Central Europe Tax&Legal Highlights


Central Europe Tax & Legal Highlights

March 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.


Instruction “On value added tax”
In the Official Gazette no. 23 is published the Instruction of the Minister of Finance and Economy no. 5, dated 22.02.2019 ‘On some additions and amendments to the instruction no. 6, dated 30.01.2015 “On value added tax in the Republic of Albania”, as amended’ through which are reflected the amendments of the reduced rate of value added tax for certain supplies of goods and services.

Instruction “On income tax”
In the Official Gazette no. 23, dated 26.02.2019 is published the Instruction no. 4, dated 21.02.2019 “On some additions and amendments to the Instruction no. 5, dated 30.01.2006 “On income tax”, as amended. This instruction has reflected and expanded the amendments introduced by the Fiscal Package 2019 and has also brought some additional treatments.

Instruction “On national taxes”
In the Official Gazette no. 22 is published the Instruction of the Minister of Economy and Finance no. 9, dated 20.02.2019 ‘On some additions and amendments to the instruction no. 26, dated 04.9.2008, “On national taxes”, as amended’ through which are reflected the following amendments.

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Czech Republic

New R&D tax relief rules apply
On Tuesday, 12 March, the Chamber of Deputies approved an amendment to the Income Taxes Act, which also amends rules for applying R&D tax relief. Amendments proposed by the Senate of the Czech Republic were not accepted. Currently, the amendment still awaits the President’s signature, but we expect the new rules to be effective from 1 April 2019.

Can holiday compensation be used as part of the R&D deduction claim?
Holiday compensation and its utilisation as a research and development (“R&D”) deduction has been a widely debated issue in recent years. The General Financial Directorate refused for such compensation to be utilised as part of the R&D deduction; on the other hand, a strong opinion of legal experts existed upholding the legitimacy of the deduction. Therefore, it was evident that the matter had to be decided in court.

Lex Brexit – current status
An approved law regulating various areas of so-called hard Brexit passed the legislative process. Following the development of the situation, it will be promulgated in the Collection of Laws unless a UK-EU agreement is agreed or Brexit is postponed.

The Final Version of the Tax Package has Been Approved
In general, the changes introduced by the tax package are expected to come into force on 1 April 2019; however, in certain situations, it is necessary to verify whether special effectiveness rules or transitional provisions apply or not.

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Regulations on making and managing security camera recordings are changing in favour of data controllers
Rules governing the use of close-circuit television cameras (CCTV), better known as security cameras, i.e. privacy issues related to the image and voice footage recorded by the cameras are governed by the act on the security of persons and property.

Beneficial changes regarding the EKD grant
The amendment of the government decree on grants based on an individual government decision (EKD grants) entered into force on 6 March 2019. It positively affects non-refundable EKD grants for job creating investments, non-job creating (technology-intensive) investments, as well as R&D projects.

Wave of inspections at employers – Is your company affected?
Considering the increasing employment difficulties and the significant tax impact, reviews of engagement contracts and services agreements by the tax authority are on the increase. The existing legal practice entails that the tax authority can introduce sophisticated criteria to assess the contractual background and actual circumstances of outsourced work processes.

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Resolution No.06-R-016 on the suspension of gambling activities has been published on the official website of the Parliament of the Republic of Kosova.
This Resolution is a response of the Parliament to the increasing illegal activities that occur on gambling grounds.

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Withholding taxation (WHT) in view of the new beneficial owner definition. Actual economic activity requirement. The possible restriction of withholding tax (WHT) relief.
One of the most widely discussed issues among the amended provisions concerning withholding tax (WHT) is the new definition of a beneficial owner. As a result of introducing new conditions, this definition has been significantly restricted. Moreover, according to the statement of the Ministry of Finance, the criteria from the new definition can be applied even where applicable provisions do not include a beneficial owner clause. This can result in restricting the scope of exemption from withholding tax and questioning the right to apply double tax treaties in many typical examples of payments within capital groups.

Changes planned in respect of trading in heating oils. New obligations linked with the preferential excise duty rate on heating oils.
The Government Legislation Centre has published a modified draft of the Act amending the Act on the system of monitoring road and rail transport of goods and some other acts (hereinafter referred to as: "the draft Act"), prepared on the basis of discussions, public consultations and opinions. The explanations accompanying it suggest that the rationale underlying the new legislation is to maintain the upward trend in the budgetary receipts from taxes by reducing the shadow economy associated with heating fuels.

New VAT rate matrix - outcome of stakeholder consultations. Partial concessions on the side of the Ministry of Finance.
On 15 February 2019 the Government Legislation Centre published the results of the public stakeholder consultations concerning planned changes in VAT rates.

Industrial Property Law -amendments in the scope of trademarks
On 20 February 2019 the Sejm adopted the Act amending the Act: Industrial Property Law. The amendments implement into the Polish law the provisions of Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks. The new legal regime will come into force on the day following the date of announcing the Amending Act.

Significant changes concerning the issue of municipal bonds binding as from 01 July 2019
01 July 2019 marks the beginning of a new chapter in the history of financing of, among others, local government units and municipal companies, but there is little talk about the upcoming changes and what the financing market will look like after that date. The far-reaching changes stem from the fact that most of the provisions of the Act of 09 November 2018 amending certain acts in connection with strengthening the supervision over the financial market and protection of investors in this market (Journal of Laws of 2018, item 2243) come into force in the second half of the year.

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New interpretation on the provisions of Directive 2011/83/EU requiring traders to inform the consumers with respect to the communications means
A new, more flexible and result oriented interpretation of the provisions of Directive 2011/83/EU on consumer rights requiring traders to provide consumers information regarding the means through which they may contact the former, is offered by the Advocate General through the opinion issued in case C 649/17.
In the opinion, it is mentioned that the traders have the obligation to enable efficient communication means and to clearly inform the consumers regarding the way in which those means can be used. Yet, this obligation cannot be interpreted as imposing on the traders, in their relation with the consumers, the implementation of certain communication means specified by the Directive 2011/83/EU (e.g. the mobile phone).
Thus, the opinion underlines that consumer protection is done not by imposing certain methods of communication, but by ensuring that the consumers are able to use the most efficient means of communication for the environment in which they operate transactions.

Significant amendments to Government Emergency Ordinance (GEO) 114 regarding the bank assets tax, as well as regulations pertaining to crediting activities and the energy sector
A Draft Ordinance amending the provisions of GEO 114/2018 was issued yesterday. Most likely, the draft shall be adopted during the Government’s session on 28 March 2019.
The most important amendment concerns the bank assets tax; the other amendments refer to the deadline for topping up the minimum share capital for private pension fund managers, as well as regulations in the field of energy. At the same time, the draft Ordinance also provides for new rules for the determination of variable interest rates on credit agreements concluded with consumers.

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EU proposes a regulation on emergency social security measures in the event of Hard Brexit
Proposal for a Regulation of the European Parliament and the Council on establishing contingency measures in the field the coordination of social security systems following the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union without a Withdrawal Agreement.

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