Global tech companies like Google and Facebook, despite generating hundreds of millions in revenue from the Czech market, have been paying surprisingly low income taxes in the country. However, this is about to change as the Czech Republic introduces a new “equalization tax” starting next year.
The impact of this change is significant. Take Google’s Czech subsidiary, for example, which paid a mere 22 million crowns in income tax last year, up from 12.5 million the previous year. While the company reported revenues of 755 million crowns, their actual earnings are believed to be in the billions, with most profits flowing through their Irish headquarters.
The new legislation targets large multinational and domestic companies with consolidated revenues of at least 750 million euros (18 billion crowns) operating in the Czech market. The law ensures a minimum 15% effective tax rate for these corporations.
According to the Czech Financial Administration, approximately 17 multinational groups and 4,800 associated companies will be affected by this tax adjustment. The state budget anticipates collecting one billion crowns in the first year, with expectations to double in subsequent years.
Companies have until October 2025 to file their first tax returns under the new system, covering the 2024 fiscal year. Tax expert Lucia Čechová warns that corporations shouldn’t rely solely on their foreign parent companies to handle these new obligations, as the responsibility for compliance remains with local entities.