Tax Treaty Case Law around the Globe 2017

S. 131Czech Republic: Application of the Abuse of Law Concept in Business Restructuring

Danuše Nerudová

1. S. 132Introduction

Case No. 8 Afs 34/2015-71 (known as the CTP case) represents one of several cases brought by CTP group companies in the Czech Republic. It can be considered as a milestone in the effort to counteract international tax planning techniques in the Czech Republic, as it sets the boundaries of what is permissible. This is mainly because it deals with the issue of whether changes in the legal and economic circumstances of a business that result in profit-shifting to a low-tax jurisdiction can be challenged under the abuse of law principle in the Czech Republic.

2. Facts of the Case

At the core of the dispute was the assessment of the tax deductibility of interest on a loan provided in the context of an intragroup restructuring of CTP Property IV, a public limited company (akciová společmost, a.s.). The loan was provided by CTP Property LUX (resident in Luxembourg) to CTP Property a.s., for the purchase of the shares in CTP Alpha, a limited company (společnost s ručením omezeným, spol. s.r.o.) and CTP Beta, spol. s.r.o. in the amount of EUR 510 million. Subsequent to the provision ...