Everything will stay...new! On 5 th September 2016 TPA Horwath became 11 Countries. 11 Tax Systems. The year 2014 also brings extensive changes in the areas of taxes, duties and social contributions in CEE and SEE countries. This special newsletter covers essential changes in effect as of 2014. TPA Horwath offers an overview of the most important tax innovations in the following CEE and SEE countries: 1. Albania... page 1 2. Bulgaria... page 2 3. Croatia... page 3 4. Austria... page 4 5. Poland... page 4 6. Romania... page 5 7. Serbia... page 6 8. Slovakia... page 7 9. Slovenia... page 7 10. Czech Republic... page 8 11. Hungary... page 9 1. Albania 1.1. VAT Starting 1 April 2014 the supply and importation of medicines and health care services has become VAT exempt. Local and cross-border supplies of services and importation of goods in the hydrocarbons sector directly relating to the development phase have become subject to VAT. The timeframe for verifying and authorizing VAT refund claims has been extended from 30 days to 60 days. 1.2. Corporate Income Taxation As of 1 January 2014, the corporate income tax rate for taxpayers with an annual turnover exceeding ALL 8m (approx. TEUR 57) has been increased from 10% to 15%. The tax deductibility for second-tier banks bad debt provisions created in compliance with IFRS is no longer limited to the amount of provisions determined in accordance to the Bank of Albania regulations. Albania Austria Bulgaria Croatia Czech Republic Hungary Poland Romania Serbia Slovakia Slovenia Member of Crowe Horwath International (Zurich) a worldwide association of separate and legally independent chartered accountants and consultants
1.3. Small Businesses Tax Small businesses i.e. taxpayers with annual turnover between ALL 2m to ALL 8m (approx. TEUR 14 to TEUR 57) are exempt from the 10% personal income tax and are now subject to the simplified income tax at a rate of 7.5%. The simplified income tax for small businesses is administered by the General Tax Directorate and no longer by the local government. Small businesses with an annual turnover below ALL 2m are taxed at a fixed amount of ALL 25,000 (approx. EUR 179) payable within the first half of the fiscal year. 1.4. Personal Income Taxation Taxation of employment income has changed from a flat tax rate of 10% to a progressive tax scale. Employment income ranging between ALL 30,000 and ALL 130,000 (approx. EUR 215 and 930) is taxed at 13% and any excess income is taxed at 23%. The initial ALL 30,000 of the employment income is tax exempt. 1.5. Real Estate Tax Individuals owning more than one residential property are subject to a tax equal to a range between ALL 5 and ALL 30 (approx. EUR 0.04 to EUR 0.2) per square meter on the first property, and twice the higher rate for any additional property. 1.6. Other As of 1 January 2014, the base for the calculation of health insurance contributions is the gross salary. The ceiling amount has been removed. Also, a new base for calculating the health insurance contributions of self-employed individuals and the voluntary health insurance contributions for unemployed individuals has been introduced. It is calculated as twice the minimum national salary amount (currently ALL 19,026 (approx. EUR 136)). Starting 1 April 2014, excise duties on the importation of petroleum by-products have been implemented. Also, excise duties for alcoholic beverages and tobacco products have been increased. 2. Bulgaria 2.1. VAT Until 2018 a temporary application of reverse charge mechanism for supplies of certain goods and services susceptible to fraud has been implemented. The amendments apply also to cereal and industrial crops, which are most commonly used in complex fraud VAT schemes. A new special mode for the cash reporting of VAT has been introduced. The implementation of this special scheme aims to support small enterprises. The special regime for cash accounting allows those who apply it to report the VAT after the payment of the delivery from their clients. Certain criteria have to be fulfilled in order to apply the cash reporting of VAT. Some amendments to the supplies of goods under finance lease have been introduced. These amendments refer to the criteria under which the lease deal is treated as acquisition of asset (supply of goods): e.g. when a purchase option is agreed and the sum of the due contributions of the lease (excluding the interest payments) is identical to the market value of the goods at the date of their disposal. May 2014 2
2.2. Income Tax As of 1 January 2014 the tax relief for young families allowing the deduction of interest on a mortgage credit for the purchase of housing is also applicable to foreign natural persons (who generate part of their income in Bulgaria) who are resident for tax purposes in an EU or EEA State. 2.3. Corporate Income Tax As of 1 January 2014 the requirement of 2 years holding period does not have to be fulfilled in order to apply the reduced withholding tax rate of 5% for interest and royalties. 3. Croatia 3.1. VAT As of 1 July 2013, when Croatia joined the EU, the Croatian VAT legislation has been fully synchronised with the EU VAT Directive. The standard VAT rate of 25% has not been changed. However, from 1 January 2014, the lower VAT rate of 10% which applies for supplies in tourism and catering business, sugar, edible oils and fat, children s food, water, concert tickets, periodic magazines and cultural as well as art magazines, has been increased to 13%. Furthermore, customs controls between the Republic of Croatia and other member states have been abolished. The transfer of goods between the EU member countries is now under the control of the Tax Authorities. For reporting purposes, INTRASTAT reports have to be filed with the Customs Authorities. 3.2. Income Tax/Corporate Income Tax The corporate income tax rate can be reduced to 10%, or 0% depending on the area the company is registered and the number of employees. Personal income tax can be reduced by 50% or 100% for selfemployed persons (entrepreneurs), depending on the area where the business activity is performed and the number of employees. Thin capitalization provisions (i.e. debt to equity ratio of 4:1), which were required for the loan interest to be a tax-deductible expense, now also refer to loans received from any related party, in addition to the loans received from the shareholders. 3.3. Withholding Tax As of 1 July 2013, dividends paid by a Croatian resident company to a company resident in the EU are exempted from taxation in Croatia, if the recipient company has held a minimum of 10% shares in the Croatian company for at least two years. Interest and royalty payments by a Croatian resident company to associated companies resident in the EU are also exempted from taxation in Croatia, if such payments are made to the beneficial owner of the Croatian company, who has held at least 25% shares in the company for a minimum of two years. 3.4. Other Following Croatia s entry into the EU, the provisions concerning social security contributions were changed to correspond with the social security system of the EU. The new provisions ensure that persons living or working in the EU fall under the legislation of only one EU member state, usually the person s country of residence. A new model of reporting on income, personal income tax and social security contributions known as the JOPPD form became effective on 1 January 2014. May 2014 3
4. Austria 4.1. VAT As of 1 March 2014 the limit for invoices for small amounts was increased to a total of EUR 400. A further amendment concerns supplies of certain goods susceptible to fraud, such as video game consoles, laptops, tablets (with an invoice amount of more than EUR 5,000.00), as well as supply of gas and electricity as and the transfer of gas and electricity certificates. Those supplies are subject to the reverse-chargemechanism. 4.2. Income Tax Starting 2014, bonds except mortgage bonds - are not included in tax advantaged investments for the use of the investment-related profit allowance. The limitation of the investment-related profit allowance for higher profits, which was provided for 2013 until 2016, is now valid for an unlimited time. Furthermore the carryforward and the set-off restrictions are abolished as of the assessment for 2014. 4.3. Corporate Income Tax The recent reduction of the minimum capital of limited liability companies to EUR 10,000 (so called GmbH light ) is now increased to EUR 35,000 again. However, some privileges for the first 10 years after foundation of a corporation have remained: Foundation of a limited liability company with a starting capital of EUR 10,000. After 10 years the minimum capital has to be increased to EUR 35,000. Minimum CIT of EUR 500 within the first 5 years after foundation; afterwards minimum CIT of EUR 1,000. Only as of the 11th year full minimum CIT of EUR 1,750. Special regulations for corporations founded after 1 July 2013 in regard to the increase of the share capital and the minimum CIT. As of 1 March 2014 interest and royalty payments to intra-group companies (in- and outside Austria) can not be deducted for CIT purposes, if one of the following conditions is fulfilled: Interest or royalty payments underlie at the level of the receiving company: no taxation because of personal or objective tax exemption, or a tax rate below 10%, or an actual tax burden of less than 10% because of tax reduction. In connection with group taxation there have been restrictions for possible group members. Only foreign corporations from EU countries or countries with which Austria has concluded a comprehensive administrative assistance agreement are eligible to be a group member. Foreign group members not fulfilling these conditions will be eliminated from the group as of 1 January 2015. The taxable losses of the eliminated group members, which have been credited in the past, have to be taxed. Starting 2015, only 75% of foreign taxable losses can be credited with the domestic group result. Moreover depreciation of goodwill is only possible for participations that have been acquired until 28 February 2014. 5. Poland 5.1. VAT As of 1 January 2014, the following amendments came into force: The VAT liability no longer depends only on the date of issuance of the invoice. As a general rule, VAT is charged at the moment of supply of goods or supply of services. However, there are some exceptions (construction services, electrical energy, heating, cooling or gas, telecommunications services, hiring or leasing services) where VAT is charged upon issuing of the invoice. Unlike in the expired regulations no May 2014 4
special regulations are implemented for license fees and transportation services. The deadline for issuing of invoices has been extended. Generally, suppliers have to issue invoices by the 15th day of the month following the supply of goods or supply of services, and no sooner than 30 days before the supply of goods or supply of services. A new definition of tax base for VAT purposes has been implemented. All payments received by the taxpayer constitute the taxable amount. The taxable amount includes additional costs such as commissions, costs of packaging, transportation or insurance, as well as duties, fees or taxes other than VAT, paid to the supplier by the buyer. In case of free-of-charge supplies, the taxable amount constitutes the acquisition price of goods or their equivalents, or, if there is no acquisition price, the manufacturing cost which was determined at the time of supply. Under certain conditions the taxpayers are not required to obtain a confirmation of receiving the relevant credit note by their contractor in order to settle the correcting invoice (credit note) as well as reduce the VAT. It is sufficient to document that the taxpayers attempted to deliver the credit note and that the buyer is aware of the correction. It is possible to fully deduct the input VAT on acquisition of some passenger cars for business purposes. The new regulations apply only to passenger cars which meet certain conditions. Taxpayers are not entitled to deduct the amount of the input VAT until the tax liability of the purchased goods or services has resulted for the seller. 5.2. Corporate Income Tax As of 1 January 2014, partnerships limited by shares (spółka komandytowo-akcyjna) are subject to corporate income tax. i.e. they are no longer regarded as tax-transparent. 5.3. Personal Income Tax As of 1 January 2014, due to the fact that partnerships limited by shares are subject to corporate income tax, income from participating in these kinds of partnerships is taxed analogically as dividends. 6. Romania 6.1. VAT Starting 1 January 2014, the application of the cash accounting VAT scheme has become optional. As of 1 September 2013, the application of the reverse charge mechanism has been extended to the local supply of electricity to taxable energy traders, as well as green certificate transactions (until 31 December 2018), under certain conditions. Furthermore, bread and related bakery products are subject to the 9% reduced VAT rate. 6.2. Income Tax/Corporate Income Tax The application of the micro-enterprise tax regime is mandatory for taxpayers fulfilling the conditions to qualify as micro-enterprises. Moreover, among other modifications, the turnover threshold for microenterprises has been reduced from EUR 100,000 to EUR 65,000. New provisions have been introduced which should create a more favorable system for holding companies established in Romania. Therefore, starting January 2014, the dividends received, revenues from sale of shares held in Romanian or foreign companies, and income from liquidation will be considered non-taxable, provided that at least 10% of the share capital has been held for an uninterrupted period of at least 1 year. In addition, the shareholding period has been reduced to 1 year (as opposed to 2 years), also in the case of withholding tax applicable to payment of dividends. Starting 1 July 2013, foreign taxpayers with more than one permanent establishment (PE) in Romania must designate one of their entities to fulfill the obligations of all their Romanian PEs. Consequently, it will be possible to consolidate the tax results of all the Romanian PEs of the same foreign entity. May 2014 5
Sponsorship expenses are not deductible for tax purposes, but under certain conditions taxpayers may use them as tax credits from sponsorship up to 3 from turnover resp 20% of corporate income tax liability. The deferred deduction right for non-deductible interest expenses and foreign exchange losses may be transferred following a merger or spin-off process to the legal entities that benefit from the process in proportion with the assets and liabilities being transferred (as per the spin-off or merger plan). 6.3. Other Group companies, whose financial year is different from the calendar year, may now opt for their fiscal year to coincide with the financial year. As of 1 January 2014 a new construction tax has been introduced, which is applicable to constructions that are not subject to buildings tax. The construction tax is 1.5% of the book value of the qualifying constructions as of 31 December of the previous year. As of 1 February 2013, the tax on income from operating activities of natural resources, other than gas, is set at 0.5% and should be computed based on specific formula provided by law. 7. Serbia 7.1. VAT As of 1 January 2014, the reduced tax rate (for basic food stuffs - bread, milk, flour, cooking oil, fresh and frozen fruits, vegetables, meat, fish and eggs, listed drugs, agricultural fertilizers, pesticides, textbooks, daily newspapers, hotel services, public utility services, gas, first transfer of ownership on residential buildings, secondary raw materials, etc.) has been increased from 8% to 10%. As of 1 January 2014, personal computers are also taxed with the standard rate of 20%, as opposed to the previous 8% rate. 7.2. Corporate Income Tax As of 2014, tax credits for investments in fixed assets have been abolished. However, unused tax credits carried forward as of 31 December 2013 can be used in the subsequent 5 years. All legal entities having related party transactions have to file a transfer pricing documentation to the Tax Authorities. 7.3. Personal Income Tax Non-resident individuals who have realized an annual income in Serbia during 2013, which exceeds three average annual salaries as per official statistics, are obliged to report and pay their annual personal income tax, (taxed with progressive tax rates of 10% and 15%) by 15 May 2014. 7.4. Real Estate Tax Starting 2014 different methods of determining the taxable base for the purpose of assessing real estate tax for legal entities are being used. The new method of assessment is based on the actual surface of the immovable in question and the average square meter prices in the zone where the real estate is located (published on the official web site of the local Authorities). However, certain exceptions to this general rule apply (i.e. tax base for certain immovable will remain net book value of the asset as at 31 December of the previous year). The above change in method of calculation will result in a significant increase of real estate tax liability, even though tax rates remained unchanged May 2014 6
8. Slovakia 8.1. VAT A new obligation for VAT payers the so called Control Report has been introduced. The Control Report is filed to the tax authorities electronically together with the VAT return. The VAT Control Report includes details on tax liabilities and deductions on the invoice level. High penalties for non-submission or incorrect information stated therein will be imposed. 8.2. Income Tax/Corporate Income Tax The corporate income tax rate has been decreased from 23% to 22%. Furthermore, tax licenses (minimum tax) have been introduced for commercial companies for the tax period starting on 1 January 2014 at the earliest. There are three annual rates of minimum tax: EUR 480 (Non-VAT payer with revenues up to EUR 500,000) EUR 960 (VAT payer with revenues up to EUR 500,000) EUR 2,880 (company with revenues over EUR 500,000) The tax license can be deducted from positive tax liability in the next maximum 3 years after its payment. As of 1 January 2014, tax losses can be deducted equally at most for four consecutive tax periods. This clause is also applicable for unused tax losses shown in tax periods 2010 to 2013. In case of the sale of a company s share in which more than 50% of the equity consists of real estate property located in Slovakia, the income from the sale is taxable in Slovakia (this applies only if it is accepted by international treaty). Also, the definition of service-permanent establishment has been introduced. The deadline for the filing of transfer pricing documentation has been reduced significantly from 60 days to 15 days. 8.3 Withholding tax For payments to non-contracting states (e.g. off shore countries) a tax rate of 35 % has been introduced. However, this does not apply to dividends. 8.4. Other A micro accounting unit has been introduced which includes financial statements in a shortened version comprising of Balance Sheet, Profit and Loss Statement and Notes. 9. Slovenia 9.1. VAT As of 1 July 2013 the standard VAT rate has been increased from 20 % to 22 %; the reduced VAT rate from 8.5 % to 9.5 % respectively. A further increase of the VAT rates has been discussed in 2014, but has not been done. 9.2. Income Tax For the first time there has been no adaption for inflation for income tax rates and tax allowances in 2014. May 2014 7
The marginal tax rate of 50 % for income exceeding EUR 70,907.20 is applicable until the end of 2014. 9.3. Corporate Income Tax The successive reduction of the corporate income tax rate to 15 % until 2015 has been stopped at 17 % in 2013. Therefore the corporate income tax is rate 17% for the time being. Interest on loans from associated parties is only deductible for tax purposes where the debt / equity ratio is not lower than 4:1. As of 2014 equity is calculated as average of all equity-positions of the financial year except yearly profits. Loss carryforwards are also to be considered. As of 2014 the thin-capitalization regulations are also applicable for the financing of sister-companies. Financing by non-related parties, for which the shareholder is liable, is equivalent to financing by shareholders; e.g. also pledging of shares. 9.4. Other A special tax of 70% for non-declared income has been implemented. Instead of implementing the planned real estate tax, different excise duties will be increased in 2014. 10. Czech Republic 10.1. VAT Revenues from the sale of land which is neither considered as building land nor built-on are VAT exempt otherwise the building regulations apply. The sale of buildings is tax exempt if it occurs 5 years after the initial commissioning or first use; otherwise the VAT rate of 21% is applied (except for so-called welfare housing where the reduced rate of 15% is applied). For buildings acquired before 1 January 2013 the exemption period is still 3 years. As the building and the land on which it is built are now seen as a unit, VAT taxation can now also be applied on land. A VAT payer who receives a taxable supply ( recipient ) which is taxable in the Czech Republic is liable for the unpaid VAT under certain circumstances: all VAT payers have to report their Czech bank account used for business purposes. In case that the receiver pays to a Czech bank account, which has not been reported to the Tax Authorities, he is liable for the VAT in case that the invoice exceeds CZK 700,000 (EUR 25,557). In other cases of VAT liability, i.e. when the supplier is known to be an unreliable VAT payer, or when the payment is not made to a Czech bank account, or when tax evasion or fraudulent obtaining of tax advantages are involved, the liability is not limited by any amount. As of 1 January 2014 all VAT payers are required to submit tax returns, supplementary tax returns and reports including attachments electronically. This also applies for the application for registration for VAT purposes and for changes of registration data. Exceptions only apply for (individual) VAT payers whose turnover in the 12 preceding calendar months has not exceeded CZK 6 mio. 10.2. Income Tax As the Inheritance and Gift Tax have been abolished, income from these sources is now subject to Income Tax. However, income from inheritances is fully tax exempt for individual and legal persons. Also, under certain conditions, received gifts are exempt (e.g. occasional gifts not exceeding CZK 15,000 (EUR 548)) for individual persons. As of 1 January 2014, the acquisition price of land is fully deductible in case of its sale. Also, losses from the sale are fully tax deductible. However, for individual persons, the acquisition price is only deductible up to the sum of income from sale of the relevant property. May 2014 8
10.3. Immovable Property As of 1 January 2014 buildings are no longer seen as separate objects, but become part of the land. The term immovable property is extended by building rights. A new Real Estate Acquisition Tax, which has been effective as of 1 January 2014, is replacing the former Inheritance Tax, Gift Tax and Real Estate Transfer Tax. 11. Hungary 11.1. VAT Currently, the VAT liability for services rendered (e.g. rental of real estate), the settlement of which takes place as agreed on maturity at the end of periods, is being worked on. According to the new legislation, tax liability for the invoice periods, which will begin after 30.06.2014, will occur on the last day of the relevant period. 11.2. Corporate Income Tax The relevant threshold for the existence of a so-called disclosed involvement have been extended. If company shares are acquired by at least 10%, and the shareholder has participated continuously in the company for at least one year, then the profit from the sales of the shares is exempt from Corporate Income Tax, if the acquisition of the shares was registered with the tax authorities within 75 days. Sales of the shares in Hungarian real estate companies by foreign shareholders are subject to 19% Corporate Income Tax, if there is no DTA and/or Hungary has the right to tax because of the DTA. Until now, real estate companies have included companies where the market value of the real estate exceeds 75% of the total assets. From now on, the book value will be used to assess the 75% threshold. 11.3. Land transfer tax Basically the acquisition of Hungarian real estate and/or the acquisition of shares in companies, under whose ownership these real estate properties are, is liable to Land Transfer Tax. There are exceptions for connected companies and restructurings. As of 2014 an exemption for foreign purchasers is only possible if the foreign corporate income tax is at least 10%, and the profit from the sales of the shares in the country of location is taxed at a minimum of 10%. The acquisition of shares in an Hungarian company with immovable property has until now only been liable to tax if its main activity is given in the commercial register as construction project organization, construction, rental of real estate, running of real estate, or sale of real estate. As of 2014, the entries in the commercial register are no longer relevant. From now on, there is only a tax liability if the book value of the real estate corresponds to at least 75% of the fixed assets of the acquired company. 11.4. Other After the relevant amendment of the Articles of Association and/or the Accounting policies, the annual statements can also be prepared in USD. May 2014 9
Mag. Robert Lovrecki Tax Advisor, Director Tel: +43 316 83 31 68-0, Fax ext: 4003 E-Mail: robert.lovrecki@tpa-horwath.com TPA Horwath Hartenaugasse 6a, 8010 Graz www.tpa-horwath.at www.tpa-horwath.com This newsletter is a service of TPA Horwath Your TPA Horwath Team Subscribe to the TPA Horwath Newsletter! www.tpa-horwath.at www.tpa-horwath.com Follow TPA Horwath on Facebook! IMPRINT Information as of May 2014, and subject to change. Without Liability. The information given here is greatly simplified and is no substitute for professional advice. Responsible for the contents: StB Mag. Robert Lovrecki, Director, TPA Horwath Wirtschaftstreuhand und Steuerberatung GmbH, Praterstraße 62-64, A-1020 Vienna, FN 200423s HG Wien, Member of Crowe Horwath International (Zürich) an association of separate and independent chartered accountants and consultants. Tel.: +43 1 588 35-0, Fax: ext. 500. Homepage: www.tpa-horwath.at; design, cover artwork: TPA Horwath Copyright 2014 TPA Horwath Wirtschaftstreuhand und Steuerberatung GmbH, Praterstraße 62-64, A-1020 Vienna All rights reserved. May 2014 10