A Permanent Establishment (PE) is taxable on its profits from resources in the territory of the Czech Republic.
The Czech corporate income tax law considers PE a fixed place of business (e. g. office, mine, workshop) or the performance of services (e. g. advisory, management services) by means of an employee or other persons in the Czech Republic over a substantial period of time (so called “service PE”). PE is usually interpreted by the Czech tax authority only in accordance with Czech national law and the particular double tax treaty, disregarding the OECD Model and the OECD commentary.
The method of taxation of a permanent establishment is either in the same manner as by Czech companies or may be liable to corporate income tax on anticipated profits. The basis on which anticipated profits are calculated must be negotiated in advance with the local Financial Authority, unless the relevant double tax treaty does not stipulate something else.
Every PE must be registered for income tax in the Czech Republic.
Permanent establishment in the Czech Republic
The manner in which Czech VAT law views an establishment is different from that of Czech Income Tax law. Accroding to the Czech VAT Act, an establishment means the branch of a taxable person that can deliver goods or provide services because it is sufficiently permanent and has appropriate personnel and technical resources. The establisment must be registered for VAT in the Czech Republic.
The Czech term establishment is based on the ECJ law (in the reference by Planzer Luxembourg Sarl (C-73/06)) and on the VAT Directive. In this case, the same VAT regulations as for Czech entrepreneurs (only available in Czech) apply to you.
Yourtaxes.cz – as your Tax Advisor in the Czech Republic – is happy to take care of all tax compliance issues relating to your permanent or VAT establishment in the Czech Republic, such as corporate income tax return (once a year), VAT return and VAT control statement (every month), intrastat report (every month), road tax return (once a year), personal income tax return (once a year) etc. On top of this, we can prepare the company’s financial statements (more information about the Czech tax system) and represent your company at the tax authority.
In some cases, although there is no permanent establishment in the Czech Republic or Slovakia, there is an obligation to register for VAT. This applies, for example, to traders who have a warehouse in the Czech Republic or Slovakia. They must register for VAT in the Czech Republic or Slovakia and use their Czech or Slovak VAT ID number for local transactions.
Yourtaxes.cz - Taking care of your permanent or VAT ID number in the Czech Republic or Slovakia