Czech News - Dec 96 - Important Income Tax Changes - Anti-Avoidance Provisions

The "transfer pricing" rules requiring transactions between related parties to be set at market rates have been extended such that interest on loans governed by the Civil Code is regarded as a market rate if set at 140% of the CNB discount rate.

The scope of the 25% withholding tax has been widened to include interest paid to a foreign resident which is disallowed under the thin capitalisation rules. Double tax treaty provisions should, however, override this new rule.

Similarly, the 25% withholding tax may now be applied to payments to foreign residents which are disallowed under the transfer pricing rules.

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