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.
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.
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.
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.
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.
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.
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.
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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.