Central Europe Tax&Legal Highlights

News

Central Europe Tax & Legal Highlights

April 2018

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

R&D Tax Deduction
Regional Court: Clinical Trials of Medicaments Classified as Research

In late February, the Regional Court in Hradec Králové issued new judgments cancelling the ruling of the Appellate Financial Directorate (the “AFD”).

Current Trends in the Area of Deduction
R&D tax deductions are increasingly more often examined by the tax administration. The growing number of audits, which often result in legal disputes, leads to uncertainty among taxpayers. It is therefore questionable whether the setup of the deduction aimed at supporting research and development is the only accurate solution and whether it is time to consider an adjustment thereto, also considering the fact that the area has not been modified since 2005.

New treaty with Turkmenistan
Implementation of the new Double Taxation Treaty with Turkmenistan will start on 1 January 2019

Courts Have Once Again Sided with Entrepreneurs in Respect of Payment Security Orders
The Supreme Administrative Court has again confirmed that it makes sense to defend yourself against the practices of the financial administration. In its latest ruling on the AB Chemitrans case, the court ruled that tax or related accrued interest and fees can only be recovered by distraint after the appellate proceedings have been concluded, which also applies to situations where the tax was subject to a payment security order. The ruling may significantly affect the existing practices relating to payment security orders and the performance of tax distraints.

Changes in the Ukraine Regime Project
The Ukraine regime was officially launched in August 2016. The Ukraine regime simplifies the hiring of employees from this country. It is intended for direct employers operating in the Czech Republic in the field of production, services or the public sector. Temporary help from Ukraine can help bridge the time when the Czech Republic’s unemployment rate is critically low and companies currently lack 240,000 workers.

The Mongolia Regime and the Philippines Regime
Other special programmes are intended to provide companies with temporary help to overcome the period of lack of employees. The Mongolia and Philippines regimes has been introduced with effect from 1 May 2018. They focus on countries whose labour force has continuously been a centre of interest of Czech employers.

Changes of conditions for filing an employee card application in Lviv

Transposition of the EU directive
The reports on the transposition of Directive 2004/114/EC and Directive 2005/71/EC showed a variety of flaws and the need to perform several changes. For the sake of clarity, the EU decided to rework both directives and replace them with a new one.

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Hungary

The Hungarian Tax and Customs Administration is now suable for minor irregularities
The category of reimbursement of damages in administrative powers is extended due to the change of approach caused by the new administrative procedure. On average, 20-30 lawsuits are filed against the Hungarian Tax and Customs Administration (NAV) for damages annually. However, this number could be higher, as there is a way for businesses to win cases against the NAV.

Unexpected option of legal remedy in adjudicated tax litigation cases
In an increasing number of cases involving the tax authorities, it is found that the resolutions issued by the tax authority against companies contained formal errors.

Making money from Bitcoin? It’s time to think about taxes!
Investment options based on blockchain technology have become increasingly well-known in Hungary in the past few years. Approximately tens of thousands of early investors, day traders and miners in Hungary are informed about the latest developments, promising projects and “pump trends” on a minute-by-minute basis through lots of terabytes of information on Twitter, Facebook, or Telegram. Deloitte Private focuses on taxation issues concerning cryptocurrencies. The company’s director dr. Gábor Baranyi has summarised the main risk factors.

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Latvia

The constitutional Court has declared the Article 12.3 and the Article 12.5 of the Law On Value Added Tax insofar as they do not ensure the return of VAT overpayment to the taxpayer within a reasonable time, as not complying with the Article 105 of the Constitution of the Republic of Latvia.
According to the contested norms, the period during which VAT overpayments are returned to the taxpayer may range from approximately one month to one year and even longer.

The Cabinet of Ministers approved amendments to the Law on Taxes and Duties with a view to improving the legal framework for transfer pricing documentation
The transfer pricing documentation requirements contained in the draft law will be more specific compared to the current general requirements.

The Committee of the Cabinet of Ministers has conceptually supported the draft of the Residential Tenancy law
The Committee of the Cabinet of Ministers on April 23, 2018 conceptually has approved the draft of the Residential Tenancy Law, which will be a new regulation in the residential real estate market and will promote the creation of qualitative and affordable rental apartments, will offer a new solution to the ongoing long litigation processes, as well as promote investments in the rental real estate sector.

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Lithuania

The court clarified the relation between personal data and the company's interest
The Supreme Administrative Court of Lithuania stated that the formal notice of professional e-mail’s monitoring at work is not necessary if the employee must understand it taking into account the nature of his/her position.

The Centre of Registers initiates the development of a virtual company's prototype
The Centre of Registers announces that the necessary legal changes will be clarified and the virtual company’s concept will be constructed.

The court ruled that employee must compensate for disclosure of commercial secrets
The Supreme Court of Lithuania ruled that the employee is liable for disclosure of commercial secrets and has an obligation to compensate damages.

New rule regarding conflict of interests applicable to the head of the company
The Supreme Court of Lithuania examined the situation in which the CEO having its professional duties was also engaged in individual activities and provided the same services as the company.

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Poland

No Revolution in the Labour Law. PiS not to support the bills proposed by the Codification Committee
The spokesperson of the Law and Justice (PiS), Beata Mazurek, said today that PiS will not support the new labour law bills proposed by the Codification Committee. This basically means that there will be no revolution in the labour law.

Solutions and Systems to Monitor Abusive Practices. How can the entities operating in the financial market avoid heavy fines?
Financial market participants are obliged to comply with the Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (“MAR”).

How to get ready for FATCA and CRS reporting for 2017
No later than on 2 July 2018 reporting financial institutions should send to the Head of the National Revenue Administration information about reportable accounts for 2017.

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Romania

Major changes to the Tax Code
Law no. 72/2018, Government Emergency Ordinance no. 18/2018, Government Emergency Ordinance no. 25/2018 amended recently the Tax Code on profit tax, income tax, withholding tax (“WHT”), microenterprises regime and Value Added Tax (VAT).

Common set of rules for calculating taxable profits (CCCTB), voted by the European Parliament
On 15 March, the European Parliament voted in favor of plans establishing a common consolidated corporate tax base (CCCTB), namely a common set of rules that companies operating in the EU can use to calculate taxable profits.

European Commission directives proposed on taxation of companies in the digital economy
The European Commission proposes two solutions on a long-term and on a short-term for taxation of companies with significant digital presence.

ECOFIN Agreement for the tax intermediaries’ directive and for revising the list of non-cooperative jurisdictions
According to the agreement, tax intermediaries are obliged to report structures including cross-border transactions.

Decision of the Court of Justice of the European Union (CJUE) on time limits for claiming VAT refunds
VAT can be reclaimed after the statute of limitation period has expired.

Opinion of the Advocate General of CJUE on the VAT exemption for transactions concerning payments
VAT exemption denied for instructions to transfer money.

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Slovakia

The Ministry of Finance’s Opinion on “Digital Permanent Establishment”
The Ministry of Finance of the Slovak Republic (hereinafter the “Ministry of Finance”) published its opinion on the definition of a permanent establishment on a digital platform.

Amendment to the Labour Code, amending Act No. 595/2003 Coll. on Income Tax, Act No. 461/2003 Coll. on Social Insurance and Act No. 580/2004 Coll. on Health Insurance
The National Council of the Slovak Republic adopted an amendment to the Labour Code, amending the Income Tax Act, the Social Insurance Act and the Health Insurance Act. The main changes include the determination of income considered as a wage, the remuneration of employees for work on public holidays and weekends, and the taxation method for such employee income.

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