Transfer pricing news

Earthquake or the fresh summer breeze?

Andrea Kleinová

The General Financial Directorate picked on the transfer pricing sphere again. In order to harmonize the procedures for applying international standards in the taxation between so-called related parties, the General Financial Directories issued a new Instruction D-34. At the same time as the new Instruction, the Czech version of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations was published in the Financial Bulletin of the Ministry of Finance No. 5/2019, as amended in 2017.

Although the Instructions D are not legally binding guidelines for tax payers, they bind the tax authorities and they must act within their intentions. The aim of the Instruction D-34 is to increase the legal certainty in determining the tax base affected by transactions between related parties and in the area of so-called transfer prices. In comparison with its predecessor, the Instruction D-332, the new Instruction focuses more deeply on the following ideas:

  • the actual behavior of the parties versus the contractual arrangements (i.e. the principle of substance over form);
  • a detailed overview of transfer pricing methods, including comments on their practical application;
  • recommendations on how to proceed for performing functional and risk analysis, such as functional profile typology, explaining the difference between function and activity, confirming the industry-leading value driver or addressing the legal and economic ownership of intangible assets;
  • guidelines for comparative analysis;
  • recommendations for access to the analysis update.

Currently, in the field of transfer pricing, it is also expected issuance of the Instruction D-35, which will replace the existing Instruction D-34. The oncoming Instruction will be deeply focused on the content of the transfer pricing documentation.


Andrea Kleinová
Andrea Kleinová
Certified Tax Advisor