Central Europe Tax&Legal Highlights


Central Europe Tax & Legal Highlights

September 2019

Welcome to the Tax & Legal Highlights newsletter. This page provides you with the latest information on tax and legal related issues from around the Central Europe region. For more specific information – choose your country and find out more about local tax practices and news around the region.

Czech Republic

Planned Income Tax Changes for 2020

The Chamber of Deputies of the Czech Republic is currently debating two amendments to the Income Taxes Act (Act No. 586/1992 Coll., the Income Taxes Act, as amended), which may come into force in 2020. These amendments, parliamentary press nos. 572 and 509, bring the following proposals for changes.

Expansion of electronic sales records approaching
On Friday 13 September, the Chamber of Deputies overrode the proposal of the Senate and approved the amendment to the Act on Electronic Sales Records. After more than one year in the Chamber of Deputies, the amendment is headed for the President’s signature. The expansion of electronic sales records to include the remaining taxpayers can be expected no sooner than 1 April 2020.

Amendment to the Tax Code in the Legislative Process
The amendment to the Tax Code, which was approved by the Government of the Czech Republic at the end of August 2019, promises changes in favour of taxable persons and modernisation of the tax administration. The amendment is presented by legislators under the name of MOJE daně, but in addition to the promised online banking in taxes, the amendment to the Tax Code also contains other process changes. Despite the fact that the amendment to the Tax Code proposed by the Ministry of Finance of the Czech Republic has now been approved by the Government of the Czech Republic, it still has the entire legislative process ahead. Taking into account possible complications, it can be assumed that the amendment may be effective in mid-2020.

DAC 6: New Obligation to Report Certain Transactions to Taxation Authorities in Advance

The Chamber of Deputies is currently discussing the governmental draft bill implementing the directive on administrative cooperation in the field of taxation (“DAC 6”). This directive regulates the obligation of businesses to report selected cross-border transactions and other arrangements affecting corporate income tax to taxation authorities in advance. The objective of this EU regulation is to gain better insight into the use of tax regulations and prevent aggressive tax planning.

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New Inspection Method 
In recent years, the audit review practices of the HTA have been subject to amendment. There is now a focus on the taxpayers’ compliance with the law via several smaller-scale reviews, using the available data (online cash registers, EKÁER). Currently, the National Tax and Customs Administration only initiates formal inspections when the chances are high for violating the law. In such cases, the authority usually succeeds.

New transfer pricing regulation focusing on correct methods used to calculate profitability

Transfer pricing remains a focal point in the audit procedures of the Hungarian tax authority (HTA). As of 1 January 2018, taxpayers are required to prepare their transfer pricing reports according to the provisions of NGM decree no. 32/2017. (X.18.) (hereinafter: “NGM decree”). This decree requires a detailed presentation of taxpayers financial data.

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Importance of R&D analysis, in particular for IT sector
IT is one of the fastest growing sectors. Technological advance requires continuous development and design of broad application solutions. It is fairly clear that many types of work performed by this sector entities may be classified as R&D under the applicable criteria.

PSD2: changes awaiting payment service providers after 14 September 2019
On 14 September 2019, regulatory technical standards regarding strong customer authentication [1], supplementing PSD2 Directive, came into effect. They changed the manner of authentication related to payment transactions, introducing a two-step strong customer authentication standard.

Excise duty exemption for Lubricating Preparations. Draft Regulation amending the Regulation on Exemptions from Excise Duty was published yesterday.

The draft Regulation of the Minister of Finance amending the Regulation on Exemptions from Excise Duty (henceforth: “Draft”) is available on the website of the Government Legislation Center. The draft introduces excise duty exemption for lubricating oils coded CN 27102090 and lubricating preparations coded CN 3403 (henceforth jointly: “Lubricants”) used for purposes other than broadly defined propulsion, heating or as engine lubricants.  

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Learn more about a service permanent establishment
Proposed marked increase in minimum wage 

The minimum wage is to be calculated by a new method from 2021.

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