On 27 March 2019, the Czech Republic released the Law of 12 March 2019, which includes CFC rules among other changes.
A foreign company or permanent establishment will be considered controlled foreign company (CFC) for tax purpose if the Czech taxpayer itself or together with associated persons has a direct or indirect participation of more than 50% in the voting rights, capital, or rights to profit of the entity.
Another condition for the inclusion in the Czech tax base is that the foreign company does not carry out any substantial economic activity and its tax liability abroad is lower than one half of the tax liability that such company would have if it were taxed under Czech tax laws. If the foreign subsidiary qualifies as a controlled company under these conditions, its Czech parent will have to include its selected income, such as income from dividends, interest and royalties in its own tax base. The Czech parent may then offset any tax paid by the subsidiary on this income in abroad against its tax liability.
Another requirement for inclusion in the Czech tax base is that the foreign company does not engage in any significant economic activity and its tax liability abroad is less than one half of the tax liability that such company would have if it were taxed under Czech tax laws. If the foreign subsidiary qualifies as a controlled entity under these conditions, its Czech parent company must include its selected income such as dividend income, interest and royalties on its own tax base. The Czech parent company can then offset the tax paid by the subsidiary on such income in abroad against its tax liability.