Taxation in Central Europe

Uniform taxation regime

Since decades ago, countries strive for uniformity with regard to the taxation regime. At world level (i.e. OECD) but also at regional level (i.e. EU) countries try to harmonize rules for a fair taxation. Multinational companies are the sole purpose of such changes. We witnessed the implementation of the Double Taxation Treaties, OECD Guidelines, the European VAT Directive, now BEPS and ATAD and SAF-T and on top the intensified collaboration between country tax authorities.

Local rules, tools and habits

One would think from distance that each country has the same taxation regime and the tax authorities play by the same rules. In reality, countries have indeed adopted international and regional rules but the measures of control are not the same. Each country has its own local tools and habits of performing a tax audit. Maybe because of late adoption of such international and regional rules the CE region still retains some old habits. Tax inspectors still check the paper documents for missing information like the date on the invoice, some go further and request supporting documentation for intra group services or plane tickets that prove that the group employees indeed visited the country when providing management or consultancy.

If we assume the company wants to go to court to defend its case, local rules are again applicable: deadline for appeals, documents need to be submitted, the format/ template of the appeal and many more. If not taken into consideration, they can cost a company a great deal of money.

Even if a company has such information there is a lot of suspicion because multinationals are clearly in the spotlight as they became the monster in the story. It is a trend with no doubt. Us, as tax consultants have seen a fair amount of such cases and turned bad for our clients.

On top of your business

Therefore, dealing with taxes at international or regional level puts a lot of stress on the shoulders of tax professionals in charge of safeguarding the business of their companies. They need to look closely to every jurisdiction and follow the local rules and sadly, sometimes it is not sufficient. I’d like to refer and invite you to the Tax Academy 2017 program in Amsterdam, The Netherlands. Meet me and my colleagues to discuss the risks and pitfalls of local tax habits and maybe also optimize your tax situation in the Central European region.

Petr Neuschl
Partner, Tax, Deloitte Czech Republic

E-mail: pneuschl@deloittece.com