Initial situation
A Slovak subsidiary of a Czech media group paid licence fees to its parent and to third-party rights holders. Over two half-year periods, invoices had been issued on a net basis while Slovak withholding tax had been paid on the gross amounts, one payment had been made for a licensor that did not belong to the Slovak entity at all, and old liabilities the parent had in fact settled were still sitting in the Slovak books. The group's CFO needed the position reconciled and a process that would stop the problem recurring.
Our solution
We convened a call with the CFO and walked through every amount line by line. The difference between gross and net for the two periods would be invoiced by the parent as an additional intercompany charge and settled by set-off against the withholding tax already paid; one incorrect invoice would be corrected to its gross value with the balance offset; and tax wrongly paid for the third-party licensor would be reclaimed through a corrective withholding-tax notification. Liabilities already paid by the parent were derecognised through income. Going forward, one rule for both finance teams: licence invoices are issued gross, paid net, and the difference is remitted as withholding tax and offset.
Result
The intercompany position was reconciled to the euro, the corrective notification was filed and the overpaid tax recovered, and the group now applies a uniform invoicing and payment protocol for royalties. For an international group, clarity on withholding tax is not only compliance — it determines whether the foreign recipient can credit the Slovak tax at home, and it removes a recurring source of reconciliation differences at consolidation.
