How to Structure Intercompany Agreements in a Holding to Avoid Disputes and Tax Risk

23.3.2026 | ARROWS law firm

In a holding environment, relationships between shareholders often deteriorate due to vague agreements. If you want to minimize the risk of disputes between the parent company and a subsidiary or sister companies, it is essential to have legal relationships set up with care. We will show you how to structure a holding so that it operates without conflicts and tax uncertainty.

In the image, we see a lawyer consulting on legal relationships within a holding group.

Service and lease agreements (Intercompany agreements)
Typical risks and issues in holdings without proper setup
Additional tax assessments and penalties
Typical risks and how to address them
How to set up contractual relationships: A practical guide
Practical tips for a successful holding structure
International element in holdings
Common mistakes when setting up holdings

Quick summary

The most common source of disputes in holdings is vague or missing definitions of intra-group transactions. Without clear contractual documentation (so-called intercompany agreements), there is a risk of additional tax assessments as well as liability of statutory bodies.
Properly set contractual relationships protect against additional tax assessments, tax authority audits, and disputes over damages. This is prevention that is cheaper than subsequent penalties and court proceedings.
ARROWS advokátní kancelář has extensive experience in structuring holdings and on a daily basis addresses transfer pricing and relationships between related parties. The firm’s lawyers understand the typical risks and can set up the structure in compliance with Act No. 90/2012 Coll., on Business Corporations (ZOK), as well as Czech tax regulations.

Why is setting up contractual relationships in a holding critical?

Many entrepreneurs do not realize that the moment they connect individual companies—whether through ownership or personnel links—relationships between related parties arise, which are subject to strict regulation. The Czech Financial Administration, insolvency administrators, and minority shareholders may view informal cash flows very differently than you do.

The problem often becomes apparent only when the following occurs:

A tax audit – the tax authority examines so-called and if they are not substantiated, it will assess additional tax including penalties.
A court dispute between shareholders – one shareholder sues the managing director for breach of the duty of due managerial care due to disadvantageous intra-group agreements.
Insolvency – in the event of insolvency of one of the companies, the insolvency administrator challenges transfers of assets within the group as an ineffective legal act.

This is precisely why the attorneys at ARROWS advokátní kancelář have long focused on structuring holdings and know how to set up individual contractual relationships so that they are not only functional, but also legally defensible before public authorities.

What do you need to consider when setting up contractual relationships in a holding?

In every holding, it is necessary to legally anchor whether it is merely a loose grouping or a concern (koncern) within the meaning of Section 79 of the Business Corporations Act (ZOK). If a concern is declared, the parent company may issue instructions to the subsidiary even to the subsidiary’s detriment, provided that the resulting harm is compensated. Without this step, any disadvantageous decision for the subsidiary is a risk for the managing director (breach of the duty of due managerial care).

The attorneys at ARROWS advokátní kancelář prepare records on the determination of a concern, rules for the Report on Relations (Section 82 ZOK), and the delineation of powers of statutory bodies. Without this clarity, there is a risk that statutory bodies will be personally liable for damage caused by an influential person.

Service and lease agreements (Intercompany agreements)

In practice, we encounter situations where the parent company invoices the subsidiary for services (management fee, IT, accounting) or leases assets based only on an oral agreement or an issued invoice.

Such a situation represents a fundamental tax risk. The tax office requires proof of the so-called substantive content and the defensibility of the price. The tax authority’s questions are: “Was the service actually provided? Who performed it? Does the price correspond to market conditions (arm's length principle)?” The reality is that without a written agreement and evidence (timesheets, handover protocols), the taxpayer’s position is weak. The costs may be excluded from tax-deductible expenses.

Key question: Who controls, who decides?

In holding structures, conflicts of authority often arise. The Business Corporations Act (ZOK) and the Articles of Association determine who decides. Typical problems include:

The statutory body (managing director) acts without the required consent of the General Meeting (e.g., for transfers of part of an enterprise or real estate, if required by the articles).
A conflict of interest is not addressed (Section 54 ZOK), where the managing director of one company is also the managing director of another company with which they conclude an agreement.
Unclear powers of procurists versus members of the board of directors.

The attorneys at ARROWS advokátní kancelář set internal policies and management agreements so that it is clear where management’s authority ends and where shareholders’ decision-making begins.

Typical risks and issues in holdings without proper setup

Lost funds and unclear payment titles

Money transfers labelled only as “transfer” or “contribution” are legally ambiguous. If it is not clear whether it is a loan, a contribution outside registered capital, or payment of an invoice, problems arise in both accounting and legal terms. In insolvency, an unclear payment may be recovered into the insolvency estate as unjust enrichment.

Additional tax assessments and penalties

The Czech Financial Administration focuses on related-party transactions. Risks include:

Reclassification of the transaction: What appears to be a service may be assessed as a hidden profit distribution (dividend).
Adjustment of the tax base: If companies invoice each other at prices that do not reflect the market, the tax authority will adjust the tax base and assess additional tax.
Disallowance of costs: Services without clear documentation ("substance") are removed from tax costs.

Liability of statutory bodies

Without clearly defined group instructions, the managing director of a subsidiary bears full liability for damages if they prioritise the holding’s interests over the interests of their specific company (breach of Section 159 of the Civil Code and Section 51 of the Business Corporations Act).

Typical risks and how to address them

Risks and sanctions	How ARROWS helps (office@arws.cz)
Additional tax assessment and penalties: If the tax authority does not accept the transfer prices or costs, it will assess additional tax. This is accompanied by a penalty of 20% of the additionally assessed tax and late-payment interest, which can double the amount.	Preparation of transfer pricing documentation: ARROWS ensures that contracts and pricing comply with the arm’s length principle and withstand a tax audit in the Czech Republic.
Damages claims disputes: Shareholders may sue management for breach of the duty of due managerial care if disadvantageous contracts were concluded without a legal basis (group instructions).	Legal structuring of the group: Our attorneys in Prague will set up governance under Sections 79 et seq. of the Business Corporations Act, including compensation for harm, thereby protecting statutory bodies from personal liability.
Withholding of VAT deduction: The tax administrator may initiate a procedure to remove doubts and withhold an excessive VAT deduction for many months if intra-group invoices are suspicious.	Tax and legal audit of contracts: We will prepare a “defence file” – a set of evidence demonstrating that the services were actually provided and made economic sense.
Invalidity of legal acts: Contracts signed by a person in a conflict of interest without notification to the general meeting may be challengeable.	Corporate compliance: We will ensure fulfilment of notification obligations under the Business Corporations Act and the proper setup of signing authorities.

How to set up contractual relationships: A practical guide

Step 1: Relationship audit (Legal & Tax Health Check)

You must identify all flows:

Financing (cash pooling, loans, contributions outside registered capital).
Services (management services, back office).
Licence fees (royalties for trademarks, know-how).

The result is a relationship matrix, which attorneys will compare with the entry in the Commercial Register and the register of beneficial owners.

Step 2: Preparation of contractual documentation

Contracts must be specific and reflect reality:

Service agreement (SLA):

Specification of services (not just “consulting”, but specific activities).
Price calculation (cost+ method, hourly rate based on a benchmark).
Evidence mechanisms (obligation to report activities).

Loan agreement / Credit agreement:

Interest (must be market-based, otherwise there is a risk of tax consequences, except for specific situations involving shareholders).
Maturity and security.

Business lease agreement / Lease agreement:

Must comply with the Civil Code and market prices customary at the given place and time.

Step 3: Implementation of corporate governance

It is not enough to keep contracts in a drawer. You need to set up:

Authorities: Who approves transactions above a certain threshold (e.g., above CZK 1 million subject to supervisory board approval).
Notifications: Obligation to report conflicts of interest.
Report on relations: Annual preparation of a document under Section 82 of the Business Corporations Act if there is no control agreement.

Practical tips for successfully setting up a holding structure

Substance - for tax purposes, it is crucial to demonstrate that the holding structure is not artificial. Companies must have a real registered office, staffing, and the competence to carry out their activities. Empty shells (“letterbox companies”) are under scrutiny in 2026 under international rules (ATAD) as well as by the Czech tax administration.

The report on relations as a key document - the statutory body of the controlled entity is required to prepare a written report on relations between the controlling entity and the controlled entity within 3 months after the end of the accounting period. It must list all contracts and transactions and assess whether any harm arose. If you neglect this, you expose yourself to the risk of sanctions and lawsuits.

International element in holding structures

If the structure extends beyond the borders of the Czech Republic, the following come into play:

Withholding taxes: On the payment of dividends, interest, or licence fees abroad.
Double taxation treaties.
DAC rules (EU Directive on administrative cooperation): Automatic exchange of information on cross-border structures ().

ARROWS, a Prague-based law firm, through the ARROWS International network, ensures that the structure complies not only with Czech law but also with the legislation in the jurisdiction of the parent or subsidiary company.

Common mistakes when setting up holding structures

Underestimating thin capitalisation rules - interest on loans and borrowings from related parties is tax-deductible only up to a certain amount (thin capitalisation rules under Section 25(1)(w) of the Income Taxes Act). Exceeding the limits leads to non-deductibility of interest for tax purposes.

Failure to address deadlock situations - in a 50:50 holding structure, deadlocks often occur when shareholders cannot agree. Without pre-agreed mechanisms (e.g., a “Russian Roulette” clause, “Texas Shootout” in a shareholders’ agreement), a dispute can paralyse the company and lead to its liquidation.

Conclusion

Setting up contractual relationships within a holding structure requires synergy between corporate law and tax advisory. A mistake in one area (e.g., too low a service price) will cause a problem in the other (additional tax assessment vs. breach of the duty of due managerial care).

A properly structured holding will allow you to:

Manage the group’s cash flow efficiently (e.g., via cash pooling).
Minimise the risk of personal liability of statutory bodies.
Withstand a tax audit.

Lawyers from ARROWS, a Prague-based law firm, provide comprehensive services from setting up articles of association, through preparing intercompany agreements, to resolving disputes. We are insured for professional liability up to CZK 400 million. If you want certainty in terms of legal and tax security, contact us. Write to us at office@arws.cz and arrange a non-binding consultation.

FAQ – Most common legal questions on preventing disputes in a holding structure

1. Must a contract between related companies be in writing?
For legal certainty and especially for tax deductibility, written form is practically essential. For agreements on the performance of office or agreements where there is a conflict of interest of a statutory officer, the law (the Business Corporations Act) directly or indirectly requires written form for validity or effectiveness.

2. How is the rent price determined between related parties?
The price must correspond to the usual (market) price. We recommend preparing a comparative analysis (benchmark) or obtaining an expert report that will support the price in dealings with the tax authority. Contact us at office@arws.cz.

3. What is a Report on Relations?
This is a document required by law (Section 82 of the Business Corporations Act) in which the statutory body of the subsidiary describes relationships with the parent company, mutual agreements, and assesses whether the subsidiary has suffered any detriment and whether it has been compensated. It is a key document for dispute prevention.

4. Can I provide an interest-free loan to a subsidiary?
A loan between related parties may be interest-free, but it has tax implications. For the lender (the parent), it is usually tax-neutral, but for the borrower (the subsidiary) a pecuniary benefit may arise that is subject to taxation, unless specific exemptions apply. It is always necessary to assess the specific situation under the Czech Income Taxes Act.

5. What is transfer pricing?
It is a set of rules that requires related companies to charge each other prices as if they were independent entities. The aim is to prevent shifting profits to countries with lower taxation or tax optimisation within the Czech Republic. ARROWS lawyers and tax advisors will help you set the methodology in line with the OECD Guidelines and the Czech Ministry of Finance.

6. How to resolve disputes within a holding company without going to court?
We recommend including a mediation clause or an arbitration clause in the articles of association and shareholders’ agreements (SHA). This enables faster and non-public dispute resolution, which is essential for the holding company’s business reputation.

Notice: The information contained in this article is of a general informational nature only and is intended for basic guidance on the topic based on the legal situation as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS, a Prague-based law firm registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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