European Union: 2019 Tax Changes In Central And Eastern Europe

Last Updated: 7 December 2018
Article by TMF Group

Operating in CEE? Here's a summary of the key tax changes coming into effect in Poland, Hungary, Croatia and Ukraine in the new year.

Now is the time for your accounting, tax and payroll departments to prepare for these 2019 changes to operating in CEE. If you need more detailed information, or help implementing any of the following developments in your business, don't hesitate to get in touch with our local experts.

Poland

Submission of financial statements

1 October 2018 saw changes to government regulations on the submission of financial statements in Poland. From now on, financial statements must be prepared in an electronic format and e-signatures used. Some technical setup is necessary to meet this requirement, and every board member of any Polish company will need a digital tool to enable their e-signature on financial statements, and subsequent transmission to the National Court Register. Alternatively, board members can use their Polish identification number (PESEL).

TMF Poland is supporting clients with electronic financial statement setup, preparation and transmission as well as e-signature filing requests.

Withholding income tax

1 January 2019 will see a completely new mechanism introduced for the settlement of withholding tax for payments in excess of PLN 2m per annum, per taxpayer.

In summary, the charging of withholding tax on payments above PLN 2m will follow basic rates as specified in the Corporate Income Tax Act. The principle of obligatory collection will apply, with the possibility of a subsequent request for reimbursement by the tax office: a 'withholding tax refund on-demand.' There will be a six-month deadline for the withholding tax refund with the possibility of an extension.

It will be possible for the payer to apply a preferential tax withholding tax in certain situations.

Hungary

Changes to personal income tax

The cafeteria-style personal income tax system, popular among both employers and employees in Hungary, will fundamentally change in 2019. In-kind benefits of cash with an annual cap of HUF 100,000 will be abolished, and the only remaining in-kind benefit option will be the Széchenyi Leisure Card. The overall tax burden increases from 34.22% to 34.5%.

Voluntary fund contributions, local public transportation season tickets, the Erzsébet voucher, school starting allowance, meals provided by canteens at workplaces, holiday services and contributions to school costs will not be considered. They will be taxed along with other specific benefits.

Housing subsidies from employers, housing allowances for mobility purposes, benefits provided to employees for making payments towards the repayment of student loans and premiums paid by employers for risk insurance policies (currently capped at 30% of the minimum wage) will not be exempt from tax. All of the above will be taxed with salaries, where they are provided in an employment contract.

Some tax free benefits will remain, however. These include individual or season tickets for sporting events and individual or season tickets for cultural services. The allowance for funding nursery and kindergarten services will also remain tax-exempt.

Other incoming tax changes in Hungary

Group corporate taxation will be implemented in Hungary from 2019. Domestic corporate income taxpayers with at least 75% common direct or indirect ownership interest, will be able to offset losses in the year of generation at group level. They'll also be exempt from transfer pricing rules within the group.

Other changes include:

  • CFC and interest limitation rules of ATAD which are now incorporated into the corporate tax law
  • 50% of VAT on the rental fee of passenger cars will be deductible without the need for a vehicle log
  • the individual VAT exemption limit increases to HUF 12m (around €37,000)
  • the 5% reduced VAT rate for residential properties is extended until 2023 in certain cases.

TMF Hungary's local tax experts are able to assess your options with regard to the changing cafeteria system for 2019. They can also provide information and implementation assistance with regard to company group taxation, bearing in mind companies have a tight deadline – between 1 and 15 January – to announce their decision to the local tax authority.

Croatia

A number of changes will impact companies operating in Croatia.

Personal income tax (PIT)

The non-taxable portion of personal income for Christmas and vacation allowances is set to HRK 2.500 per year, while for the awards for work performance and/or other forms of additional awards (additional salary, supplement to regular monthly salary) is set to HRK 5.000 per year - valid from December 2018. This means employers still have the opportunity to pay their employees in line with the new non-taxable limit, this year.

From January 2019, the tax bases for PIT will be as follows:

  • 24% until 30.000 HRK
  • 36% above 30.000 HRK.

These new bases significantly increase salaries for qualified staff such as doctors, IT specialists and pharmacists. They're expected to affect the retention of qualified personnel in the country.

Salary contributions

Also from January 2019, health contributions increase from to 16.5% from 15%. And two contributions are cancelled:

  • contribution for unemployment
  • contribution for safety at work.

While health contributions increase in the new year, this is offset by the fact that there will be no more unemployment and safety at work contributions required. Employers will incur a saving as they will be paying fewer contributions for each employee. Employers can elect to increase employees' salaries as a result.

VAT

The VAT rate for diapers, live animals, meat, fish, fruits, nuts, vegetables and eggs from specific marks of combined nomenclature is reduced to 13% from 25%.

Tax payers who have deliveries worth more than HRK 300.000 during the tax period must be registered in the Register accordingly (currently they are registered at the end of the calendar year for the next year).

A delivery book of incoming and outgoing invoices together with a VAT form will be required.

The deduction of input tax for personal cars will be suspended ( regardless of value HRK 400.000,00) and VAT recoverable for vessels and aircraft

Croatia's general VAT tax rate will reduce to 24% from 25% on 1 January 2020.

The reduction of VAT rates is set to increase annual disposable household income in Croatia by an estimated average of 872 Croatian Kunas.

TMF Croatia's payroll specialists can provide clarification on the new non-taxable portion of personal income. While the local accounting team can help with VAT registration in the VAT Register where business deliveries have reached more than HRK 300.000.

Ukraine

There are three key accounting and tax changes that businesses in Ukraine should be aware of going into the new year.

1. Ecological tax

The tax rate for carbon dioxide emissions will increase to UAH 10 per ton from the current rate of UAH 0.41. This substantial increase is intended to encourage companies to reduce environmental pollution. It also brings greenhouse gas emission rates in line with EU levels.

2. Rental rates

Rates for the usage of subsoil in Ukraine - for oil and condensate extraction - will increase by 2%.

3. Fuel tax accounting

From 1 July 2019, administration changes to the electronic system for fuel turnover will take effect. Excise collection will increase, and fuel tax accounting will be provided for with regard to warehouses and other storage locations, and the licensing of all business entities engaged in the production, storage, wholesale and retail sale of fuel.

All of the aforementioned changes require businesses to allocate additional resources for implementation in their accounting and tax administration. Accounting system and exchange tools and interfaces must be updated accordingly.

TMF Ukraine's local experts can assist in providing the proper accounting and legislative compliance checks.

Have questions about anything you've read here? Contact us today.

Discover how our in-country accounting and tax teams across CEE help businesses adapt to local rules and regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions