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B. NATIONAL ENTERPRISES WITH BRANCHES OR SUBSIDIARIES ABROAD

I. GENERAL METHODS OF ALLOCATION

As already mentioned in connection with the special and general taxes on profits, national enterprises which do business abroad without having any foreign establishments are liable to tax in respect of the profits from this business in the same way as in respect of all their other profits.

Enterprises with establishments abroad are, in principle, liable in respect of the profits of such establishments, only if the latter are not being required to pay income tax abroad. In the event of taxation, the same rules of apportionment apply to national enterprises as to foreign enterprises with establishments in Czechoslovakia. In all cases, however, a certain minimum percentage of the foreign establishment’s profits will be held to tax in Czechoslovakia.

II. ALLOCATION OF PROFITS TO REAL CENTRE OF MANAGEMENT WITHIN THE COUNTRY

For purposes of the taxes on profits, the real centre of management is to be considered as an establishment, as it constitutes an organisation which renders services to the business.

As regards enterprises liable to the general tax on profits which have an establishment abroad, the law lays down that at least one-quarter of the enterprise’s total profits shall be held to tax in Czechoslovakia.

In the case of enterprises liable to the special profits tax, the rule is that the minimum taxable in Czechoslovakia shall be one-tenth of total profits. Further, when enterprises buy in Czechoslovakia and sell abroad or vice versa, at least one-half of the profits from these operations shall be taxable in Czechoslovakia. When enterprises manufacture in Czechoslovakia and sell abroad, the taxable minimum is one-third of the profit from these transactions.

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