The Supreme Administrative Court has received another case of abuse of law in the creation of a holding structure. The previous case law could be perceived rather negatively, so the professional public was waiting with anticipation to see how the next case would turn out. The Supreme Administrative Court in the case of the applicant FPPV s.r.o. brings a new positive view on the issue of the creation of holding structures and abuse of law. In our opinion, it makes it quite clear that it is not possible to lump all holding structures into one "bag" called abuse of law and automatically impose high taxes on taxpayers without examining the specific circumstances.
In the judgment in question, the court dealt with a company which was accused by the tax authorities of setting up a holding structure for the sole purpose of obtaining a tax advantage. However, it disagreed with the tax authority's view and held that the company had already sufficiently explained the legitimate economic purpose of the holding company in the tax proceedings, so there could be no abuse of law. However, the court further emphasised that it is essential that any entity setting up a holding structure must be able to demonstrate that it is for the purpose of achieving economic objectives such as restructuring, preparing for future acquisitions, centralising asset management, entering new markets or protecting family assets, and is not simply a cover-up to avoid tax liability.
This judgment thus brings greater certainty to entrepreneurs when creating complex holding structures. At the same time, however, it places greater demands on the quality of documentation of the individual steps leading to the establishment of a holding structure.
In view of the above, we perceive that the judgment of the Supreme Administrative Court represents a significant milestone. It confirms that holding structures can have their legitimate justification and cannot automatically be considered only as tax optimisation tools. We cannot overlook the fact that this is one of the first "positive" decisions in this respect. In conclusion, although this judgment represents a significant step forward, it is important to note that each case is specific and the tax authorities may continue to examine individual cases of the establishment of holding structures. At the same time, when creating them, we recommend not to underestimate the "preparatory" phase of the holding structure, which usually involves the genesis of the objectives, ideas and ideas of the functioning of the structure itself. There is then nothing easier than to present the ideas thus materialised on paper to the tax authority during the audit and thus make it clear that a legitimate economic objective was pursued from the outset by creating the holding company.
Author: Jana Šejnohová
In the judgment in question, the court dealt with a company which was accused by the tax authorities of setting up a holding structure for the sole purpose of obtaining a tax advantage. However, it disagreed with the tax authority's view and held that the company had already sufficiently explained the legitimate economic purpose of the holding company in the tax proceedings, so there could be no abuse of law. However, the court further emphasised that it is essential that any entity setting up a holding structure must be able to demonstrate that it is for the purpose of achieving economic objectives such as restructuring, preparing for future acquisitions, centralising asset management, entering new markets or protecting family assets, and is not simply a cover-up to avoid tax liability.
This judgment thus brings greater certainty to entrepreneurs when creating complex holding structures. At the same time, however, it places greater demands on the quality of documentation of the individual steps leading to the establishment of a holding structure.
In view of the above, we perceive that the judgment of the Supreme Administrative Court represents a significant milestone. It confirms that holding structures can have their legitimate justification and cannot automatically be considered only as tax optimisation tools. We cannot overlook the fact that this is one of the first "positive" decisions in this respect. In conclusion, although this judgment represents a significant step forward, it is important to note that each case is specific and the tax authorities may continue to examine individual cases of the establishment of holding structures. At the same time, when creating them, we recommend not to underestimate the "preparatory" phase of the holding structure, which usually involves the genesis of the objectives, ideas and ideas of the functioning of the structure itself. There is then nothing easier than to present the ideas thus materialised on paper to the tax authority during the audit and thus make it clear that a legitimate economic objective was pursued from the outset by creating the holding company.
Author: Jana Šejnohová