At dispute was the definition of the conditions under which a reference price (i.e. a price that would be negotiated between independent persons in normal business relations under the same or similar conditions) cannot be determined and the tax administrator should therefore use the administrative price (i.e. the price determined in accordance with the legal regulation) as the arm’s length price for adjusting the income tax base. In 2013 Automotoklub Masarykův sold K. A. (a person who participated in its management) real estate for the purchase price of CZK 40 000 000. The tax authorities adjusted the tax base in accordance with Section 23(7) of Income tax Act, comparing the agreed (purchase) price with the price determined in accordance with the Act on the Valuation of Property, as amended in the version applicable to the case at hand (hereinafter referred to as the Act on the Valuation of Property), which amounted to CZK 450,786,850. The Regional Court concluded that the ...
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