Tag: Lease of real estate

Czech Republic vs. Corp. February 2011, Supreme Administrative Court, Afs 19/2010-125

A Czech company (the lessor) owned real estate and rented it to independent parties. An Austrian related company provided management and consulting services to the lessor The service fees significantly increased each year, although the income of the Czech company and the number of lease contracts were constant in the examined years The tax authorities required that the taxpayer prove the actual provision of the services and their relationship to taxable income. The tax authorities rejected this explanation and concluded that the taxpayer had not proven the real condition of the real estate in the examined period. The legal question was: the scope of the burden of proof that rests with the taxpayer with respect to services received from related party The court ruled that: the taxpayer was obliged to prove the relationship of the expensed service fees to its taxable income. Tangible evidence of the provided services, including reports, correspondence and confirmation of business trips should be provided by ... Continue to full case

Czech Republic vs. Corp. January 2011, Supreme Court 7 Afs74-2010-81

A lessor rented real estate for a low price to related parties.  The tax authorities claimed that the price was too low and required additional income to be taxed with the lessor. The lessor explained that the low rental fees were due to the poor condition of the real estate that was leased to related parties. The tax authorities rejected this explanation and concluded that the taxpayer had not proven the real condition of the real estate in the examined period. The legal question was the allocation of burden of proof between the tax payer and the tax authorities is specific phase of the tax inspection. The court ruled that: the tax authorities bore the burden of proof in this case and had to prove all significant parameters of the controlled transaction. The tax authorities must establish the arm’s length price (called the “reference price” in the decision) in order to be able to require that the taxpayer explain the ... Continue to full case