Transfer pricing and the Czech tax policy

Abstract

The Czech Republic as a small open economy with an extensive network of the international tax treaties for the avoidance of the double taxation prevents from shifting the tax base of the associated enterprises to countries with preferential tax regime through transfer pricing rules. Transfer pricing as one of the important areas of international taxes determines how the profits of the multinational enterprises are split between the jurisdictions in which they operate and which countries get to tax those profits. This situation may affect the global budget of the multinational enterprises and the tax revenues of the jurisdictions. This paper is focused on the transfer pricing rules used in the Czech Republic and makes recommendations for the Czech tax policy in this area based on the analysis of the transfer pricing rules in the EU Member States.