should be justified.
Transaction-Based or Aggregate Approach, or Both
Both approaches may be used. A transaction-by-transaction approach is generally preferred where transactions can be reliably analysed separately. Aggregation may be acceptable for closely linked or continuous transactions, or where separate testing would be impractical or unreliable.
How Often are Benchmarking Sets Renewed (financial update versus full scope BMS preparation)
There is no statutory renewal cycle; however, Guidance D-34 recommends refreshing the search strategy at least every three years, with annual financial updates and checks of the selected comparables’ profitability and independence. Earlier refresh may be appropriate where there are material changes in functions, risks, assets, market conditions or transaction terms.
TP Penalties
In Case of Delayed Submission of Documentation
For Local File/Master File, there is no specific penalty for delayed preparation/submission as such; however, non-cooperation or failure to comply with a tax authority request can trigger general procedural fines and materially increases audit risk. For CbCR, statutory fines may apply for non-compliance.
In case of Income Adjustments in Course of a Tax audit
If a TP audit adjustment increases tax, the standard penalty is generally 20% of the additionally assessed tax. Late payment interest also applies, generally based on the CNB repo rate plus 8%.
Other Considerations
APA & MAP Availability
Both available; APA: Unilateral, bilateral and multilateral APAs are available (the APA fee is currently CZK 10,000). MAP: available for transfer pricing cases under tax treaties, the EU Arbitration Convention and Act No. 335/2020 Coll.; no fee is charged for MAP requests.
Applicability of Safe Harbour Rules
Czech Republic allows/sources a simplified approach for low value-adding intra-group services consistent with OECD principles (GFD D-10). Czechia has not domestically implemented OECD Amount B for baseline marketing and distribution activities.
Critical Transfer Pricing Issues Prevailing in the Jurisdiction, if any
Current high-risk areas include intra-group services and management fees, royalties and intangibles, advertising/marketing services, intercompany financing and guarantees, thin capitalization/debt capacity, restructurings and business model changes, contract manufacturing/limited-risk arrangements, persistent losses and consistency between profitability and functional/risk profile.
Criteria/ Guidelines for Transfer Pricing Audit/ Assessments by Tax Authority
Audits are risk-based. Common risk indicators include significant related-party transactions, low or volatile profitability, recurring losses, large service/royalty/financing charges, business restructurings, substantial marketing or advertising payments, and mismatches between contractual allocation of functions/risks and actual conduct. The CIT TP annex, CbCR data and information exchange can be used for audit selection.
Relevant Regulations and Rulings with Respect to Thin Capitalization or Debt Capacity in the Jurisdiction
Thin capitalisation is regulated by Section 25(1)(w) of the Income Tax Act. The rule sets a debt-to-equity ratio limit (4times of equity). If the ratio is exceeded, interest on intercompany loans is excluded from tax-deductible expenses / becomes taxable.
Transfer pricing remains a key focus area for the Czech tax administration, particularly in tax audits involving cross-border related-party transactions. The tax authorities typically focus on whether the pricing reflects the actual conduct of the parties, the functional and risk profile of the Czech entity, and the commercial rationale of the transaction.
Recent audit practice and case law have highlighted the importance of properly substantiating the arm’s length nature of advertising and marketing services, including arrangements involving intermediaries, as well as contract or toll manufacturing arrangements within multinational groups.
The main areas of focus include intra-group services, royalties and other IP-related payments, financial transactions, business restructurings, marketing and advertising services, recurring losses, and cases where the profitability of the Czech entity does not appear to match its functional and risk profile.
There are no separate Czech accounting or auditing rules specifically governing transfer pricing.
However, transfer pricing may affect the true and fair view of the financial statements, related-party disclosures and tax positions. Czech accounting rules and, where applicable, audit procedures concerning related-party transactions should therefore be considered.
.
Advance Pricing Agreements
Advance Pricing Arrangements are available in the Czech Republic through the Czech binding ruling mechanism. The relevant substantive provisions are included in Sections 38nc and 38nd of the Income Taxes Act, while the procedural framework follows the Tax Procedure Code.
A Czech binding ruling allows the taxpayer to obtain advance confirmation that the selected transfer pricing method, or the method for attributing profits to a permanent establishment, is acceptable for Czech tax purposes, provided that the actual facts and circumstances correspond to those described in the application.
The application is generally submitted to the locally competent tax administrator. The General Financial Directorate is involved in cases concerning taxpayers falling under different local tax administrators and in bilateral or multilateral APA cases. The ruling is effective for the taxable periods specified in the decision, subject to the statutory time limitation and provided that the relevant facts and assumptions remain unchanged.
The APA application should include, in particular, a detailed description of the controlled transactions, the functional and risk analysis, the proposed transfer pricing method, economic analysis, benchmarking or other comparability support, and the relevant contractual and factual background.
Mutual Agreement Procedure
The mutual agreement procedure is available in the Czech Republic under applicable double tax treaties and relevant EU instruments. MAP may be used, for example, where a transfer pricing adjustment gives rise to double taxation or where the taxpayer considers that taxation is not in accordance with the relevant treaty.
If the request is accepted, the Czech competent authority may enter into discussions with the competent authority of the other state with the aim of eliminating double taxation or resolving the dispute.
Alignment with OECD Guidelines
Czech transfer pricing legislation is relatively concise. The core domestic rule is the arm’s length principle reflected in Section 23(7) of the Income Taxes Act. In addition, the Czech Republic applies relevant double tax treaties, EU instruments and administrative guidance issued by the Czech tax administration.
The OECD Transfer Pricing Guidelines are not directly incorporated into Czech tax law. However, they are widely used in practice as an important interpretative source and are reflected in Czech administrative guidance, particularly Guidance D-34. Czech transfer pricing practice should therefore generally be aligned with the OECD approach, while always taking into account Czech domestic law and applicable treaties.
The Czech tax administration has also published information reflecting updates to the OECD Transfer Pricing Guidelines, including guidance on financial transactions and the Czech translation of the OECD Transfer Pricing Guidelines 2022.
Benchmarking Analyses Nuances or Preferences
There is no statutory obligation in the Czech Republic to prepare a Master File or Local File in the same way as in jurisdictions with formal documentation filing requirements. However, robust transfer pricing documentation is strongly recommended. In a tax audit, it is the primary evidence supporting the taxpayer’s position and may help shift the evidentiary burden back to the tax administrator.
For benchmarking analyses, Guidance D-34 places emphasis on the proper delineation of the controlled transaction, functional and risk analysis, selection of the tested party, selection of the most appropriate transfer pricing method, and reliable comparability analysis.
Internal comparables should be considered where available and sufficiently reliable. External benchmark analyses are typically prepared using commercial databases such as Orbis or TP Catalyst, supplemented where appropriate by publicly available information such as annual reports, websites and financial statements.
For a Czech tested party, Czech comparables should generally be considered first. If insufficient reliable Czech comparables are available, the search may be broadened on a step-by-step basis to comparable regional markets, such as V4, the EU or Europe. The search criteria should be objective, fair and reviewable, and the final sample should be subject to qualitative screening.
Independence criteria should generally follow the Czech related-party threshold, i.e. no shareholder holding more than 25% of capital or voting rights. Where too few comparables are identified, the search strategy may need to be reasonably broadened and documented.
Multi-year data, typically covering three to five years, may be used to improve reliability and understand business cycles. The full range may be appropriate where comparability is high and the range is narrow without extreme values. In database benchmark analyses, the interquartile range is commonly used where appropriate, especially where the data set is broad or contains potential outliers. The search strategy should generally be refreshed at least every three years, with annual financial updates and checks of independence and continued comparability.
Thin Capitalisation Considerations for Intercompany Loans
Thin capitalisation rules in the Czech Republic are included in Section 25(1)(w) of the Income Taxes Act. Where the statutory debt-to-equity limits are exceeded, the relevant portion of financial expenses may be treated as non-deductible for Czech corporate income tax purposes.
In addition to thin capitalisation, intercompany financing must also comply with the arm’s length principle. The tax authorities may review, in particular, the borrower’s creditworthiness, debt capacity, purpose and commercial rationale of the loan, interest rate, contractual terms, guarantees, and whether the arrangement is consistent with the conduct that would be expected between independent parties.
Transfer Pricing Primary Risk Areas in Jurisdiction
The most risky areas monitored by the tax authorities are:
Intra-group services and royalties
The tax authorities check whether the services were actually provided, whether they bring an identifiable benefit to the Czech entity, whether there is any duplication or shareholder activity, and whether the charge complies with the arm’s length principle. For royalties and other IP-related payments, the focus is on the legal and economic ownership of intangibles, DEMPE functions, the amount of the royalty, its justification and the link to expected benefits or revenues.
Intra-group loans and financial transactions
The tax authorities review the arm’s length nature of the interest rate and other financing terms, the borrower’s creditworthiness and debt capacity, the commercial rationale of the financing, guarantees, cash pooling arrangements and potential thin capitalisation implications.
Business restructurings and corporate reorganisations
Business restructurings are reviewed with a focus on changes in the functional and risk profile of the Czech entity, transfer of functions, assets or risks, potential compensation for transferred profit potential, and whether the post-restructuring remuneration reflects the actual conduct of the parties.
Functional and risk profile in relation to profitability
The Czech tax administration may challenge situations where the Czech entity’s profitability does not correspond to its actual functions, risks and assets, including cases involving limited-risk entities, contract manufacturers, distributors or service providers.
Recurring tax losses
Recurring losses are commonly reviewed to assess whether they are commercially justified, whether independent enterprises in comparable circumstances would have incurred similar losses, and whether transfer pricing may be the cause of the loss position.
