Central Europe Tax&Legal Highlights


Central Europe Tax & Legal Highlights

February 2020

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

Income Taxes Act Outlook through 2021 – Significant Changes Considered in Individual Taxation
Parliamentary Press No. 572 updating, inter alia, Act no. 586/1992 Coll., on Income Taxes (the “ITA”) has not passed the legislation process yet and another amendment for 2021 is already being discussed. According to the statement of the Ministry of Finance of the Czech Republic, the changes under preparation should be based on a long-term plan of the Government of the Czech Republic under which the ITA should be simplified and rid of a large number of exceptions it contains. And frankly speaking, the state budget has to be funded as well. Debates on this topic clearly indicate that the amendment should include mainly changes in individual taxation and some of them are to be fundamental.  

New Methodical Guidance on Permanent Establishments
General Financial Directorate issued new comprehensive guidance on the taxation of the income generated by tax non-residents from activities performed by means of a permanent establishment. The new guidance represents a relatively extensive and comprehensive summary (28 pages) of an approach to the taxation of a permanent establishment.

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Gratuitous performance for companies in serving as management board members without remuneration. Judgment of the Supreme Administrative Court
If a management board member carries out their duties without remuneration, the Company bears the risk of gratuitous performance, as shown in the justification of the judgment issued by the Supreme Administrative Court on 30 October 2019.

White list — a chance for more relaxed provisions after the first few weeks of sanctions

Sanctions arising from the improper performance of obligations related to the so-called “white list” have been effective for over a month already. To avoid them, taxpayers have to meticulously verify whether the details concerning the bank accounts of their customers are consistent with the information found in the database of the Ministry of Finance. The white list, which is an electronic list of VAT taxpayers, is designed to facilitate due diligence on the one hand, but on the other hand, it is also an additional administrative burden. Ignoring the related requirements may result in making it impossible for the taxpayer to settle tax-deductible expenses. However, seeing the scale of the problems which have resulted from the new regulations, the Ministry of Finance has decided to slightly relax them. The amendment bill is already being considered by the Sejm of the Republic of Poland.

New MDR amendment bill — additional reporting obligations. Important changes to come into effect on 1 April 2020

On 5 February 2020, the Council of Ministers presented the Sejm with a bill concerning the amendment of i.a. the Tax Ordinance and the Act on International Tax Information Exchange (parliamentary paper no. 208). It envisages an obligation imposed on the promoters, users, and intermediaries to report all cross-border tax schemes if the first step towards their implementation was made between 26 June 2018 and 31 March 2020 (even if the tax scheme has already been reported).

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Novelties in the international taxation and exchange of information
International taxation and exchange of information

Categories of foreign citizens eligible for temporary residence permit

Serbian government adopted a Decree on the criteria for determining the category of foreign citizens who may be granted a temporary residence permit by the Republic of Serbia, regardless of the grounds for granting the temporary residence on 13 February 2020

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Abolition of the Obligation to Sign the Declaration Annually
Since 1 January 2020 the obligation to sign the “Declaration of an Application of a Tax Allowance per Taxpayer and Tax Bonus” form has been abolished, which means that an employee does not have to sign the declaration in 2020, but only reports to the employer any changes that occur during the year.

Due to Brexit, UK Citizens are Required to Visit the Foreign Police

Due to the Brexit Agreement citizens of the United Kingdom with a registered residence in Slovakia are required to apply for new residence documents in the SR. New documents will be issued based on the automatically granted 5-year permanent residence, or long-term residence, as a result of the UK’s exit from the EU. All UK citizens with a registered residence in the SR until 31 December 2020 will be granted this residence from 1 January 2021, but the issue of new residence documents will not be automatic and UK citizens will have to apply for them at the relevant Foreign Police Department.

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