Mazars_TaxGuide_2018

TA X GUIDE 2018 1

MAZARS
CENTRAL AND
EASTERN EUROPEAN
TAX GUIDE
2018

6TH
EDITION

Albania | Austria | Bosnia and Herzegovina
Bulgaria | Croatia | Czech Republic | Estonia | FYROM

Germany | Greece | Hungary | Kosovo | Latvia
Lithuania | Montenegro | Poland | Romania | Russia

Serbia | Slovakia | Slovenia | Ukraine

TAX | LAW | AUDIT | OUTSOURCING

2 TA X GUIDE 2018

TAX BEYOND BORDERS -
AN OVERVIEW OF THE MULTI-FACETED
REGIONAL TAX LANDSCAPE / 04
ALBANIA / 06
AUSTRIA / 08
BOSNIA AND HERZEGOVINA / 10
BULGARIA / 12
CROATIA / 14
CZECH REPUBLIC / 16
ESTONIA / 18
FYROM / 20
GERMANY / 22
GREECE / 24
HUNGARY / 26
KOSOVO / 28
LATVIA / 30
LITHUANIA / 32
MONTENEGRO / 34
POLAND / 36
ROMANIA / 38
RUSSIA / 40
SERBIA / 42
SLOVAKIA / 44
SLOVENIA / 46
UKRAINE / 48
SUMMARY / 50

“CREATINGCONTACTS / 53
SHARED
VALUE”

TA X GUIDE 2018 3

WELCOME TO THE
CEE TAX GUIDE
2018

W elcome to Mazars’ sixth annual Central and Eastern
European (CEE) tax guide.
The main purpose of this guide is to provide you with an

overview of the tax systems in the CEE region. I would also

highlight the expansion of our coverage: from 1th January 2018 we are

proud to report that the guide has increased its scope to cover 22 CEE

countries.

As always, this publication strives to help investors understand the

complexities of the various CEE tax regimes. In the first section, the tax

systems of the CEE region are presented country-by-country, based on data

provided by the relevant Mazars offices. At the end of this guide you will find

summary tables that allow side-by-side comparisons of the relevant tax

environments.

Before making any strategic business decision further discussion and

detailed analysis is always required. To that end, we have included direct

contact information for our offices and experts. Please feel free to get

in touch with the relevant people with any questions or clarifications

you might have.

We hope you find this guide useful.

Sándor Szmicsek
Partner
Tax and legal services
Mazars Hungary

4 TA X GUIDE 2018

TAX BEYOND BORDERS - AN OVERVIEW OF THE
MULTI-FACETED REGIONAL TAX LANDSCAPE

VAT collection goes digital, employers’ contributions declining

T his is the sixth occasion that Value-added tax A persistent trend is that states
Mazars offices around Central attempt to collect value-added taxes
and Eastern Europe (CEE) and Thanks to the positive economic more efficiently with the help of digital
beyond have cooperated to climate of recent years, in most technology. Efforts are in place for the
produce and publish our report on CEE states the government budget identification of transactions for which
current taxation in the region. balance improved and consumption due taxes were not paid, the reduction
In actual fact, this 2018 summary has started to increase. Governments of tax evasion and the “whitening”
extends well beyond the CEE region; try to build upon this momentum by of the shadow economy. Further
each year we have added new countries giving an increasingly large role to measures include the introduction of
to the initiative and it now numbers 22 consumption-type taxes when planning on-line cash registers and increased
participants, with Bulgaria, Kosovo and fiscal revenues. Accordingly, one of attention to the monitoring of
Germany the latest entrants. the most important sources of income transactions involving the transport of
A quick look at the map on the previous for the budgets is value added tax. goods. From 2018 in Hungary invoicing
page reveals that the publication also Owing to EU regulations the rules are software must be connected to the tax
covers the Visegrad (V4) countries, as mostly harmonized, but the tax rates authority’s system, which will result
well as South-Eastern Europe, Russia, applied vary widely across the region. in the supply of relevant real-time
Ukraine and the Baltic States. The average of normal VAT-rates is electronic information.
Regarding the content, we can around 20%; in 2018, only Montenegro
safely declare that investors increased its rate by a few percentage
interested in the region will receive a points. The 25% and 27% rates in
comprehensive overview of the taxation Croatia and Hungary, respectively, are
conditions in the CEE region. Our still particularly high.
publication also allows a comparison
of the fundamental factors of
competitiveness.

“Significant changes have been introduced in “Over the last few years the Slovak
the Romanian tax legislation in the last period of tax system is becoming stricter
time below some of the highlights. in the area of international
• From the 1st of January 2018 approximately taxation including transfer pricing.
20% of the Social Security Contributions have The current trend is taking a closer
been transferred from the employer to the look at substance requirements
employee which makes the gross to net salaries as well as at beneficial ownership.
to be more transparent. During the course of tax audits
• In addition the split VAT payment system as in the area of transfer pricing,
introduced in 2017 continues to be applicable standard documentation is often
however for most business on an optional basis, regarded as insufficient proof
being mandatory only for taxpayers under insolvency by Slovak tax authorities. More
procedures or with outstanding VAT liabilities. extensive materials and additional
Which is intended to improve VAT collection. documents are requested
• The so called micro-company has become more frequently.”
beneficial as the revenue threshold is increased to
EURO 1M and when having 1 employee the tax on Günter Oszwald/ Tax Partner/
revenue is 1%. Slovakia
• Romanian Transfer Pricing audit by the Tax
Authorities are intensifying which gives good
grounds to concluded APA’s. In addition part of ATAD
has been implemented from the 1st of January 2018”

Edwin Warmerdam/ Partner / Romania

“Following BEPS Actions’ adoption, the Greek Tax TA X GUIDE 2018 5
Authorities are focusing on the strict implementation
of anti-abuse provisions, preventing tax evasion
and artificial arrangements especially through
preferential tax jurisdictions in the region. The tax
rates remain high and the business environment is
tight, however some recent decisions of the Greek
Supreme Court in the field of tax residency for
individuals and statute of limitation for the unaudited
years gave to the taxpayers an optimistic feeling.”

Theodoros Kintis/ Director/ Greece

Taxes on Across the other CEE countries it is Estonia and Hungary do not impose a
employment increasingly apparent that different withholding tax on capital gains.
emphasis is placed on taxing A clear trend of recent years is the
The proportion of taxes and corporate incomes. The difference acceptance of IFRS-based financial
contributions on employment between the lowest and the highest tax statements: in two-thirds of the region
continues to decrease. Despite rates is now less than 20 percentage taxpayers are allowed to prepare IFRS-
these changes, the total wage cost points. We again have one country based separate financial statements
of employers in the region is still where the corporate income tax rate and to use these also for taxation
approximately 160% of the net wages. decreased by a few percentage points purposes. Finally, it should be noted
It should be noted that Hungary (Croatia), while in another there was that the tax systems of more than
has made progress in reducing the a comparable increase (in Slovenia). half of the countries surveyed support
large burden on employers. Effective Overall, the average corporate income research and development (R&D)
2018, the Romanian system of social tax rate in the CEE region is a little activities in some form.
contributions has been completely over 17% (calculating with the highest
overhauled. Further, Romania, Croatia rate in case of countries where several Transfer pricing
and Montenegro each found ways to rates are used).
decrease personal income tax rates. All of the CEE countries with The BEPS (“base erosion and profit
The most important challenge that traditional income tax schemes allow shifting”) initiative of the OECD
the CEE region must face in the near losses generated in previous years to alerted tax authorities to concentrate
future is increasing labour shortages. be carried forward and used against more on intra-group or cross-
How government measures aimed at the positive tax base of subsequent border transactions. Transfer pricing
combatting this problem will impact years. Generally, this amount can regulations have earlier appeared in
employment costs remains an open only be used for a limited period of the tax systems of almost all of the
question. time, usually 5-7 years, but in some countries concerned, and now there is
countries only for 3-4 years. Only six an increasing emphasis on the related
Corporate countries allow losses to be carried documentation obligations. The
income taxes forward indefinitely. fundamental aim of the “country-by-
The majority of the countries examined country reporting” (CBC-R) required
Methods of calculating the tax base used some kind of interest limitation by OECD is to improve transparency by
vary across the region, and some of rule, which determines what part of way of providing local tax authorities
the countries have also introduced tax the interest paid on corporate loans with the information necessary for
schemes that are altogether different can be deducted from the income assessing tax risks. In the past year,
from traditional, profit-based taxation. tax base. Thanks to the EU’s Anti taxpayers in the CEE region had to
Earlier, only Estonia had its own, Tax Avoidance Directive (ATAD), actively participate in launching the
unique system, whereby companies the earlier thin capitalisation rules CBC reporting system.
did not have to pay the 20% corporate are increasingly being replaced by
income tax as long as there was methods linked to EBITDA-based
no withdrawal of income from the calculations. The standardisation of
company. From 2018, Latvia chose this the Controlled Foreign Company (CFC)
same path, and also made distributed rules is also due to the same directive.
profits the tax base. States in the region have a penchant
for imposing withholding taxes on
payments of interest, dividends and
royalties (at rates of 15%, or even 19-
20%). Naturally, these may be applied
with attention to the provisions of
the relevant tax treaties. Lithuania,

6 TA X GUIDE 2018

ALBANIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

Resident companies are subject to cor- The gross amount of interest, royalties, 2018 is triggered when annual turnover
porate income tax on their worldwide in- dividends, and shares of partnerships’ exceeds ALL 5 million (approximately
come, while non-resident companies are profits paid to non-resident companies EUR 36,000). From 01 April 2018 the
taxed only on their income derived from is subject to a withholding tax of 15%, threshold for VAT registration will be ALL
sources in Albania. Resident companies unless a Double Tax Treaty (DTT) provides 2 million (approx. EUR 14,800) Persons
and sole traders having an annual turno- for a lower rate. Albania has established involved in import or export activities
ver above ALL 8,000,000 (EUR 57,000) are agreements with 41 countries for and taxpayers supplying professional
subject to corporate income tax. Capital avoiding double taxation. 39 of them are services must register for VAT regard-
gains, dividends, interests, and royalties ratified and currently in force. less of the amount of turnover.
are included in the income of compa-
nies and are taxed as part of corporate VAT AND OTHER Customs duty in the Republic of Albania
income tax. Income tax is assessed on a INDIRECT TAXES is applied by the custom authorities
current-year basis at the rate of 15% and on the import of goods. The liability to
5% for the entities which operate in pro- The new law of VAT entered in force in pay the duty is always on the importer
duction and development of IT software’s January 1, 2015 has been harmonized of goods, but it is added to the cost of
activities. The assessment of CIT is based with the “acquis communautaire” in goods and in this way it is finally passed
on the FS prepared in accordance with almost all respects. Any person (entity on to the consumers. The customs
the National Accounting Standards or or individual) that makes supplies in duty rates range between 0% and 15%,
IFRS, subject to certain adjustments for the course of the person’s independent depending on the type of goods and the
tax purposes as specified in the Albanian economic activity is required to pay VAT. country of the origin.
Tax Laws and other supplementary legal For domestic supplies and for services
acts. Fiscal losses may be carried for- subject to the reverse-charge mecha- Local taxes consist of different catego-
ward up to three consecutive years. The nism. The obligation to register for VAT ries of taxes
law does not provide for consolidated tax purposes and charge VAT until 31 March
returns. Each company forming part of a
group must file a separate tax return.

TRANSFER PRICING IN ALBANIA VAT OPTIONS IN ALBANIA Applicable / limits
N/A
Arm’s length principle No since 1998 Distance selling N/A
Documentation liability No since 2014 Call-off stock N/A
APA since 2014 VAT group registration N/A
Country-by-Country liability Cash accounting N/A
Master file-local file (OECD BEPS ~ Documentation submited on delay -EUR 70 / for Import VAT deferment
13) applicable each month of delay for all services from non
Penalty Local reverse charge resident entities that are
0.06% on daily bases (not more than 365 days) subject to VAT in their country
lack of on tax underpayment + late payment interest Option for taxation
documentation direct or indirect control or common managing letting of real estate N/A
supply of used real estate EUR 14,800/year**
tax shortage director VAT registration threshold*
Rational value added service from 5% to 15% mark up
Related parties 50% <
5/10
Safe harbours * Persons involved in import or export activities and taxpayers who
Level of attention paid by Tax Authority supply professional services must register for VAT regardless of the
amount of turnover.
**This limit of threshold for VAT registration is in force from 01 April 2018.

TA X GUIDE 2018 7

MAZARS MAZARS SHPK,
IN ALBANIA Rr. Emin Duraku,
Pall. “Binjaket”, Nr.5, Tirana
Albania
Phone: +355 (0) 42 278 015
www.mazars.al

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

Mandatory social security and health insurance Employed persons are subject to income tax on remu-
contributions are due on employment income. The neration and all benefits received from employment.
social security contribution is calculated on a monthly Entities are required to withhold personal income tax
gross salary, from a minimum amount of ALL 24,000 from the gross salaries of their employees. In Albania
(approximately EUR 178) to a maximum amount of a progressive rate is applicable since 2014; no tax is
ALL 105,850 (approximately EUR 784). Social contri- applicable up to a monthly salary of ALL 30,000; above
bution payable by the employer is 15%; while the rate that 13% applies between ALL 30,000 and 130,000.
payable by the employee is 9.5%. The health insurance Above that level ALL 13,000 plus 23% of the amount
contribution rate is 1.7% for both the employer and the above ALL 130,000 is payable.
employee.

WAGE-RELATED TAXES IN ALBANIA Minimum wage Average wage in
private sector

Exchange rate ALL / EUR 135 in EUR in ALL in EUR in ALL Contact:
178 24 000 407 55 000 Teit GJINI
TOTAL WAGE COST 207 116,70% 475 116,70% Managing Partner
Social Contribution tax 27 15,00% 61 15,00% Mobile : +355 (0) 29 30 37 456
Health Insurance Contribution 3 1,70% 7 1,70% E-mail : [email protected]
GROSS SALARY 100,00% 100,00%
Personal income tax* 177,78 0,00% 407,41 13,00%
Employees’ Social contributions - 9,50% 24 9,50%
Employees’ Health contributions 1,70% 39 1,70%
NET SALARY 17 88,80% 7 82,79%
3
337
158

*Salary 0 -30,000 ALL PIT rate 0%.
Salary 30,001 -130,000 ALL PIT rate 13% of the amount over 30,000 ALL.
Salary over 130,001 ALL PIT 13,000 All + 23% of the amount over 130,000 ALL.

8 TA X GUIDE 2018

AUSTRIA

CORPORATE TAXES Thin capitalization is not subject to Losses from nonresident companies
AND OTHER DIRECT TAXES any specific regulations. However, can be used in Austria (again, the 75%
in order to avoid insolvency, the limitation is applicable and the foreign
The Austrian corporate income tax is reorganization law stipulates losses have to be calculated by applying
flat with a rate of 25%. The Austrian guidelines. The standard tax rate on Austrian accounting rules if extensive
Corporation Tax Act defines the tax capital gains is 27.5%. Dividends paid mutual assistance exists. These losses
framework for corporations, setting an out from resident companies to the can be subject to a recapture in cases
annual minimum tax of EUR 3,500 for resident shareholder (not individuals) of liquidation or if they are used
public companies (AG) and a minimum in Austria are exempt regardless of abroad.
tax per year of EUR 1,750 for limited the participation percentage. Several
liability companies (GmbH). These important exemptions exist, such as an VAT AND OTHER
minimums are to be considered as a tax international participation exemption INDIRECT TAXES
in advance, and as such, the amounts for dividends from non-resident
can be set off against any future companies. These dividends are tax free The general rate is 20% for the sale of
corporate tax obligation. The company’s if a minimum of 10% direct or indirect goods and services. A reduced rate of
profits are computed by summing up shareholding has existed for at least 10% is used for agricultural products
the income generated by business one year (applicable also for less than and rentals with a residential purpose
activities performed, the passive income 10% shareholding if extensive mutual (in certain cases 13% for entertainment,
and the capital gains. In principle, all assistance exists with such countries). art). Exemptions are in place for banking
expenses linked to the conduct of the Royalties and licenses are also subject transactions, and no VAT is levied on
business are deductible. Losses can to exemptions in accordance with tax exports. Entrepreneurs with annual
be carried forward indefinitely (but treaties and EU directives; otherwise sales below EUR 30,000 are exempted
only 75% of one year’s profit can be the standard tax rate is 20%. Austria, from VAT obligations. Non-residents
offset), carry back is not permitted. with 90 tax treaties, offers double trading in Austria are also subject
Incentives concerning R&D are provided taxation conventions with a large to registration. Monthly returns are
in the form of a 14% premium in number of countries. electronically recorded, and annual
cash for certain types of expenditure. Austria has a group taxation regime: returns are to be completed by 30
An expert report from the FFG profits and losses of the group June of the following year. Companies
(“Forschungsförderungsgesellschaft”) is members are attributed to the group represented by a tax advisor can have
compulsory to request this tax incentive. holder and the aggregated balance the deadline substantially extended.
is subject to taxation.

TRANSFER PRICING IN AUSTRIA VAT OPTIONS IN AUSTRIA Applicable / limits
Distance selling EUR 35,000/year
Arm’s length principle 20% < since 1988 Call-off stock
Documentation since 1988 / 2016 VAT group registration EUR 700,000/year
liability Cash accounting*
APA since 2011 Import VAT deferment gas, electricity, heating, emission quotas,
Penalty mobile phones, game consoles, construction
lack of CbCR not provided up to KEUR 50 Local reverse charge
documentation late payment interest if fraud: fiscal services, scrap, compulsory auction
Option for taxation of immovable property
tax shortage penal code letting of real estate
direct or indirect ownership supply of used real estate EUR 30,000/year
Related parties VAT registration threshold

Safe harbours No * Not applicable for capital companies

Level of attention paid by Tax Authority increasing

8/10

TA X GUIDE 2018 9

PERSONAL MAZARS MAZARS GMBH
INCOME TAX / IN AUSTRIA Am Heumarkt 10
SOCIAL SECURITY 1030 Vienna
SYSTEM Tel : +43(0) 1 367 16 67 0
Fax : +43(0) 1 367 16 67 20
[email protected]
www.mazars.at

The Austrian income tax rate is 1. Salaried employees: 2. Self-employed persons:
progressive (maximum of 55%).
The personal income tax progression Social security contributions are partly For self-employed persons also a
adds up as follows: paid by the employee and partly paid by maximum contribution base is in
• annual income up to EUR 11,000 the employer. The base is the monthly use (2018: EUR 5,985 per month and
  is not taxed, gross salary and special payments. EUR 71,820 per year). Based on the
• from the 11,001st to the 18,000th Euro Generally, a maximum contribution maximum contribution base the social
  earned, the marginal tax rate is 25% base is in use (2018: EUR 5,130 per security contribution amounts to 26.15%.
• from the 18,001th to the 31,000th Euro month, EUR 10,260 per year for special This insurance covers health insurance,
  earned, the marginal tax rate is 35%, payments.) Based on the maximum pension insurance and accident
• from the 31,001st to the 60,000th Euro contribution base the social security insurance. For the first 3 years lower
  earned, the marginal tax rate is 42%, contribution amounts to 39.60% (18.12% contributions can be paid.
• from the 60,001st to the 90,000th Euro employee and 21.48% employer).
  earned, the marginal tax rate is 48%, Additionally employers are obliged Minimum wages depend on the sector’s
• from the 90,001st Euro earned, the to pay various other payroll-related collective agreement. Therefore, no
  marginal tax rate is 50%, costs such as a contribution of 1.53% standard minimum wage exists.
• part of the earnings which exceeds to the employee pension provision
  1 mio. Euros is taxed with 55%. fund (“BVK”), a contribution of 3,9%
to the family allowance fund (“DB”), a
Concerning capital gains, a 27.5% tax surcharge of approx. 0.40% to contribute
rate is applied to all capital income from to the family allowance fund (“DZ”), and
both Austrian and foreign sources. a municipal tax of 3%.

In Austria a statutory compulsory social
security system is in use. All employees
are subject to this system. The two most
important schemes are the Austrian
General Social Insurance Act (“ASVG”),
which is used for dependent employees
(blue and white-collar workers) and the
Austrian Commercial Social Insurance
Act (“GSVG”) which is used for the self-
employed.

WAGE RELATED TAXES IN AUSTRIA Minimum wage Average wage in private
sector

in EUR in EUR

1 806,7* 3 498**

TOTAL WAGE COST 2 746 130,27% 5 316 130,27% Contact:
Employer's SS and other contri- 638 30,27% 1 235 30,27% Günther MAYRLEITNER
butions*** 4 081 Partner - Tax Advisor - CPA
GROSS SALARY**** 2 108 100,00% 100,00% Phone: +43 (0) 1 367 16 67 13
41 1,95% 629 15,41% Mobile: +43 (0) 676 8495966 13
Personal income tax 734 17,98% E-mail: [email protected]
379 17,98% 2 719 66,62%
Employees' contributions 1 688 80,07%
NET SALARY

* Payroll accountant in Austria, 2nd professional year
** Average monthly salary of full time employed persons in Austria in 2016.
*** In addition to SSC contribution to family equalization fund, surcharge, severance pay and community tax is also payable
**** Monthly gross salary (12 months)

10 TA X GUIDE 2018

BOSNIA AND HERZEGOVINA

CORPORATE TAXES
AND OTHER DIRECT TAXES

It is important to note that Bosnia and Dividends profit is not included in the obligation to pay withholding tax.
Herzegovina (BiH) is divided into three calculation of the tax base. In the FBiH, The group taxation concept is allowed in
tax jurisdictions: the Federation of BiH taxpayers who make investments from BiH for a group of resident companies
(FBiH), the Republika Srpska (RS) and its own resources in production equip- with a minimum of 90% (FBiH). Moreover,
Brčko District (BD). For the sake of sim- ment worth more than 50% of the profit mother company and its subsidiaries
plicity we will focus on the RS and FBiH. of the current tax period, reduces liabili- constitute a group of companies if among
The CIT rate is flat and amounts to 10%. ties of corporate income tax for 30% of them there is direct or indirect control
A company in FBiH/RS is resident if it is the amount in the year of investment. over 50% of the shares or stakes.
registered as legal entity in the relevant The taxpayer who invests more than
jurisdiction, or in other case its activities 20 million BAM (10,2 million EU) in five In case of acquiring real estate in the
in BiH qualify as PE (PE requirements are consecutive years (minimum investment FBiH, the transfer is taxable at cantonal
similar to those defined by OECD Model in first year equals to 4 million BAM (2,04 level. In the RS, there is no transfer tax,
treaty). In all tax jurisdictions, losses can million EUR), reduces its CIT liability for but the owner of the real estate has to
be carried forward for up to 5 years. Loss 50% of the investment in each of 5 years. pay property tax up to 0,20% of the mar-
carry-back is not permitted. There are no ket value. (decreased rules for production
special limitations in case of M&A trans- Withholdings rate is 10%, for dividends RE applies).
actions. In FBiH, interest expenses taken amounts to 5% in FBiH unless an DTT
from related parties are tax deductible in applies (currently, around 30 active VAT AND OTHER
debt / equity ratio of 4: 1 (thin cap rule). In DTT’s). Interests, royalties and technical INDIRECT TAXES
RS, interest expenses are not recognized fees paid by a BiH company to a foreign
for the amount of net interest expenses company are subject to withholdings at The general rate is 17%. There are
exceeding 30% of the tax base (without the rate of 10%. In RS there is a flat rate no reduced rates beside the 0% rate
financial items). In the RS, R&D costs are withholding tax (10%) on all payments to (mainly for the export of goods).
recognized in line with IAS. In FBiH and foreign legal person in which there is an VAT-exempt services are mainly
BD, R&D costs are recognized. banking services, insurance, healthcare,
etc. Export exemption as well as exemp-
TRANSFER PRICING IN BOSNIA AND HERZEGOVINA tion for deliveries to free zones apply.
Certain thresholds are as follows.
Arm’s length principle since 1998
It is necessary. It is prescribed the content of transfer pricing documentation. Other indirect tax types in BiH are cus-
Documentation tom duties and excise duties on goods
liability imported into BiH.

APA No

Country-by-Country prescribed both by FB&H Rulebook on transfer pricing as the RS since 2016
liability expected to be applicable from FY 2018 on
Master file-local
file (OECD BEPS 13) RS: 10.226,00 EUR-30.678,00 EUR for legal person and 2.556,00 EUR-7.669,00 VAT OPTIONS IN BOSNIA Applicable /
applicable EUR for responsible person. FBIH: 1.534,00 EUR-51.130,00 EUR for legal AND HERZEGOVINA limits
Penalty person and 1.278,00 EUR-5.113,00 EUR for responsible person. No
lack of Distance selling
documentation No There is no interest rates defined by Governmental Rulebook Call-off stock No
tax shortage VAT group registration No
25% direct or indirect control (25% for FBIH, 25% for RS) or common managing Cash accounting No
Related parties (25%) < director or significant influence on decisions. One person is connected Import VAT deferment Yes
with another when that person participates directly or indirectly in the Local reverse charge
Safe harbours management, control or capital of that other person or where the same Option for taxation No
person or the same persons participate directly or indirectly in the letting of real estate No
Level of attention management, control or capital of both persons. supply of used real estate approx.
paid by Tax Authority VAT registration threshold EUR 25,510/year
In FB&H, safe harbour rate for support services is 5%. Support services include:
Yes IT maintenance services, accounting and auditing, administration, legal services,

HR menagement, employees training and education and tax advisory services.

We believe that the attention of the tax authorities will be increasing, given the new
provisions of the Act and Regulations relating to transactions with related parties.

TA X GUIDE 2018 11

MAZARS THE CROATIAN OFFICE
IN BOSNIA AND IS RESPONSIBLE FOR EX
HERZEGOVINA YUGOSLAVIAN COUNTRIES
Mazars Cinotti Consulting d.o.o.
10000 – Zagreb,
Strojarska cesta 20, Croatia
Phone: (00385) 1 4864 420
Fax: (00385) 1 4864 429
www.mazars.hr

PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM

Personal income is taxed at a flat rate of In the RS, the employee contributes 33% In FBiH, the lowest hourly wage cannot
10%, and it is applicable on the active (e.g. of the gross salary. In the FBiH, the em- be less than 1,75 BAM (0,895 EUR) net,
employment, assignment fee) and pas- ployer contributes 10.5%, and employee or 2,96 BAM gross (1,51 EUR). In RS,
sive income (interest, real estate rental, contributes 31% of the gross salary. the lowest salary is determined as a net
etc.). Dividends are not taxable in BiH. amount in the amount of 395,00 BAM
(201,96 EUR).

2018 IN FBIH AND RS Average wage in FBiH Average wage in the
RS
Exchange rate BAM/ EUR
1,96 in EUR in BAM in EUR in BAM
679 1 331 683 1 338
TOTAL WAGE COST 750 683
Employer's SS and other contributions 71 110,50% - 100,00%
GROSS SALARY 679 10,50% 683 0,00%
Employees' contributions 211 225
Personal income tax* 32 100,00% 36 100,00%
NET SALARY 437 31,00% 422 33,00%
4,65% 5,21%
64,35% 62,97%

2018 IN FBIH AND RS Average wage in FBiH Average wage in the
RS

Exchange rate BAM/ EUR 1,96 in EUR in BAM in EUR in BAM
202 394,94
267 524 318 100,00% Contact:
- 0,00% Kristijan CINOTTI
TOTAL WAGE COST 295 110,50% 318 100,00% Partner – Tax & FAS services
105 33,00% Phone: (00385) 1 4864 420
Employer's SS and other contributions 28 10,50% 11 3,49% Mobile: (00385) 99 4877 112
202 66,07% E-mail: [email protected]
GROSS SALARY 267 100,00%

Employees' contributions 83 31,00%

Personal income tax* 3 1,17%

NET SALARY 181 67,59%

* Tax base differs from the gross salary, deductions apply.

12 TA X GUIDE 2018

BULGARIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

Bulgaria has a flat corporate income It applies for entities, which fulfill specific • tax on the acquisition of property for a
tax rate of 10% applied on the annual conditions. The tax rate is 10% and it consideration – applies for real estates,
tax profit. The tax profit may be also is applied to the calculated base for all vehicles and limited real estate rights,
deducted by tax losses to be carried ships - the ship’s net tonnage, by law acquired for a consideration. The tax
forward within five subsequent amounts for each type of ship and the rate range is between 0.1 and 3% of the
financial years. Bulgaria applies thin days in exploitation of the ship. value of the property, or of the value of
capitalization rules to interest expenses Local taxes are determined by each the more expensive property in case of
from loans provided or guaranteed by municipality in ranges, stated in Local exchange;
related parties. taxes and fees Law. Local taxes and fees • inheritance tax - exempt in a limited
The financial result of collective include: extent (family members);
investment schemes and enterprises • tax on the carriage of passengers by
with special purposes are not taxable • real estate tax – its ratio is in the range taxi – fixed amount between 300 and
with corporate income tax. between 0.1 and 4.5‰. Base for taxation 1 000 BGN for each car, used for
Advance tax payments should be made for non-living real estates of companies providing taxi services;
each month or quarter, based on the is the highest of book value or calculated • patent tax – it’s applied for micro entities
estimated tax profit for the current year. by municipality tax valuation. Base for or individuals, which activities are small
Withholding tax rates are 5 % for taxation of all living real estates is the services like tailoring, very small stores,
dividends and 10 % for interests, municipality’s tax valuation; carpentry, etc. There are fixed amounts,
royalties and other (Double tax treaties • transportation vehicle tax – determined determined by each municipality;
between Bulgaria and other countries as exact amount, depending on vehicle • garbage fee – fee collected from
could also be applied in order the type, and power; municipalities for maintaining of waste
withholding tax rate to be decreased). • tourist tax – applicable for each disposal, and cleaning the public areas
There is no withholding tax if the overnight in place of accommodation. (parks, streets, sidewalks, etc.);
dividends, interests and royalties are The range of tax is between 0.20 and 3 • wide range of other fees, usually
paid in favor of EU member state parent BGN for overnight; imposed for specific services, like social
company. • gift tax – applied for gifts of all kind, with services, technical and other services,
Social, representative expenses and the very limited exemptions. Applies also for rent of plots for sale at market places,
expenses for vehicles are also taxable forgiven payables. There are the two rate sidewalks, etc.
with 10 % tax rate. ranges applicable – between 0.4 and
There is also tax for operating of ships. 0.8 % for gifts between brothers and
sisters and their children; and between
3.3 and 6.6 % for all remaining;

TRANSFER PRICING IN BULGARIA VAT OPTIONS IN BULGARIA

Arm’s length principle No since 1989 Distance selling approx. EUR 35,790/year
No Call-off stock No
Documentation late payment interest VAT group registration
liability No direct or indirect control Cash accounting* 500,000 EUR/last 12 months
APA Import VAT deferment No
or personally related
Penalty Local reverse charge all types of waste (construction, household,
5/10 production, hazardous); services related to waste
lack of documentation Option for taxation processing; different types of agricultural production
Letting of real estate
tax shortage No Supply of used real estate** (seeds and grain)
VAT registration threshold
Related parties 50% < approx. EUR 25,565/last 12 months

Safe harbours No

Level of attention paid by Tax Authority

* If specific conditions are fulfilled and after permitment from tax authorities
** 5 years time test

TA X GUIDE 2018 13

MAZARS 2 Tsar Osvoboditel Boulevard,
IN BULGARIA BNP Paribas Office Building,
1000 Sofia- Bulgaria
Mobile: +359879435999
www.mazars.com

VAT AND OTHER
INDIRECT TAXES

For year 2018, the standard VAT rate PERSONAL INCOME TAX / There is minimal basis for social and
is 20%, while the reduced rate is 9% SOCIAL SECURITY SYSTEM health contributions for each position
(applicable for accommodation, (mostly divided by sectors of economy).
provided by hotels and similar places Personal income tax is applied at a flat The maximum assessment base
for accommodation, including holiday rate of 10% on most of the incomes. for social and health insurance
accommodation and renting of places Income from employment and self- contributions is BGN 2 600 BGN
for caravans and camping). VAT- employment is subject to social security (app. EUR 1 329).
exempt services include financial and and health insurance contributions. In Tax rate for dividends or liquidation
insurance services, the transfer of case of employment, the employee’s shares paid in favor of natural person
buildings and some land plots, and contribution amounts to 13.78% is 5 %.
rights related to them, rent of real (10.58% social security and 3.2% Tax rate applicable to the gross amount
estate to individuals for housing, post health insurance). For the employer, of interests, received from bank
services and post stamps, education the contributions are 18.92% (14.12% accounts, is 8 %.
services, gambling, supplies, related and 4.8% respectively). For specific Tax rate for amounts received after
to culture, religion, medical and social positions there are different rates for expiry of Life insurance, if its duration
care services and, also supplies, for contributions. was more than 15 years, is 7 %
which no tax credit has been used.
VAT payers are obliged to submit VAT
returns, sales and purchase registers,
VIES and Intrastat declarations on
monthly basis.

Other indirect taxes include excise
duties (on mineral oils, spirits, beer,
wine, tobacco and tobacco products,
gas, electricity and solid fuels).

WAGE RELATED TAXES IN BULGARIA Minimum wage Average wage in private
sector
Exchange rate BGN/EUR 1,95583
in EUR in BGN in EUR in BGN Contact:
TOTAL WAGE COST 261 510 541 1059 Milena Mladenova
Social security contribution - employer 310 641 118% Head of Audit Services
Health insurance - employer 36 119% 74 Mobile: +359879435999
GROSS SALARY 13 13,72% 26 13,72% E-mail: [email protected]
Employees' contribution 261 541 4,80%
Calculated personal income tax after 36 4,80% 75 100%
employees' contributions 100%
NET SALARY 23 13,78% 13,78%

202 10,00% 47 10,00%

77% 419 77%

14 TA X GUIDE 2018

CROATIA

CORPORATE TAXES A withholding tax of 15% is applied VAT AND OTHER
AND OTHER DIRECT TAXES on interest, royalty and business INDIRECT TAXES
consultancy services paid by a Cro-
From 2017 onwards, CIT rates are atian company to a foreign company. The tax rate is 25%; a reduced rate of
18% or 12% for enterprises with Exceptionally, WHT on dividends and 13% applies to tourist accommodation
annual revenues below HRK 3 million profit shares are taxed at the rate of services, newspapers, specific input
for taxable periods which ends after 12%. However, Croatia has more than for agricultural production, delivery
1.1.2017. The tax base is accounting 60 active DTT treaties used to avoid of electrical energy, etc., while a
profit modified by several increasing withholding tax. A withholding tax of reduced rate of 5% applies on milk,
and decreasing items. Enterprises 20% is applied on all payments to off- books, etc. VAT-exempt services are
with annual revenues below HRK 3 shore companies for the services not mainly banking services, insurance,
million have the option of determining mentioned in Law. The EU Directives investment-related services, educa-
the profit tax base by cash flow prin- on withholding tax apply. tional services (under certain condi-
ciple. Losses can be carried forward tions), games of luck, certain services
within 5 years but special limitations Real estate transfer tax (RETT) is provided by medical doctors and
are applicable in case of M&A transac- applied on the transfer of immovable dentists, and certain other activities
tions. Capital gains are included in the property at the rate of 4%. The taxable which are tax exempt with regard to
annual corporate profits tax return. base is the market value of a real their public interest or their special
Croatia uses thin capitalization (4:1), estate at the moment when the tax character. Tax is deductible on food
but thin capitalization does not apply if liability is incurred and the taxable donation to non-profit humanitarian
shareholders are financial institutions, person is the buyer. The acquisition legal entities up to 2 percent of total
CIT payers in Croatia or PIT payers in of newly built real estate that is taxed revenues of previous year. From 2018,
Croatia. There is a range of tax allow- according to the VAT Law is not con- taxpayers are entitled to deduct 50 %
ances for new investments and R&D sidered the transfer of real estate. of the input VAT related to the acqui-
(up to 150% of qualified costs), the Other taxes include contribution to the sition and rental of personal cars and
education of employees, etc. Croatian Commercial Chamber (fixed other means of personal transport
monthly fee), forestry tax (annual including the acquisition of any goods
TRANSFER PRICING IN CROATIA percentage) and tourist tax (for certain or services related to those goods (but
activities). only to purchase value of HRK 400.000
per single means of transport).

Arm’s length principle since 2004

Documentation Deliver to Tax Administration upon request. Other indirect tax types in Croatia are
liability excise duty and insurance tax.
Yes Together with tax return for 2017, taxpayers have
to deliver Report on business transactions with

related parties ( PD-IPO form) (deadline is 30 April)

APA Yes APA is available as from January 1, 2017.
The application fee will be charged.
Country-by-Country
liability from FY 2017 VAT OPTIONS IN CROATIA Applicable / limits
Master file-local file EUR 36,000/year
(OECD BEPS 13) The tax authorities have not yet issued any Distance selling
applicable No guidance on the implementation of the Master File, Call-off stock No
Penalty VAT group registration EUR 400,000/year
but is expected and recognised in practice Cash accounting Only in specific cases
lack of Import VAT deferment construction work, the supply of used ma-
documentation No Not specifically stated, general rules apply Local reverse charge terial, the transfer of allowances to emit
(up to HRK 200,000 for a company and HRK 20,000 greenhouse gase, the supply of immovable
tax shortage Yes Option for taxation property in certain conditions
50% for the responsible individual letting of real estate
Related parties (25%) < No
Additional tax charged and 100%
of that tax is not deductible

direct or indirect control (25% is commonly used by
tax authority and advisors) or joint control functions

Safe harbours Interest on IC loans is determined by the Minister supply of used real estate EUR 39,000/year
of Finance, for 2017 4,97% and for 2018 interest VAT registration threshold*

rate is 4,55%

Level of attention paid by Tax Authority

7/10 * Lorem ipsum Ut acculpa aut et molorep udanimus, serit, sinverum et aut iderias
perspicium adipis et quam eaquatum idita.

TA X GUIDE 2018 15

MAZARS Mazars Cinotti Consulting d.o.o.
IN CROATIA Strojarska cesta 20, II. Floor,
10 000 – Zagreb, Croatia
Phone: (+385) 1 4864 420
Fax: (+385) 1 4864 429
www.mazars.hr

PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM

Personal income tax rates are 24% (monthly represent employer contribution.
tax base up to HRK 17,500) and 36% (above For the person under 30 on undetermined
HRK 17,500), while 12% rate is withheld from period, there is no contributions on salary
certain types of income, e.g. dividends, capital (17,2) for the period of 5 years. Passive
gains, lease of the real estate etc.. Active incomes are generally subject only to taxes.
incomes fall under the scope of the SSC sys- The examples below show the cost of the em-
tem: individual pension social contributions ployer and the employee in case of minimum
equal 20% (employee contribution) and health and average wage level in the private sector.
and unemployment contributions of 17.2% Basic personal allowance amounts to HRK
3,800 and surtax is determined by municipali-
ty/city and amounts from 0% to 18%.

WAGE-RELATED TAXES IN CROATIA Minimum wage Average wage in
private sector

Exchange rate HRK/EUR 7,5 in EUR in HRK in EUR in HRK Contact:
459 3 440 1 117 8 381 Kristijan CINOTTI
TOTAL WAGE COST 538 1 310 Partner – Advisory services
Employer's contribution 79 117,20% 192 117,20% Phone: (00385) 1 4864 420
GROSS SALARY 459 17,20% 1 117 17,20% Mobile: (00385) 99 4877 112
Employees' contributions 92 223 E-mail: [email protected]
Tax and surtax* - 100,00% 89 100,00%
NET SALARY 367 20,00% 805 20,00%
0,00% 7,97%
80,00% 72,03%

*Tax base differs from the gross salary, deductions apply.

16 TA X GUIDE 2018

CZECH REPUBLIC

CORPORATE TAXES The Czech Republic has a wide inter- VAT AND OTHER
AND OTHER DIRECT TAXES national treaty network with more than INDIRECT TAXES
80 double tax treaties concluded. If the
The Czech Republic has a flat corporate payments are realized to third countries For 2018, the standard VAT rate is
income tax rate of 19% applied on a without a double tax treaty (or a valid 21%, while the reduced rates are 15%
general tax base. Basically, the tax base international agreement on exchange of (applicable, for example, on foodstuff,
is represented by an accounting profit information on tax matters), the with- non-alcoholic beverage, heat, cold, public
or loss modified by certain increasing holding tax amounts to 35%. transport, accommodation and selected
and decreasing items. The tax base may medical/sanitary goods and food-ser-
be deducted by tax losses to be carried Road motor vehicles used in connection ving services) and 10 % (applicable, for
forward within five subsequent taxable with business, as well as trucks with example, on baby formula and children’s
periods. The Czech Republic applies thin a maximum gross weight exceeding food, certain pharmaceuticals, certain
capitalization rules to loans provided by 3.5 tonnes regardless of their use, are printed books, children’s picture books,
related parties (generally 4:1). subject to a road tax if registered in the newspapers, magazines, music sheets
Czech Republic. A real estate tax is to be and food for gluten-intolerant persons).
The Czech Republic provides tax exemp- applied in relation to land and buildings, VAT-exempt services include financial
tion for holding structures: dividends and with tax rates generally depending on and insurance services, the transfer of
capital gains are tax exempted, provided the type of the property, while the final buildings/flats/non-residential premises
certain conditions are fulfilled. More- amount of tax may also be influenced by (after 5 years following the building ap-
over, under certain specific conditions, local ratios (as applied by local author- proval), rent of real estate, post services,
an exemption may also be granted to ities). A real estate transfer tax is to be radio and TV services, education services
royalties or interest from credit and loans. applied at a rate of 4%. Inheritance tax and medical and social care services.
A withholding tax of 15% applies to divi- and gift tax are incorporated into the
dends, royalties, interest and generally to income tax, with the application of stan- VAT payers are obliged to submit VAT
income received in the Czech Republic, if dard income tax rates (15% for individ- returns, EC Sales Lists and Control
the conditions for tax exemptions are not uals, 19% for legal persons). Gratuitous Statements (evidence which reports
fulfilled and a relevant double tax treaty income from inheritance is fully exempt. detail on the selected transactions). All
states otherwise. Gratuitous income from giving is exempt reports may be submitted on monthly or
in a limited extent (e.g. gifts within family). quarterly basis (depends on the subject
TRANSFER PRICING IN CZECH REPUBLIC who submits the report). The following
options/limits based on the EU Directive
are presented within VAT legislation:

Arm’s length principle since 1993

Documentation since 2006 (scope of Documentation VAT OPTIONS IN CZECH REPUBLIC Applicable / limits
liability is only recommended)
Distance selling approx. EUR 45,000/year

Country-by-Country from FY 2016 Call-off stock
liability
VAT group registration*
the recommended scope of the TP
documentation in the Czech Republic Cash accounting
corresponds to the general principles
Master file-local file Import VAT deferment
(OECD BEPS 13) included in the OECD Guidelines
applicable and the Code of Conduct on Transfer supply of construction works, waste, gold and intermediary service related to supply of gold,
Pricing Documentation for Associated supply of emission permits, selected cereals and industrial crops, mobile phones, integrated
Local circuits, portable devices for the automated processing of data (e.g. notebooks and tablets),
Enterprises in the EU. reverse videogame consoles, real estate (when VAT payer voluntarily applies VAT on the sale which should
charge be generally VAT exempt), supply of gas, electricity to trader, provision of telecommunication
APA since 2006 services to trader, outplacement of construction and assembly workers, supply of immovable
property in forced insolvency sale, supply of goods originally provided as guarantee, supply
Penalty
of goods after assignment of reservation of ownership

lack of No Option for taxation
documentation

20% on tax underpayment letting of real estate**
+ late payment interest
tax shortage supply of used real estate***
VAT registration threshold****
Related parties 25% < direct or indirect control approx. EUR 39,200/year
or personally related
* related parties, only for Czech legal entities
Safe harbours Low value added services: ** only when let to VAT payer for perfoming of his economic activity
3-7% mark-up *** 5 years time test
**** only for Czech based legal entities
Level of attention paid by Tax Authority
Other indirect taxes include excise duties (on mineral oils, spirits, beer, wine and tobacco) and an energy
9/10 taxes (on gas, electricity or solid fuels). A ‘contribution’ from electricity produced via solar facilities
applies to such electricity producers.

TA X GUIDE 2018 17

MAZARS MAZARS S.R.O.
IN THE CZECH INTERNATIONAL BUSINESS CENTER
186 00 Prague 8, Pobřežní 620/3,
REPUBLIC Czech Republic
Phone: (+420) 224 835 730
Fax: (+420) 224 835 799
www.mazars.cz

PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM

Personal income tax is applied at a part of the gross income from an em- For the employer, these amount to 25%
flat rate of 15% on active (employment, ployment/tax base from self-employment and 9% respectively. The social security
self-employment) and passive income exceeding 48 times the amount of the ave- contributions are not paid on the income
(e.g. capital gains, dividends, interests). rage wage (for 2018 it is CZK 1,438,992). exceeding the maximum assessment
The employees’ tax base is increased by Income from employment and self-em- base (for 2018 it is CZK 1,438,992). The
health insurance/social security contri- ployment is subject to social security and maximum assessment base for the
butions paid by the employer, thus the health insurance contributions. In case of health insurance contributions has been
effective tax rate amounts to approxi- employment, the employee’s contribution cancelled as of 2013. The example below
mately 20%. A “solidarity” increase of amounts to 6.5% (social security) and shows the employer’s and the employee’s
tax at the rate of 7% is applied for the 4.5% (health insurance). costs in case of minimum wage and
average wage in the private sector.

WAGE- RELATED TAXES IN CZECH Minimum wage Average wage in
REPUBLIC private sector

Exchange rate CZK/EUR 25,265 in EUR in CZK in EUR in CZK
483 12 200 1 187 29 979
TOTAL WAGE COST ("SUPER GROSS" 647 134,00% 1 590 134,00%
SALARY)
121 25,00% 297 25,00% Contact:
Social security contribution - 43 9,00% 107 9,00% Pavel Klein
employer 1 187 Leading Partner of Tax Department
483 100,00% 239 100,00% Corporate tax / VAT
Health insurance - employer 97 15,00% 15,00% Mobile: (+420) 721 461 394
157 E-mail : [email protected]
GROSS SALARY 15 131 11,00%
53 11,00% 900 75,81%
Calculated personal income tax without 415 85,88%
standard tax deduction*

Personal income tax after
standard tax deduction**

Employees' contributions

NET SALARY

* 15% tax rate is applied on "super gross" salary, the effective tax rate is approximately 20%
** Each individual is entitled to deduct a lump sum of CZK 2,070 (app. EUR 82) per month

from his tax liability (called "standard tax deduction")

18 TA X GUIDE 2018

ESTONIA VAT AND OTHER
INDIRECT TAXES

CORPORATE TAXES tax rate of 20%. A calculation example in The general rate is 20%, while the
AND OTHER DIRECT TAXES case the net payment is 1,000 EUR: the reduced rate is 9% (e.g. books and
tax base is 1000 / 80% = 1,250 EUR, and workbooks used as learning materials,
In Estonia there is no traditional the corporate income tax is 1,250 EUR x particular medicinal products,
corporate income tax, which means 20% = 250 EUR. There are no rules particular periodic publications, certain
that retained profits enjoy deferred regarding how losses can be carried accommodation services). Exportation
taxation, which is considered as the most forward because only distributed profits is zero-rated. VAT is not imposed on
attractive tax incentive for companies to are subject to income tax. certain goods and services of social
invest in Estonia. Corporate profits are nature. Other VAT-exempt goods and
subject to income tax upon distribution There is no withholding tax on dividends, services include insurance services,
i.e. dividend payments, liquidation interest and royalty paid by an Estonian leasing or letting of immovable
proceeds, etc. company to either an Estonian or foreign properties, the sale of immovable
In addition, certain payments, such as company, provided that certain criteria properties or parts thereof before
fringe benefits, gifts, donations, costs are met. Also, there is no corporate their first use, securities and financial
of entertaining guests, expenses and income tax applied in case of pass- services. The options/limits based on
payments that are not business-related through dividends corresponding to the EU Directive are presented within
are also identified as profit distributions certain rules. Income tax is withheld from the VAT legislation:
for income tax purposes. Expenses rent from a commercial or residential
related to business are not taxable if they lease (20%), payments to a non-resident At the end of 2014 Estonia introduced
have been incurred for the purposes of for services provided in Estonia (10%), an additional reporting form that
deriving income from a taxable business and payments to a legal person located companies need to submit together
or are necessary or appropriate for in a low-tax-rate territory for services with their VAT returns for reporting all
maintaining or developing such business provided to an Estonian resident (20%). transactions exceeding 1,000 EUR with
and it is clearly justified that the expenses Estonia has a wide international treaty a single partner in a calendar month.
are business-related. Also, no income network with 63 double tax treaties. Also, in 2014 new rules were introduced
tax is charged on business gifts, gifts Other direct taxes include a gambling regarding vehicle-related VAT-
and donations to specified non-profit tax and a land tax applicable in specific deductions, which in general (with one
associations and costs of entertaining cases. Also, there is a social tax, which specific exception) restrict more than
guests not exceeding limits set by law. is described under the social security 50% of total input-VAT deduction related
The corporate tax rate is fixed as 20/80 system below. with vehicle costs (purchase of car, fuel,
on the net amount of the payment, which repair, etc.).
means that net distribution/payment is
grossed up first and then subject to a Other indirect tax types in Estonia
include excise duty and customs duty.

TRANSFER PRICING IN ESTONIA VAT OPTIONS IN ESTONIA Applicable / limits

Arm’s length principle No since 1999 Distance selling EUR 35,000/year
since 2007 Call-off stock -
Documentation VAT group registration*
liability N/A Cash accounting turnover < 200,000 EUR
Import VAT deferment specific real estate, metal waste, gold
APA Up to EUR 3,200. A criminal penalty may also be Local reverse charge
imposed up to EUR 16 million. Option for taxation EUR 16,000/year
Penalty letting of real estate
supply of used real estate
lack of documentation VAT registration threshold**

tax shortage Daily interest of 0.06% on the tax underpayment

Related parties 25% < share capital or voting rights; other special rules
relating mutual business interest or control
Safe harbours No
8/10
Level of attention paid by Tax Authority * There must be an element of common control over the members of the group.
** If the trade is below the registration threshold, voluntary VAT registration might
be possible.

TA X GUIDE 2018 19

MAZARS MAZARS OFFICIAL
IN ESTONIA CORRESPONDENT
IN ESTONIA
Baltic Business Advisory OÜ
Rotermanni 8, Tallinn, 10111
Estonia
Phone: +372 534 634 22
www.bba.ee

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

In Estonia there is a flat rate of PIT, exemption decreases according to the contributions equal altogether
which is 20%, and it is generally following formula: 6000 – 6000 ÷ 10 800 1.6%-3.6% depending of the type
applicable to active (e.g. employment, × (income amount – 14 400), 3) if annual of mandatory pension subscription;
assignment fee) and passive income income is above 25 200 EUR, basic the employer’s contribution is
(e.g. capital gains, dividend and exemption is 0. altogether 33.8% (social tax 33%
interest). Resident individuals can use and unemployment insurance 0.8%).
a monthly tax-free amount, which is In addition, there a specific list of tax Passive incomes are in general not
maximum 500 EUR per month starting deductions, which can be applied via subject to SSC. Benefits in kind are
from 2018. The monthly tax-free the annual tax returns e.g. deduction taxed only on the level of the employer
minimum is applicable only with lower of housing loan interests (in certain at two rates: corporate income tax
income and the application of it goes limits), voluntary pension payments, (20/80 on net amount) plus social tax
according to the following formula: 1) donations and training expenses, an 33%, which is altogether approximately
annual income up to 14 400 EUR gives additional tax allowance in case more 60%. The examples below show the
6000 EUR as annual basic exemption, than one child, etc. cost of the employer and employee in
2) in case annual income increases Active incomes fall under the scope case of minimum wage level and the
from 14 400 EUR to 25 200 EUR, basic of the SSC system: individual social average wage in the private sector.

WAGE TAXATION IN ESTONIA Minimum wage Average wage in private
sector

in EUR in EUR
1 604
TOTAL WAGE COST 629 133,80% 10 133,78%
396 0,80%
Employer unemployment insurance 4 0,80% 1 199 Contact:
193 33,00% Karin NEEMSALU
Social tax 155 33,00% 19 100,00% Tax partner
36 Mobile: +372 534 634 22
GROSS SALARY 470 100,00% 180 20,00% E-mail: [email protected]
951 1,60%
Personal income tax 54 20,00% 3,00%
-
Employees' unemployment insurance 8 1,60%
79,32%
Employees' pension insurance* 14 3,00%

Minimum monthly tax deduction (for tax residents) 180 -

NET SALARY 395 83,98%

*The rate could be 2% or 3% depending of the age and the subscription type

20 TA X GUIDE 2018

FORMER YUGOSLAV
REPUBLIC OF MACEDONIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

The general corporate income tax FYROM applies thin capitalization (3:1). The tax rate on sales and other transfers
rate for all taxpayers in the Former Thin capitalization rules do not apply of real estate and rights to real estate
Yugoslav Republic of Macedonia is flat to loans received from banks and other is 2 to 4% of the market value of the
and amounts to 10%. Exceptionally, financial institutions and for newly property. There is also a property tax
companies with a total revenue up to established companies, within first (the rate is 0.1-0.2%) paid annually by
3 million denars (MKD) are exempted three years. In the FYROM, there is a owners of immovable properties.
from the payment of CIT, and companies withholding tax at the rate of 10% on
with a total revenue between 3,000,001 dividends, interests, royalties and other VAT AND OTHER
and 6,000,000 denars have the option to incomes paid by a FYROM company to INDIRECT TAXES
pay CIT in the amount of 1% of the total a foreign company. The entities obliged
revenue. to pay withholding tax should submit The general rate is 18%; a reduced
The tax base is the pre-tax profit modified a Report about the paid withholding rate of 5% applicable to food products,
by several increasing and decreasing tax on the form “DD-I“ to the Public pharmaceuticals, production equipment,
items. Losses can be carried forward Revenue Office once a year. This form computers and public transportation.
within a limited period of 3 years. Loss is submitted until 15 February in the Exports are zero-rated. VAT-exempt
carry-back is not permitted. No special following year. services are mainly banking services,
limitations are applicable in case of M&A insurance, the rental of real estate,
transactions. The tax base is reduced FYROM has a wide international treaty certain services provided by medical
for the amount of investment of profits (DTT) network with 45 double tax doctors and dentists, certain types of
(reinvested profit) for development treaties, and the withholding tax rate education and training, as well as some
purposes i.e. investment in tangible can be reduced or abolished under the other activities which are tax exempt
assets (property, plant and equipment) active DTT. Taxpayers are obliged to with regard to their public interest or
and intangible assets (computer software obtain approval from the Macedonian their special character.
and patents) intended to expand the tax authorities prior to applying the tax Thresholds are as follows:
activity of the taxpayer. rates from DTT.

TRANSFER PRICING IN FYROM VAT OPTIONS IN Applicable / limits
FYROM
Arm’s length principle Since 2009
Documentation liability Distance selling No
APA No Upon request by the Macedonian tax authorities
Call-off stock No
Country-by-Country liability The tax legislation does not provide for a binding APA. Companies are entitled
No to file an application to the tax authority for a ruling with respect to the tax VAT group registration*

position they intend to take, to which the tax authority is obliged to reply Cash accounting No

No No obligation Country-by-Country reporting Import VAT deferment No

Master file-local file The tax authorities have not yet issued any guidance on the implementation Local reverse charge Construction including
(OECD BEPS 13) applicable of the Master File maintenance, electrical
installation, plumbing, etc.

Penalty Option for taxation

lack of ~ EUR 2.500-3.000 / missing documents doubled on recurrent basis and tax letting of real estate No
documentation authorities are entitled to suspend the taxpayer's business activity for 3 to 30 days.

tax shortage Up to 10 times the amount of the understatement of tax supply of used real No
estate

Related parties individuals and legal entities with control or significant influence VAT registration threshold** MKD 1 milion per year
- family members of owners or members of the Management Bord (EUR 16,260 /year)
- all nonresident legal entities registered in low-tax jurisdictions, irrespective
of whether they have control or are of significant influence to the taxpayer

Safe harbours Interest income/expense from the loans as EURIBOR + 1% (or SKIBOR +1% Other indirect taxes in FYROM are fuel tax
for loans extended in MKD) and excise duties.

Level of attention paid by Tax Authority * related parties
** voluntary registration is possible
4/10

TA X GUIDE 2018 21

MAZARS THE CROATIAN OFFICE
IN FORMER IS RESPONSIBLE FOR EX
YUGOSLAV YUGOSLAVIAN COUNTRIES
REPUBLIC OF Mazars Cinotti Consulting d.o.o.
MACEDONIA Strojarska cesta 20, II. Floor,
10 000 – Zagreb
Phone: (+385) 1 4864 420
Fax: (+385) 1 4864 429
www.mazars.hr

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

There is a flat PIT rate of 10%, and it health care at work insurance is 0.5%. The minimum base for social security
is generally applicable on the active The examples below show the cost of contributions equals 50% of the
(e.g. employment, assignment fee) the employer and the employee in case average monthly salary for the current
and passive income (e.g. capital gains, of minimum wage level and the average month. The highest base for payment of
dividend and interest). Employers are wage. The personal allowance is MKD mandatory social security contributions
obligated to calculate, withhold from 90,372 (EUR 1.468) on an annual basis on a monthly basis is 12 average
employees’ gross salary, and pay into while the monthly personal allowance salaries paid in Macedonia.
the accounts of respective funds the is in the amount of MKD 7,531. Starting
compulsory social contributions and from FY 18 the taxpayers are obliged
personal income tax (PIT). Social to prepare and submit an Electronic
security contributions payable by calculation for advanced payment of tax
employees altogether amount to 27% of (e-PPD) for the separate income they
the gross salary: pension contribution realize in the country and abroad during
is 18%; health care insurance is 7.30%; the calendar year.
unemployment insurance is 1.2%; and

WAGE RELATED TAXES IN FYROM Minimal wage in MAC Average wage in MAC

Exchange rate MKD/EUR 61,58 in EUR in MKD in EUR in MKD
553 34 079
239 14 739 553 100,00%
- 0,00%
TOTAL WAGE COST 239 100,00% 553 100,00%
149 27,00%
Social contribution on salary - 0,00% 28 5,11% Contact:
376 67,89% Kristijan CINOTTI
GROSS SALARY 239 100,00% Managing Partner
Phone: (+385) 1 4864 420
Employees' contributions 65 27,00% Mobile: (+385) 99 4877 112
E-mail: [email protected]
Personal income tax* 5 2,24%

NET SALARY 169 70,76%

*Personal income tax base differs from gross salary, deductions apply.

22 TA X GUIDE 2018

GERMANY

CORPORATE TAXES VAT AND OTHER
AND OTHER DIRECT TAXES INDIRECT TAXES

Companies are subject to German essential when calculating the taxable The VAT rate is in general 19%.
taxation if they have either their profit. Capital gains on tangible assets A reduced rate of 7% applies for certain
statutory seat in Germany or the main are fully liable to corporate income basic foodstuffs, books, newspapers,
management decisions are taken in tax and to trade tax. Capital losses antiques, live animals, hotel
Germany. In this case the worldwide are fully tax deductible. Some income accommodation and for some other
income is subject to German taxation. does not have to be taken into account items. Banking services and insurance
Besides, companies with a branch or in the taxable income, e.g. 95% of premiums are exempt from VAT. In
permanent establishment in Germany dividends received from corporations addition to VAT, various excise taxes
are taxed based on the income realised originated in Germany or abroad by a and customs duties on imported goods
in Germany. The corporate income tax corporation as well as capital gains as well as real estate transfer tax and
rate amounts to 15% plus solidarity from selling these (if the participation land tax are mentioned as so-called
surcharge of 5.5%. The solidarity in capital amounts to at least 10% and “indirect” taxes. If goods are exported
surcharge was introduced to finance none of few general exemptions apply). outside the EU, the customers are not
the German reunification. Therefore, The carry-back system allows for tax subjected to VAT. In the other hand,
the total tax burden is 15.825%. In losses recorded in a financial period any related input tax may still be fully
addition the local municipalities collect to be offset against earlier tax profits. deducted from amounts payable to the
trade tax. The average trade tax burden Losses reduced by carry-back may be tax authorities. Imports into Germany
is 15.5%. carried forward without limit, whereas outside the EU are subject to an “import
their offset in one year is limited to VAT” on entry. Sales within the EU
In Germany, the determination of the € 1 million plus 60% of the income are also tax-free in the B2B sector. If
taxable income is generally based on exceeding € 1 million. persons or goods are transported from
the result of the commercial profit and or to another EU country, this carriage
loss statement. However, the taxable Furthermore, the tax law in Germany is subject to German VAT, unless the
income (which generally represents distinguishes between partnerships carrier has made the transaction subject
the reference base of the main taxes) and corporations. A partnership is in to the VAT of another EU country.
tends to differ from the profit and loss general liable to trade tax. The result of
disclosed in the commercial financial a partnership will be liable to income The real estate transfer tax is levied on
statements. The taxable profit is to be tax, if the shareholders are individuals, the sales price or other transfer value on
established from the changes in net and to corporate income tax, if the each change of ownership in land and
capital employed during the financial shareholders are corporations on buildings. The basic rate of real estate
year, from which the deposits are the level of the shareholder. The transfer tax rate is 3.5%. Each federal
deducted and to which withdrawals are partnership itself neither pays income state in Germany has the right to apply a
added. The assessment rules governing nor corporate income tax. different rate of the real estate transfer
the assets and liabilities are therefore tax on his territory.

TRANSFER PRICING IN GERMANY VAT OPTIONS IN GERMANY

Arm’s length principle since 1995 Distance selling EUR 100,000/ year
Documentation since 2003 Call-off stock
liability since 2006 VAT group registration
APA Cash accounting
Penalty bases of taxation can be estimated by the tax authorities
+ surcharge between 5 % and 10 % of the income Local reverse charge Construction works,
lack of adjustment maximum of 1 Million EUR emission permits, gold, cleaning
documentation from EUR 100,000 tax reduction - of buildings, turnover covered by the
imprisonment or/and high fine Real Estate Transfer Tax Act, natural
tax shortage direct or indirect control or personally related
gas and electricity
9/10
Related parties 25% < Option for taxation
letting of real estate
Safe harbours Supply of real estate
VAT registration threshold
Level of attention paid by Tax Authority

EUR 17,500 /year

TA X GUIDE 2018 23

MAZARS Mazars GmbH & Co. KG
IN GERMANY Wirtschaftsprüfungsgesellschaft
Steuerberatungsgesellschaft
Alt-Moabit 2 | 10557 Berlin |
Deutschland
Phone: +49 30 208 88-1878
Fax: +49 30 208 88-1999
www.mazars.de

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

Taxable income of individuals can stem tax. The rate varies between 8% and 9% to the Double Taxation Agreements are
from the following categories: income of the income tax and is not collected applicable. Individuals who are neither
from business, income from self- if the taxpayer declares that he has no resident nor have their customary place
employment, income from dependent religious faith. Furthermore, solidarity of residence in Germany are subject to
employment, investment income, surcharge is due of 5.5% of the payable limited tax liability in Germany for income
agricultural and forestry income, income income tax. Losses can be carried they derive from German sources.
from real estate and other leases back for one assessment period up to a
and other income. The rate of income maximum of € 1 million (married couples Active incomes fall under the scope
tax varies according to progressive € 2 million) and be carried forward of the social security system. The
taxation brackets. There is a tax-free indefinitely. However, minimum taxation German social security system is broken
base allowance in accordance with the is applicable (i.e. loss carry-forward can down into four main elements like as
minimum subsistence level of € 8,820 for be utilized up to € 1 million unlimited, retirement insurance, unemployment
single individuals in 2017. The minimum and the exceeding income can only be insurance, invalidity insurance, and
tax rate has been 14% since 2009, offset by 60%). healthcare insurance. The social
whereas the maximum tax rate has been contribution is split equally between
45% since 2009. Some expenses, e.g. Individuals who are permanently resident employer and employee, although
special expenses or exceptional expenses - independent of citizenship - in Germany childless employees over 23 are required
may be deducted to calculate taxable and individuals who have their customary to bear an additional 0.25% premium for
income. There is a second tax regime for place of residence in Germany are liable the invalidity insurance. The statutory
investment income which mainly refers to unlimited taxation for German income minimum for health insurance is 14.6%
to dividends, interest etc. which is subject tax purposes. and is divided equally, but most health
to 25% withholding tax. Individuals living The tax liability relates to the worldwide funds require a supplement of, typically,
in Germany may be liable to church income unless restrictions according around 1% to be borne by the employee
alone. The total of social contributions
WAGE-RELATED TAXES IN GERMANY Minimum wage Average wage in amounts to a minimum of 38.65% of an
private sector employee’s gross salary.

EUR in EUR 119,42% in EUR 119,42% Contact:
1 540 19,42% 2 900 19,42% Dr. Christian Birkholz
TOTAL WAGE COST 1 839 3 463 Attorney, Tax advisor
Employer´s contributions* 299 100,00% 563 100,00% Partner
GROSS SALARY 1 540 12,40% 2 900 12,40% Phone: +49 30 208 88-1880
Employee´s contributions** 191 8,40% 359 8,40% E-mail: [email protected]
Healthcare insurance 129 5,95% 244 14,76%
Personal income tax and solidarity 92 428
surcharge***
NET SALARY 1 128 73,25% 1 870 64,44%

* consists of retirement insurance, unemployment insurance, invalidity insurance and healthcare insurance
** includes retirement insurance, unemployment insurance, invalidity insurance
*** calculation without church tax/ for a single 25 year old and without children

24 TA X GUIDE 2018

GREECE

CORPORATE TAXES transactions, under conditions. Greece Tax Residency
AND OTHER DIRECT TAXES has a wide international treaty network
with 57 treaties on the avoidance of An individual is a tax resident of Greece,
A flat corporate income tax rate of double taxation. provided that his permanent or principal
29% applies for Greek businesses and On top of the ordinary annual real estate place of residence or habitual residence
foreign branches. The relative tax rate tax, legal entities holding real estate in or the center of his vital interests are in
applies after the deduction of business Greece may under certain conditions be Greece. Furthermore, the criteria of 183
costs, depreciations and provisions for charged furthermore with the Special days presence in the country does also
bad debts. Major tax adjustments and Estate Tax, calculated at a rate of 15% apply. For businesses, the concept of
non-deductible items are payments on the value of the property in case that place of effective management has been
out of banking system, transfer pricing the beneficial owner is not known to the incorporated in the Greek law since 2014.
adjustments, personal consumption Greek authorities.
expenditure, bad depts without legal Capital gains from shares and immovable VAT AND OTHER
actions, payments to low tax rates property are taxed as normal business INDIRECT TAXES
jurisdictions (under conditions), non- profits (29%) for businesses and with a
paid SSC and thin cap interests to the flat rate of 15% for individuals. Especially Greek VAT system is in line with the EU
extent that they are over 30% of EBITDA. for individuals and the capital gains VAT Directives. The standard rate is 24%,
Losses can be carried only forward arising from the sale of real estate the while the reduced rates are 13% (e.g.
for 5 years however special limitations tax 15% has been postponed until the end agricultural services, accommodation
apply in M&A transactions. A new of 2018. services, certain types of food) and 6%
shareholder over 33% cannot benefit The general transfer tax rate which (e.g. journals, books, medicines, plays).
from prior years losses if the change of applies to property transactions is 3%. VAT-exempted activities are the financial
the shares ownership has not been made The taxable base is the contract value of and banking services, insurance, medical
for business purposes. The loss from a the real estate unless the tax nominal services, education (under conditions).
P.E in the EU can be recognized. Finally, value of the property is higher than the Regarding to other indirect taxes, in
Greek companies are subject to annual contract value and the taxable person is Greece applies a flat stamp duty rate
business tax up to 1.000€, irrespective of the buyer. The acquisition of newly built of 2,4 or 3,6% to certain transactions
their profitability. real estate falls within the scope of VAT. excluding VAT, such as rents, loans etc.
The domestic rate for dividends Greece applies the Multilateral Other indirect tax types in Greece include
distribution is 15% for both individuals Agreement of Principles for the excise duty on oil, alcohol and tobacco
and legal entities shareholders. In case Automatic Exchange of Financial Account products, environmental protection
a DTT is in force the rate can be reduced Information, the OECD regulations for charge on products heavily polluting the
according to the provisions of the Treaty. transfer pricing, CFC (Controlled Foreign environment.
By adopting the EU Parent Subsidiary Companies) rules and is line with the The options/limits based on the EU
Directive, there is no withholding tax on BEPS Actions. Directive are presented within VAT
dividends, interests and royalties paid legislation:
on EU (including Greece) intragroup

TRANSFER PRICING IN GREECE

Arm’s length principle No since 1994 VAT OPTIONS IN GREECE EUR 35,000/year
since 2008 No
Documentation since 2014 Distance selling No
liability Follows OECD TP Guidelines Call-off stock
VAT group registration Optional for small companies up to 2m
APA For inaccuracy/incompleteness; Cash accounting turnover
1‰ of TP transactions (min EUR 500-EUR 2,000)
Hyerarchy in TP methods For non submission , fine of 1‰ of TP transactions Import VAT deferment sale of waste,B2B sales for laptops-
(min EUR 2,500 max. EUR 10,000). Non existence of tablets- cell phones under conditions
Penalty Local reverse charge
documentation file, penalty up to 20,000 optional on business rents
lack of Direct or indirect control or management dependence Option for taxation No
documentation letting of real estate
or exercise of decisive influence Supply of real estate EUR 10,000/year
tax shortage VAT registration threshold
10/10
Related parties 33% <

Safe harbours No

Level of attention paid by Tax Authority

TA X GUIDE 2018 25

MAZARS MAZARS CERTIFIED PUBLIC
IN GREECE ACCOUNTANTS BUSINESS ADVISORS S.A.
130 Syngrou Avenue,
176 71 Athens, Greece
Phone: +30 2106993749
Fax: +30 2106983708
www.mazars.gr

PERSONAL INCOME TAX / Additionally, personal income is The social security contributions are
SOCIAL SECURITY SYSTEM subject to special solidarity levy with a calculated on the actual salary of the
progressive scale from 2,2% to 10%. employee. The applicable rates are
Pursuant to domestic law as Regarding the tax payment, by the end 25,06% for employers and 16% for
employment income is considered any of the second subsequent month of the employees. The Social Security grants
remuneration received by an employee relative payment (payroll, fee etc.). the benefits in the case of unemployment,
for services rendered per year under employer must pay all tax arising. The sickness, disability, retirement and
an employment agreement (benefits income tax for individual income is paid death. For calculation purposes the
in cash or in kind are also included in three bi-monthly remits. Persons who upper limit of the social security
e.g. the private usage of a company car, are self-employed, freelancers, etc. are contributions is €5.860,80 gross salary.
the cost of living allowance, etc.). In responsible for paying their own taxes Benefits-in-kind are taxed if the total
Greece personal income tax (dependent and social insurance. value of benefits exceeds the amount of
employment, assignment fee) is subject Active incomes fall under the scope of 300 Euro per fiscal year.
to a progressive tax rate which ranges the SSC system. The vast majority of the For individuals a progressive tax rate
from 22% to 45%. There is a flat rate of Greek employees are covered by Social from real estate income is imposed
15% for dividend and interest income Insurance Institution called E.F.K.A. as follows: <12.000 €15%, 12.001-
and a flat rate of 20% for royalties’ from 1/1/2017. 35.000€35%,>35.001 €45%.
income. Tax payable on active incomes
is reduced by a family tax allowance.

WAGE RELATED TAXES IN GREECE Minimum wage Average wage in private sector

TOTAL WAGE COST in EUR 125,06% in EUR 125,06% Contact:
Employer's social security 733 1 478 Theodoros Kintis
contribution Director
GROSS SALARY* 147 25,06% 296 25,06% International Tax / VAT
Personal income tax Phone: +30 2106993749
Employees' contributions 586 100% 1 182 100% Mobile: +30 6976697450
NET SALARY - 22%/29%/37%/45% 86 22%/29%/37%/45% E-mail: [email protected]

94 16,00% 189 16,00%
492 84,00% 907 76,72%

* per payroll period (there are 14 payroll periods per year)

26 TA X GUIDE 2018

HUNGARY

CORPORATE TAXES
AND OTHER DIRECT TAXES

From 2017, a flat corporate income Hungary has a wide international treaty acquisition of real estate or 75% of
tax rate of 9% was introduced in network with more than 80 treaties the quotas of a real property holding
Hungary. The tax base is the pre-tax on the avoidance of double taxation. company. There are some exceptions
profit modified by several increasing IFRS accounting is optional for larger regarding intra-group transactions.
and decreasing items. In Hungary, companies (above approx. 1 million The transfer tax is 18% on gifts and
the losses can be carried forward for EUR of revenue). inheritance, 9% in case of flats; gifts
5 years. The losses may be used for and inheritance within family is tax-
reducing the tax base only up to 50% The local business tax of maximum exempt.
of the tax base calculated without the 2% is payable on gross margin (sales
loss carried forward. Loss carryback is revenue deducted by COGS, mediated VAT AND OTHER
only possible in the agricultural sector. services, material costs and R&D INDIRECT TAXES
Special limitations are applicable in the costs). A special surtax applies to
case of M&A transactions. the energy sector (31% of the taxable Hungary runs a VAT system complying
Hungary applies thin capitalization (3:1) profit, payable in addition to the with the EU VAT Directives. The standard
and CFC rules. There is an ever growing corporate income tax) and the bank rate is 27%, while the reduced rates
range of tax allowances for new sector (the tax is based on the total are 18% (e.g. bread, accommodation
investments and R&D. For example, assets as of the statutory accounts services) and 5% (e.g. milk, eggs,
a new incentives have been recently of the second year prior to the tax journals, books, medicines, certain meat
introduced for energy-efficiency year). The advertisement tax is only products, new homes, internet access
investments and also for investing in paid on the sales revenue resulting service and restaurant services). The
start-up companies. Hungary provides from advertisement services. Small options/limits based on the EU Directive
tax exemption on holding structures: companies may benefit from a special are presented within VAT legislation.
capital gains on shares and intellectual multi-component taxation system Due to the limited voluntary compliance
property under certain conditions are (“Kiva”). in certain sectors (e.g. retail business
tax free, and a 50% tax allowance is and certain services), Hungary introduced
applicable on royalty incomes. There Transfer tax is applied in Hungary to a number of measures aiming at
is no withholding tax on dividends, a limited scope of transactions. The enforcing the law, such as the online
interest and royalty paid by a Hungarian general transfer tax rate applied to real control of cash registers, domestic sales
company to a foreign company. property transactions is 4%, including reports are also required.

Exchange rate HUF/EUR 310

TRANSFER PRICING IN HUNGARY

Arm’s length principle since 1996 VAT OPTIONS IN HUNGARY Applicable / limits
Documentation since 2003
liability since 2007 Distance selling EUR 35,000/year
APA from FY 2016 (with transitional rules) Call-off stock
Country-by-Country liability from FY 2018 on VAT group registration* appr. EUR 400,000/year
Master file-local file Cash accounting - yearly amount in
(OECD BEPS 13) applicable ~ EUR 6,500 / missing documentation doubled on EUR (approx.) sale of waste, agricultural products,
Penalty recurrent basis Import VAT deferment emission quotas, pawn, construction

lack of documentation Local reverse charge services, handing over of a
constructed structure
tax shortage 50% on tax underpayment + late payment interest Option for taxation - letting of real
estate No
Related parties 50% < direct or indirect control or common managing Option for taxation - supply of used
director real estate
Safe harbours VAT registration threshold**
Level of attention paid by Tax Authority Low value added services: 3-7% mark-up

9/10 * Available only for related parties
** Special VAT exemption applies for small businesses

TA X GUIDE 2018 27

MAZARS MAZARS HUNGARY IS
IN HUNGARY THE TRANSFER PRICING CENTER
IN THE MAZARS NETWORK
Mazars Kft.
1123 Budapest, Nagyenyed utca 8-14
Hungary
Phone: +36 (1) 429 3010
Fax: +36 (1) 235 0481
www.mazars.hu

In order to prevent “carousel” fraud, an PERSONAL INCOME TAX / Active incomes fall under the scope
online registration of the international SOCIAL SECURITY SYSTEM of the SSC system: social security
transportation of products has been contributions payable by the individuals
required since 1 January 2015. Although There is a flat rate of PIT since 2013, concerned equal altogether 18.5%; the
all of these measures aim to reduce which has been reduced to 15%, and employer’s contribution has been further
the extent of the black economy and tax it is generally applicable both to active reduced to 19.5%. Passive incomes are
evasion in Hungary, they also cause a (e.g. employment, assignment fee) and subject to different rates of health care
relatively high VAT administration burden passive incomes (e.g. capital gains, tax depending on the income type: 14%
for the taxpayers. As from mid-2017 dividend and interest). Tax payable on with a low threshold (e.g. on dividends,
taxpayers will be required to use billing active incomes is reduced by a family tax capital gains, real estate rental income);
software capable of providing the tax allowance. or 19,5% (e.g. income on selling rights);
authority with real-time data online. or they are exempt from health care
Other indirect tax types in Hungary The amount of the family tax allowance tax (e.g. capital gain on shares of stock
include excise duty on oil, alcohol is HUF 17,500/month/child up to 2 exchange, or interest).
and tobacco products, environmental children (appr. EUR 56)/child); and Benefits-in-kind are taxed at two rates:
protection charge on products heavily from 3 children HUF 33,000 (EUR 110)/ PIT plus health care tax calculated on a
polluting the environment (e.g. all kinds child). The family tax allowance may be special tax base altogether amounting
of electric equipment, accumulators and also deducted from the social security to 40,71% or 43.66% and payable only by
batteries, packaging materials, etc.), contributions payable by the employee the employer.
financial transactional tax (payable by (up to 17% of the gross salary), if the PIT
the banks completing such transactions), base does not allow to fully benefit from
insurance tax and 'chips tax' (levied on the family tax allowance.
unhealthy foods and drinks).

WAGE RELATED TAXES IN HUNGARY Minimum wage Average wage in private
sector
Exchange rate HUF/ EUR 310
in EUR in HUF in EUR in HUF
TOTAL WAGE COST 445 138 000 1 042 323 000
Vocational training contribution 539 121,00% 1 261 121,00%
Social contribution tax 7 16
GROSS SALARY 1,50% 1,50%
Personal income tax 87 19,50%
Employees' contributions 445 100,00% 203 19,50% Contact:
NET SALARY 15,00% Sándor SZMICSEK
67 18,50% 1 042 100,00% Tax and legal partner
82 66,50% 156 15,00% Mobile: +36 (20) 579 0450
296 193 18,50% E-mail: [email protected]
693 66,50%

28 TA X GUIDE 2018

KOSOVO VAT AND OTHER
INDIRECT TAXES

CORPORATE INCOME TAX TRANSFER PRICING A transaction is subject to VAT taxation in
Kosovo, if the supply of goods or supply
Resident companies are subject Transfer pricing (TP) effective from of services, against the payment made
to corporate income tax on their 2017 regulated the intra-companies within the territory of Kosovo by a taxable
worldwide income, while the object of pricing arrangement between related person acting as such. Further on, the
taxation for a non-resident taxpayer is business entities. A controlled taxation is import of goods pursuant to the Law is
taxable only income generated from considered to be whenever a minimum subject to VAT taxation.
a source in Kosovo. The Corporate 50% ownership or voting right test Taxable person is any person regardless
Income Tax (CIT) system in Kosovo exist for the transaction. Controlled if this person is natural or legal
adheres to the principles of worldwide transactions include all types of person, or organized in any other form
taxation. transactions that may affect the taxable recognized by law in Kosovo, which
Resident companies and sole traders income of a taxpayer. independently carries out an economic
whose gross annual income exceeding Taxpayers performing controlled activity pursuant to the law, regardless of
EUR 50,000 are subject to CIT. Below transactions above the amount of EUR the place, purpose, or result this activity.
the threshold taxpayers can opt for 300,000 within a calendar year must In line with EU and VAT principles,
a special quarterly payment on their submit with the tax authorities an annual exports are exempted from VAT with
gross income. controlled transactions form by 31 March the right of deduction of input VAT. VAT
The CIT rate for annual turnover is 10%. of the following year. on imports is collected in state borders
This tax is paid every three months The regulation excludes internal of Kosovo. Holder of Transaction pays
depending on the annual turnover. controlled transactions (it applies only VAT on the basis of the customs value
Taxable Income for CIT period is the to cross border transactions) and has and any other import duty (customs and
difference between gross income provided for certain safe harbors to excise tax, if applicable) regardless of
received or accrued during the tax prove that the arm’s length principle their origin. VAT is levied on imports and
period and the deductions allowable is respected. The safe harbors involve any supply of goods or services, except
with respect to such gross income. calculating, on an annual basis, total those which by law are considered as
Tax Period for CIT is the calendar year. costs of all group members for the low exempted supplies.
Losses can be carried forward for six value-adding intra-group services. For VAT rate has escalated into two fixed
consecutive tax periods. such services, there is no need to prepare rates: the standard rate of 18% and
a transfer pricing study, but instead a the reduced rate of 8% of the value
profit mark-up to a maximum 7% on of supplies of imported and domestic
costs is allowable. taxable supplies, except for exempted
supplies and supplies treated as exports.

TRANSFER PRICING IN KOSOVO since 2017 VAT OPTIONS IN KOSOVO Applicable / limits
since 2017
Arm’s length principle since 2017 Distance selling n.a.
Documentation from FY 2017 (with transitional rules) Call-off stock n.a.
liability from FY 2018 on VAT group registration* n.a.
APA Cash accounting - yearly amount in EUR
Country-by-Country liability A maximum of EUR 2,500 (approx.) n.a.
Master file-local file Import VAT deferment
(OECD BEPS 13) applicable
Penalty Local reverse charge Supply of construction and
construction-related works;
lack of documentation
construction activities.

tax shortage n.a. Option for taxation - letting of n.a.
real estate n.a.
Related parties 50% < direct or indirect control or common managing director EUR 30,000/year
Low value added services: mark-up to a maximum 7% Option for taxation - supply of
Safe harbours used real estate
9/10
VAT registration threshold**

Level of attention paid by Tax Authority

* Available only for related parties
** Special VAT exemption applies for small businesses

TA X GUIDE 2018 29

MAZARS MAZARS
IN KOSOVO Rr. Pashko Vasa, No.45/6,
Prishtina, Kosovo
Phone: +381 38 609 029
www.mazars.al

PERSONAL INCOME TAX companies who receive or create gross income from
AND OTHER DEDUCTIONS all sources, including wages, business activity, rents,
lottery winnings, interest, dividends, capital gains, use
The object of taxation for a resident taxpayer is of intangible property, pensions, and any other income
taxable income from a source in Kosovo and from that increases the taxpayers’ net worth. The taxable
a foreign source. The object of taxation for a non- period for Personal Income Tax is the calendar year.
resident taxpayer is taxable income from a source Personal Income Tax is applicable at the progressive
in Kosovo. rates (rates from 0% to 10%).
With the exception of income that is exempted
from tax under the law, gross income shall mean Other Deductions
all income received or accrued from any source,
including: wages, rent, business activity, the use Kosovo Pension Savings Fund is responsible for
of the intangible asset, interest, capital gains, administering and managing the individual pension
lotteries and other games of chance, pensions paid saving accounts. This fund obliges the employee and
by an employer, or in line with the Law on pensions the employer to contribute in financing the employee’s
in Kosovo and any other income that increases the pension at the rate of 5% from the employee’s salary
taxpayer’s net worth. and 5% from the employer.
Taxpayers are natural persons, resident and non-
resident, personal businesses, partnerships and

WAGE-RELATED TAXES Minimum wage Average wage
IN KOSOVO in private sector

TOTAL WAGE COST in EUR 104,76% in EUR 104,76% Contact:
Vocational training contribution 170 0,00% 400 0,00% Violeta HAXHILLAZI
Social contribution tax 179 4,76% 420 4,76% Managing Director
GROSS SALARY - - Mobile: + 377 (0) 44 82 37 85,
Personal income tax 9 100,00% 20 100,00% +355 (0) 69 20 33 984
Employees' contributions 170 2,12% 400 4,70% Email: [email protected]
NET SALARY 4 5,00% 19 5,00%
9 20
158 92,88% 361 90,30%

30 TA X GUIDE 2018

LATVIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

As of 2018, the corporate income tax 31 December 2017 can be utilized over (e.g. investment fund notes, securities,
(hereinafter - CIT) system in Latvia has the following five taxation years (i.e. till bonds, etc.) as well as to royalties and
changed – CIT is payable only upon 2022). The companies may use 15% of interest received.
distribution of profit, deemed profit or these losses to decrease CIT payable for Latvian companies are obliged to
deemed dividends. dividends but not more than 50% of CIT document the arm’s length character of
Generally, the following payments payable on dividends. intra-group transactions. If the turnover
(distributions) are subject to CIT: As of 2018 the following thin of a Latvian company exceeds 1.4 million
capitalization rules will apply: euros and the amount of its intra-group
• dividends (also interim dividends), 1) the debt/equity ratio exceeds 4 to 1, transactions exceeds 14 thousand
• deemed dividends, 2) the amount of interest paid exceeds euros, the structure of the transfer
• non-business expenses, EUR 3 million and it exceeds 30% of pricing documentation needs to be in
• loans issued to related parties, EBITDA. compliance with the recommendations
• interest payments subject to thin If any of the thin capitalization rules is of the OECD Guidelines. Furthermore,
capitalization rules, exceeded, the interest payment will be Latvia has adopted country-by-country
• bad debts to be written off, treated as deemed dividends and will reporting requirements.
• transfer pricing adjustments, be subject to 25% CIT from net excess
• liquidation quota, etc. interest value. Withholding tax of 20% is applied on
Tax exempt capital gains - starting management and consulting service
The CIT rate is 20% from gross taxable from 2018 distributed profit from the fees paid by Latvian companies to
value (expense/distribution value) or sale of shares (except for shares of foreign companies.
25% from net value (i.e., rate 20/80). low/tax free companies) is not subject
The Latvian companies are allowed to to CIT unless the company has held A 3% withholding tax will be applied to
apply tax incentives for donations to the relevant shares for less than 36 remuneration paid to a foreign company
public benefit organizations. The tax months. The exemption will not apply for the disposal of real estate located in
rebate is also applied in case donations in case the main purpose of setting up Latvia.
are made to non-governmental of the taxpayer or the structure is to Still, under the active international
organizations registered in a member benefit from the holding regime (i.e. tax treaty network consisting of more than
state of the European Union or the optimization or avoidance of taxes has 61 double tax treaties, the withholding
European Economic Area with which taken place). tax might be avoided. A withholding tax
Latvia has concluded a double tax treaty. Tax exemption is not applicable to profits of 20% is applied on all payments to
In Latvia, tax losses accrued until from the sale of financial instruments offshore companies.

TRANSFER PRICING IN LATVIA VAT OPTIONS IN LATVIA Applicable / limits

Arm’s length principle since 2005 Distance selling EUR 35,000/year
Documentation liability since 2013 Call-off stock No
APA since 2013 VAT group registration
Country-by-Country liability since 2017 Cash accounting EUR 300,000/year, applicable to private
Master file-local file To be adopted in 2018 Import VAT deferment enterpreneurs or agricultural companies
(OECD BEPS 13) applicable
Penalty ~ EUR 1,000 administrative penalty Local reverse charge if conditions are met
lack of documentation 20% on tax underpayment + late payment interest construction works and deals with the
direct control for foreign companies or common Option for taxation scrap metal, metal products and related
tax shortage letting of real estate services, timber and related services, elec-
managing director - supply of used real tronic goods (computers, mobile phones),
Related parties 20% < indirect control for foreign companies or common estate grain crops, electronic communications,
VAT registration threshold broadcasting and electronically provided
50% < managing director services, household electronic appliances

Safe harbours No 8/10 No

Level of attention paid by Tax Authority 40,000/year
voluntary registration is possible

TA X GUIDE 2018 31

CORRESPONDENT SIA TAXLINK BALTIC
OF MAZARS Duntes iela 6-213,
IN LATVIA Riga, Latvia, LV-1013
Phone: (371) 67379031
www.taxlink.lv

VAT AND OTHER
INDIRECT TAXES

The general rate is 21% for the sale of PERSONAL INCOME TAX /
goods and services. A reduced rate of SOCIAL SECURITY SYSTEM
12% is used, for example, for medical
goods, periodicals, accommodation Starting from 1 January 2018, If a payroll tax book is not submitted at
services, and thermal energy supplied a progressive PIT rate has been a place of employment, the salary tax
for private individuals. Furthermore, introduced. It foresees the following: rate will be 23% regardless of monthly
reduced 5% VAT rate is applicable to 20% should be applied for income not income.
supply of fruits and vegetables, which exceeding EUR 20 004 per year (or EUR Income from capital and capital gains
are typically grown in Latvia. Basically, 1 667 per month); 23% - for income is taxed at 20% PIT rate.
a 0% rate is applicable for the export between EUR 20 004 to EUR 55 000 per Active incomes fall under the scope
of goods. Exemptions are in place for year (or EUR 1 667 - EUR 4 583.33 per of the SSC system: individual social
postal services, medical and health month); 31.4% for income exceeding contributions equal altogether 35.09%
services, certain financial services, etc. EUR 55 000 per year (or more than € out of which employer’s contribution
Entrepreneurs with annual sales 4 583.33 per month). is 24.09% and employee’s contribution
below EUR 40,000 are exempted from The tax on annual income of more than is 11%. Benefits in kind are taxed with
VAT obligations. Monthly returns are EUR 55 000 per year will be calculated in PIT and SSC at standard rates. The
electronically recorded. The options/ a recapitulative order when submitting examples below show the cost of the
limits based on the EU Directive are the annual income declaration. employer and employee in case of
determined in the VAT Act. minimum wage level and the average
wage in the private sector.
Other indirect tax types in Latvia
are excise and customs duties. Also
some transactions related to public
administrative actions (e.g. submitting
application forms, issuing certificates,
granting permissions, etc.) are subject
to stamp duty.

WAGE-RELATED TAXES IN LATVIA Minimum wage Average wage in private
sector

EUR in EUR 124,09% in EUR 124,09% Contact:
430 0,00% 915 0,00% Andris Jaunzemis
TOTAL WAGE COST 534 Tax partner
Vocational training contribution - 24,09% 1 135 24,09% Mobile: +371 29635522
Social contribution tax 104 100,00% - 100,00% E-mail: [email protected]
GROSS SALARY 430
Personal income tax* 76 20,00% 220 20,00%
Personal income tax** 89 23,00% 915 23,00%
Employees' contributions 47 11,00% 163 11,00%
NET SALARY* 294 68,37% 190 68,23%
NET SALARY** 307 71,40% 101 71,19%
624
651

*if employee has not submitted salary tax book to the employer
**if the employee has submitted salary tax book to the employer

32 TA X GUIDE 2018

LITHUANIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

The general corporate income tax rate is Lithuania applies thin capitalization → Land tax – tax on land owned in
15% in Lithuania. An incentive corporate (4:1) and CFC rules. Tax allowances Lithuania, to be paid by both resident
income tax rate of 5% is applied for apply for certain new investments and and non-resident entities and
small companies with an annual R&D. Furthermore, Lithuania provides individuals. The tax rate varies from
turnover up to EUR 300,000 and having a tax exemption on holding structures: 0.01% to 4% of the taxable value of the
not more than 10 employees. In addition, capital gains on shares and dividends land. Tax rates are set by municipalities
since 1 January 2018 it was introduced received under certain conditions are and depend on the location of the land.
that small companies could apply 0% tax-free. Under certain conditions there The tax period is a calendar year.
rate of corporate income tax for the first is no withholding tax on dividends,
financial year. interest and royalty paid by a Lithuanian VAT AND OTHER
In Lithuania, the ordinary losses company to a foreign company. INDIRECT TAXES
incurred may be carried forward to Lithuania has a wide international treaty
the subsequent taxable periods for an network with more than 50 double tax The general rate is 21%, the reduced
unlimited time, as long as the entity treaties. rates are 9% (e.g. journals, newspapers,
continues the activities that generated Companies are also subject to two types books, central heating, public
the losses. The amount of losses carried of taxes on capital: transportation, tourist accommodation
to the subsequent taxable periods is → Immovable property tax – tax on (until 31 December 2022) and 5%
limited to the 70% of taxable income property, deemed to be immovable by (medicine). The options/limits based on
of the corresponding taxable period. law and located in Lithuania (buildings, the EU Directive are presented within
The 70% limit does not apply for small constructions, except unfinished the VAT legislation.
companies. Capital losses incurred constructions). The annual tax rate
associated with the transfer of derivative varies from 0.3% to 3% of the taxable Other indirect tax types in Lithuania
financial instruments and securities value of immovable property. Tax rates include excise duty, environmental
may only be carried forward for 5 years are set by municipalities according protection charge and data storage
and can only be covered from future to the territory where the immovable device tax.
capital gains. property is located. The tax period is a
calendar year.

TRANSFER PRICING IN LITHUANIA VAT OPTIONS IN LITHUANIA Applicable / limits

Arm's length principle since 2004 Distance selling EUR 35,000/year
Documentation liability since 2004
APA since 2012 Call-off stock
Country-by-Country liability from FY 2016
Master file-local file (OECD VAT group registration No
BEPS 13) applicable to be implemented in 2018
Penalty Cash accounting No, only optional regime for agricultural producers
EUR 1.400 - 4.300/EUR 2.900 -
lack of documentation 5.800 (missing documents on Import VAT deferment

recurrent basis) Local reverse charge Taking over the property as a transfer of contribution to a
10% - 50% on tax underpayment legal entity; taking over a material improvement of a building;
supply of goods and services from a supplier which is under
+late payment interest bankruptcy; supply of certain metal scraps and certain timber
direct or indirect control
Low value added services: materials, supply of construction services

5% mark-up Option for taxation

tax shortage 9/10 - letting of real estate

Related parties 25% < - supply of used real
estate

Safe harbours - certain financial
services

Level of attention paid by Tax Authority Local taxable person - 45,000 EUR/12 months;
Foreign taxable person - No
VAT registration threshold

TA X GUIDE 2018 33

MAZARS CORRESPONDENT
IN LITHUANIA OF MAZARS IN LITHUANIA
TaxLink Baltic UAB
Konstitucijos ave. 26,
Vilnius, Lithuania
Phone: +370 650 17900
www.taxlink.lt

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

There is a flat rate of PIT, which is 15%, and it is Employers must also pay social insurance contributions
generally applicable to active (e.g. employment, equalling to 31.18% of the gross salary. An additional
assignment fee) and passive income (e.g. capital gains, 2% contribution may be paid by individuals who have
dividend and interest). Income in general is recognized decided to accumulate an additional pension using the
at the moment of its actual receipt. formula 2+2+2.

The employee’s gross salary is subject to a mandatory Lithuania is subject to EU regulations laying down
health insurance contributions of 6%, and the employer social security principles for persons migrating
is required to withhold this tax. The employer also has between EU Member States.
to pay a 3% mandatory health insurance contribution
on top of the employee’s gross salary. The employer The examples below show the cost of the employer
deducts 3% from the employee’s gross salary as the and employee in case of minimum wage level and the
social insurance contribution paid by the employee. average wage in the private sector.

WAGE- RELATED TAXES IN Minimum wage Average wage in private
LITHUANIA sector

TOTAL WAGE COST 525 131,18% 1 116 131,18%
Social contribution tax
GROSS SALARY 125 31,18% 265 31,18% Contact:
Personal income tax* Justinas Basalykas
Employees' contributions 400 100,00% 850 100,00% Partner
NET SALARY** Mobile: +370 650 17900
3 15,00% 104 15,00% E-mail: [email protected]

36 9,00% 77 9,00%

361 90,25% 670 78,73%

* Non taxable allowance of EUR 380,0 (minimum wage) and EUR 154,8 (average wage)

34 TA X GUIDE 2018

MONTENEGRO

CORPORATE TAXES
AND OTHER DIRECT TAXES

The general corporate income tax The total amount of the tax exemption A transfer tax of 3% is levied on the
rate is a flat rate amounting to may not exceed 200.000 € for a period transfer of immovable property. There
9% and it applies to both resident of eight years. In Montenegro, there is no surtax or alternative minimum
and non-resident companies. are no specific thin capitalization taxes. Property tax is levied on the
Resident companies are taxed on rules, except that interests paid to a ownership/use of property at rates
their worldwide income, while non- non-resident must be on arm’s length ranging from 0,25% to 1%.
residents are taxed only on income terms.
generated in Montenegro. The tax VAT AND OTHER
base is the pre-tax profit modified by Withholding tax at the rate of 9% is INDIRECT TAXES
several increasing and decreasing applicable on dividends, interests,
items. Capital gains are included in the capital gains, royalties and other The general rate is 21%, the reduced
annual corporate profits tax return and intellectual property rights, fees for rates is 7% (e.g. bread, milk,
are subject to a 9% tax. In Montenegro, the lease of movable and immovable accommodation services, medications),
losses can be carried forward for 5 property, consulting services, market and there is VAT-exemption for exports
years while the carry back of losses is research and audit services which are and banking services. Taxpayers
not permitted. paid to a non-resident legal entity. with revenue in excess of EUR 18,000
A tax incentive (profit tax rate for the Montenegro has a wide international must register for VAT purposes. The
first eight years is 0%) is applied for treaty network with 42 double tax options/limits based on the VAT Act in
newly founded legal entities engaged treaties. Montenegro:
in manufacturing in economically
underdeveloped municipalities.

TRANSFER PRICING IN MONTENEGRO VAT OPTIONS IN MONTENEGRO Applicable / limits

Arm's length principle since 2002 Distance selling No
Documentation liability Call-off stock No
APA No At the moment of request from the tax VAT group registration No
Country-by-Country liability authorities. Cash accounting No
Master file-local file (OECD BEPS 13) Import VAT deferment No
applicable No - Local reverse charge Yes
Penalty
lack of documentation No - Option for taxation - letting of real estate No
tax shortage - letting of real estate No
No - - supply of used real estate EUR 18,000/year
Related parties VAT registration threshold
No Not specifically stated, general rules apply
Safe harbours
Level of attention paid by Tax Authority No Not specifically stated

The parties between whom special

25% < relations exist, which could directly impact
the conditions or economical results of the

transaction between them.

No -

2/10

TA X GUIDE 2018 35

MAZARS SERBIAN OFFICE IS
IN MONTENEGRO RESPONSIBLE FOR MONTENEGRO
Law office Milosavljevic
11000 – Belgrade,
Terazije 29/18, Serbia
Phone: (00381) 11 408 1715
Fax: (00381) 11 408 4018

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

In Montenegro, resident individuals are taxed based pensions (15%), health (8.5%) and unemployment
on their worldwide income, and non-residents are (0.5%). The employer’s contribution is at the rate of
taxed only on income provided in Montenegro. There 10.7% of the employee’s salary. It includes pensions
is a flat rate of 9%, and it is generally applicable on (5.5%), health contributions (4.3%) unemployment
the active (e.g. employment, assignment fee) and (0.5%), contributions to the Labour fund (0.2%) and
passive income (e.g. capital gains, dividend and Labour union fund (0.2%). Also, local surtax, which is
interest). calculated on PIT assesed, is paid by the employer to
Monthly salary exceeding a gross amount of EUR the municipality of taxpayer’s seat. Surtax rates range
765 is taxed at rate of 11%. It is important to state from 10% to 15%, depending on municipality, with
that non-resident income on interest is taxed by most municipalities having the 13% rate.
5%. Active incomes fall under the scope of the The examples below show the cost of the employer and
SSC system: individual’s social contributions equal the employee in case of minimum wage level and the
altogether 24%. These include contributions for average wage in the private sector.

WAGE- RELATED TAXES IN Minimum wage Average wage in private
MONTENEGRO sector

TOTAL WAGE COST in EUR 109,80% in EUR 109,80% Contact:
Employer's contributions 322 10,30% 854 10,30% Aleksandar P. Milosavljevic
GROSS SALARY 30 79 Attorney at law
Employees' contributions 288 100,00% 765 100,00% Partner – Tax services
Personal income tax Phone: (00381) 11 408 1715
Surtax 69 24,00% 184 24,00% Mobile: (00381) 63 81 02 914
NET SALARY E-mail: [email protected]
26 9,00% 69 9,04%

4 15,00% 10 15,00%

193 67,00% 512 66,96%

36 TA X GUIDE 2018 In consequence, the taxpayers will also royalties paid to non-residents it is 20%
have to allocate tax deductible costs to and 10%, respectively. However, the
POLAND appropriate source of income (‘capital WHT rate can be reduced by double tax
gains’ or ‘others’); treaties. Poland has a wide international
CORPORATE TAXES • came into force the new regulations treaty network with approximately 90
AND OTHER DIRECT TAXES regarding the tax credit for R&D. The double tax treaties. In accordance with
amount of the maximum deduction of all the EU interest and royalties directive
Subject to taxation are limited liability such costs from the tax calculation base interest and royalties paid by Polish
and joint stock companies, as well is increased to 100% (for enterprises corporate residents to associated
as limited joint-stock partnerships with the status of a research and EU companies may by subject to
(since 2014) that are Polish residents. development center - 150%.); full exemption of WHT (on certain
Other partnerships are neither CIT nor • new regulation according to which conditions). Since 2016 a “small anti
PIT payers, and income generated by provisions on CFC (in Poland since abusive clause” has been implemented
partnerships is directly attributed to 2015) apply only when the taxpayer has for dividends related to activities whose
shareholders (in proportion to their • directly or indirectly – 50% company's only purpose was to gain tax benefits
shares) and – depending on their foreign capital (rather than 25% as yet). and which were not real.
status (companies or natural persons) At the same time reduced - from 50%
– subject to CIT or PIT. CIT in Poland is up to 33% - the level of passive income Real property tax and transport tax are
payable on the income, i.e. on revenues that a foreign company can achieve to be charged as local taxes in Poland. Real
decreased by tax-deductible costs. The recognized as CFC; property tax is paid by owners of real
standard CIT rate is 19%. From 2017 • was introduced new method of estate. Banks and financial institutions
there is also applicable a new 15% calculation of thin capitalization (the tax is taxable with 0.0366% rate (monthly
CIT rate for small taxpayers (whose new limit is going to be calculated in levy) of the total assets (exceeding
revenue on sales in the previous year reference to 30% of EBITDA) indicated minimal value).
did not exceed EUR 1,200,000) and • was introduced a new commercial
for new taxpayers in the first year of property tax imposed on certain VAT AND OTHER
their activities. Tax-deductible costs commercial real estates located on the INDIRECT TAXES
exceeding the revenues in the given territory of Poland (e.g. shopping malls,
financial year constitute a loss, which office buildings). The standard VAT rate is 23%.
may be carried forward for five years, Starting from 1 January 2017 the Preferential rates of 8% and5% apply
but the deduction in a given year may taxpayers are obliged to prepare more to certain goods and services. Other
not exceed 50% of the loss incurred in extensive TP documentation. goods and services (e.g. exports,
the previous five years. intra-Community supplies of goods,
There is a withholding tax on dividends, international transport services) may be
Starting with 2018 came into force many interests and royalties paid by a Polish zero-rated or exempt. The options/limits
important amendments, in particular: company to a foreign company. The based on the EU Directive and Polish
general withholding tax (WHT) on VAT regulations:
• were defined two separate sources dividends is 19%; on interest and
of revenues: from ‘capital gains’ and
‘other revenues’ (mainly revenues from
operating activities).

TRANSFER PRICING IN POLAND since 1997 VAT OPTIONS Applicable / limits
since 2001 IN POLAND
Arm's length principle since 2006 PLN 160,000 /year (approx. EUR 40,000)
Documentation liability from FY 2017 Distance selling
APA from FY 2017 Call-off stock No
Country-by-Country liability VAT group registration PLN 20,000/year (approx. EUR 5,000)
Master file-local file (OECD BEPS 13) personal liability of the members of the Cash accounting
applicable Company’s Board Import VAT deferment supplies of scrap; paper waste; certain
Penalty kind of electronics above limit of PLN
50% on tax underpayment + late payment Local reverse charge
lack of documentation interest 20,000 (approx. EUR 5,000)
Option for taxation
tax shortage direct or indirect control - letting of real estate No
personal, family relations - supply of used real
Related parties 25% < estate PLN 200,000 /year (approx. EUR 50,000)
No 10/10 VAT registration threshold
Safe harbours
Level of attention paid by Tax Authority

TA X GUIDE 2018 37

MAZARS MAZARS AUDYT SP. z o.o.
IN POLAND 00 - 549 Warsaw, Piękna 18, Poland
Phone: + 48 22 25 55 200
Fax: + 48 22 25 55 299
www.mazars.pl

From 1 July 2018 will come into force PERSONAL INCOME TAX / Active incomes fall under the
in Poland so called split payment SOCIAL SECURITY SYSTEM scope of the SSC system: individual
mechanism. Mentioned mechanism social contributions (capped) and
assumes that the payment for PIT is generally calculated on the other insurances equal altogether
purchased goods or services would income (i.e. on revenues reduced by 13.71%; employer’s contributions
be split between two accounts (i.e. the tax-deductible costs). However, the equal altogether approximately 21%.
purchaser would pay VAT into special income calculation differs depending Additionally, the individual is obligated
VAT account and the remainder net sales on the source from which the income to pay a 9% contribution to health
value to the supplier’s company bank is earned (for example, employment insurance, out of which 7.75% is
account). contract, sole traders’ activity, deductible from the tax and 1.25% from
personally performed activities, etc.). the net income. The examples below
Other indirect tax types in Poland are PIT is calculated according to the show the cost of the employer and
excise duty and gambling tax. Some progressive tax scale at the rates of the employee in case of minimum
civil acts such as contracts of sale, 18% to 32%. A specific rate applies to wage level and the average wage in the
loan agreements, foundation deeds of individuals pursuing business activities private sector.
partnership or company, if not subject to as sole proprietorships or partners in Since 2018 came into force the new
VAT, may be subject to civil law activity partnerships, who may opt for a flat regulations about tax free amount
tax (CLAT), the rates of which are from 19% PIT rate. Due to the above flat rate, (dependable on the value of the tax
0.1% to 2%. Transactions related to as well as other rules applicable to base).
filling a power of attorney and public this type of income, the taxation of sole
administrative actions (submitting traders is based on similar provisions
application forms, issuing certificates, as described in the previous chapter on
granting permissions, etc.) are subject corporate income tax (CIT).
to stamp duty.

WAGE- RELATED TAXES IN POLAND Minimum wage Average wage in private
sector

Exchange rate PLN / EUR 4,4 in EUR in PLN in EUR in PLN

477 2 100 1 130 4 973

TOTAL WAGE COST 577 121,00% 1 367 121,00%

Employer's social security * 78 16,26% 184 16,26% Contact:
Kinga Baran
Other insurance (approx.) 23 4,74% 54 4,74% Head of Tax Advisory Department
Tax Advisor
GROSS SALARY 420 100,00% 934 100,00% Phone: + 48 22 25 55 326
Mobile: +48 691 20 70 58
Employees` contributions 65 13,71% 155 13,71% E-mail: [email protected]

Healthcare insurance 32 9,00% 88 9,00%

Personal income tax** 21 18,00% 65 18,00%

NET SALARY 301 63,19% 627 55,45%

* capped at income of PLN 133 290 zł - over this amount only other insurance and healthcare insurance is charged
**taxable base = gross salary – employee’s contributions – statutory tax deductible costs – health insurance (tax deductible part)

38 TA X GUIDE 2018

ROMANIA The Interest & Royalty Directive and
Parent Subsidiary Directive has been
CORPORATE TAXES within the fiscal period, excluding implement in Romanian law, thus
AND OTHER DIRECT TAXES non-taxable income and including CIT subject to these conditions, the
expenses, as well as the exceeding costs withholding taxes are reduced to nil.
The general corporate income tax is a of indebtedness and the deductible tax The capital gain from the sale of shares
flat rate of 16% in Romania. In order depreciation. If the tax base is negative is tax exempt (certain conditions apply).
to compute the taxable profit, the or nil, the expenses that exceed the In all other relations for withholding tax
accounting profit is adjusted upwards aforementioned threshold are non- the general tax rate and the relevant
(with non-deductible expenses) deductible within the fiscal period and double tax treaty are applicable.
or downwards (with non-taxable can be carried forward in the following A compulsory micro company scheme
revenues). A maximum 50% additional fiscal periods, without time limit and is applicable for companies obtaining
deduction can be applied for certain under the same deduction rules. revenues lower than EUR 1,000,000 as
R&D expenses. The loss recorded by a By exception, the borrowing costs can follows:
company can be carried forward for 7 be fully deductible if the taxpayer is an • 1% if the company has at least
years. independent entity (i.e. it is not part 1 employee;
Starting with 1 January 2013, the of a consolidated group for financial • 3% if the company has no employees.
transferred loss can be carried forward accounting purposes and has no related
from a merger or spin-off operation. entity or permanent establishment). VAT AND OTHER
As of the 1st of January 2018 the Anti INDIRECT TAXES
Tax Avoidance Directive (ATAD) has been Adjustments are expected to the above
implemented, one of the consequences mentioned restriction during 2018. The general rate is 19%. Reduced rates
is that as of now there are new rules Capital gains arising from the sale of the are 9% (e.g. medicines, bread, flour, food
in respect of the fiscal treatment of participations held in a state with whom etc.) and 5% (e.g. for journals, books,
the interest and exchange rate losses Romania has concluded a DTT are non- medicines, applied to residential sales
related to loans. As such, the exceeding taxable (certain conditions apply). under certain conditions). The following
cost of indebtedness recorded, that Starting with 1st of January 2018 CFC options/limits based on the EU Directive
exceeds EUR 200.000 threshold, are rules are applicable in Romania. are presented in the Romanian VAT
deductible within 10% of the designated Romania has an international treaty legislation:
computation base within the respective network consisting of approximately
fiscal period. The tax base is computed 85 double tax treaties. The Romanian VAT-exempted activities consist of
as the difference between the income withholding tax rate on Dividends, hospital and medical services, financial
and expenses accrued under the Interest, Royalties is 16%. and banking services, insurance and
applicable accounting regulations reinsurance, sale and rental of real
estate, certain types of educational and
training activities, and other activities of
public interest.

TRANSFER PRICING IN ROMANIA since 2003 (Law 227/2015) VAT OPTIONS Applicable / limits
since 2003 (Order 222/2008, Order 442/2016) IN ROMANIA
Arm's length principle approx. EUR 26,300/year at the current
Documentation liability since 2007 (Order 3735/2015) Distance selling exchange rate
APA from FY 2017 (with transitional rules) Call-off stock
Country-by-Country liability Only the local file rules are applicable VAT group registration EUR 500,000/year
Master file-local file Cash accounting* Certificate of payment deferral
(OECD BEPS 13) applicable For large and medium tax payers – RON Import VAT deferment Sale of certain types of waste, certain
Penalty 12,000-14,000 (approx. EUR 2,700-3,100) types of cereal, wood, greenhouse gas
Local reverse charge emission certificates, electricity, green
lack of documentation Other tax payers – RON 2,000-3,500 certificates, land and buildings, laptops,
(EUR 450-800) Separately, adjustment of tax Option for taxation
tax shortage base plus late payment interest and penalties - letting of real estate mobile phones
- supply of used real
Related parties minimum may be applicable. approx. EUR 48,890
of 25% regular tax regime estate
direct or indirect control VAT registration threshold**
Safe harbours No
10/10
Level of attention paid by Tax Authority

*Optional for SME
**Optional VAT registration below the threshold is allowed

TA X GUIDE 2018 39

MAZARS MAZARS ROMANIA S.R.L.
IN ROMANIA 6E Dimitrie Pompeiu Str.
RO-020335 Bucharest
Phone: (+40) 21 528 57 57
Fax: (+40) 21 528 57 50
www.mazars.ro

The VAT cash accounting system is
optional for companies having an annual
adjusted turnover of less than RON
2,250,000 (approx. EUR 500,000).

Starting 2018 Romania has implemented PERSONAL INCOME TAX / Independent activities are subject to
the split VAT mechanism as optional. SOCIAL SECURITY SYSTEM SSC only if the revenue from such
The system refers to the actual payment activities is higher than the minimum
of the VAT into a special VAT account Romania applies a 10% flat tax rate salary (i.e. RON 1,900). Otherwise, the
(with certain exceptions such as cash to revenues obtained from dependent SSC is optional for the taxpayer. The
payments). However, the mechanism is activities (e.g. employment or activities Social Security Contribution tax rate
mandatory for the taxpayers for whom assimilated to employment) or (25%) is applied on a tax base that
the insolvency procedures or insolvency independent activities (e.g. freelancers). is equal to the minimum salary per
prevention procedures have started, Dividends are subject to a 5% tax rate. country. By the option of the taxpayer,
the taxpayers who have outstanding the Social Security Contribution can be
VAT debts at 31 December 2017 or Starting with 1st of January 2018, the applied on a tax base higher than the
after the 1st of January 2018 (that have SSC are the following: Social Security minimum salary. The Health Insurance
overdue VAT debts older than 60 working Contribution (25% - employee part, Contribution tax rate (10%) is applied
days) that exceed certain thresholds Health Insurance Contribution (10% - on o tax base capped at the level of the
depending on the category of taxpayer. employee part) and Work Insurance minimum salary per country.
If the taxpayer opts to apply the split Contribution (2,25% - employer part).
VAT mechanism, it may benefit from a Dependent activities are subject to
discount of 5% of the profit tax or micro SSC at the employee (35 %) and the
company tax. employer level (2.25%).
Other indirect taxes applicable in
Romania include excise tax and
environmental tax.

WAGE- RELATED TAXES IN Minimum salary Average salary in private
ROMANIA sector

Exchange rate RON/ EUR 4,7 in EUR in RON in EUR in RON

404 1900 * 886 4 162

TOTAL WAGE COST 415 102,75% 910 102,75%

Employer contributions 11 2,75% 24 2,75% Contact:
Edwin Warmerdam
GROSS SALARY 404 100,00% 886 100,00% Partner, Tax Advisory
Phone : 0040 21 528 57 57
Employees` contributions 141 35,00% 310 35,00% E-mail: [email protected]

Personal Deduction ** 143 0

Personal income tax*** 12 10,00% 58 10,00%

NET SALARY 251 62,03% 518 58,50%

* As of 01.01.2018, the minimum gross salary is 1,900 RON
** 1 family member is assumed
*** Personal income tax base is: gross salary - employee's contribution - personal deduction

40 TA X GUIDE 2018

RUSSIA

CORPORATE AND OTHER TAXES

Russian legislation on taxes and levies tax losses exceeding 50% of the taxable The standard VAT rate is 18%. However,
consists of the Tax Code of the Russian profit for the respective tax period. sale of certain food products, goods for
Federation (hereinafter, the Tax Code) and Russia applies thin capitalization rules children, medical and pharmaceutical
laws adopted in accordance with it. Taxes that have been significantly amended products is taxable at a 10% rate.
and levies in Russia could be categorized starting 2017 inter alia by extending A 0% VAT rate applies to export
as federal, regional and local. Federal definition of the controlled debt. Starting sales and cross-border services (e.g.
taxes and levies are those established by from 2015, several new anti-tax international transportation and freight).
the Tax Code, they are payable throughout avoidance concepts were introduced in Starting from 01 January 2018,
the Russian Federation. Federal taxes the Russian tax legislation such as: (1) exporters and taxpayers offering
include value-added tax (VAT), excise the concept of beneficial owner of income international transportation services
tax, personal income tax, profits tax, for application of DTT benefits; (2) CFC may elect to apply the general VAT rate
mineral extraction tax, water tax, levies rules; (3) the concept of tax residency for of 18% instead of 0%.
for natural and biological resources companies.
consumption, stamp duty. PERSONAL INCOME TAX /
VAT SOCIAL SECURITY SYSTEM
PROFITS TAX
VAT applies to goods (property rights) Russian tax residents are individuals
The tax rate is flat and generally equals sold, work performed and services who spent 183 days on more in the
to 20%. The tax base is calculated as rendered, if supplied on the Russian Russian territory for the subsequent
income less expenses, which should territory. Tax base is calculated based 12 months and are taxable on their
be economically justified and duly on sales prices applied by the taxpayer worldwide income at the flat rate
documented. or imputed market price (in case of free- of 13% on most types of income.
Certain expenses could be deducted of-charge transfers). VAT is also payable Individuals that do not meet the above
for tax purposes within specific limits with regard to goods imported into the physical stay criteria are non-residents.
(e.g., interest, advertising expenses, Russian territory as established by the Non-residents are only taxable on their
representation expenses, etc.). customs legislation. Russian source income. Salary paid
Starting 01 January 2017 tax losses VAT payable to (receivable from) the for the performance of a labor function
could be carries forward without timing budget is calculated as the difference in Russia is deemed a Russian source
limitations. However, for the tax periods between VAT accrued on taxable revenue income.
from 01 January 2017 to 31 December and VAT claimed for refund with regard
2020 it is not allowed to carry forward to VATable purchases.

TRANSFER PRICING IN RUSSIA since 1999 Russia has concluded double tax treaties
since 2012 (DTTs) with more than 80 countries.
Arm’s length principle since 2012 Withholding income tax rates are as follows:
Documentation liability from FY 2018 (with transitional rules)
APA from FY 2018 (with transitional rules) Type of income General rate Tax rates under DTT
Country-by-Country liability
Master file-local file ~EUR75 fine for non-filing of TP Notifications Dividends 15% 15/12/10/5%
applicable 40% on tax underpayment starting 2017 Interest 20% 15/10/7.5/7/5/0%
Penalty + late payment interest Royalty 20% 18/15/13.5/10/ 7.5/7/5/4.5/0%
lack of documentation
direct or indirect control plus other criteria
tax shortage Interest

Related parties 50% < 5/10 Income from international freight, including lease of
property used in international transportation and lease
Safe harbours of sea craft and aircraft vehicles is subject to withhold-
ing income tax at a 10% rate.
Level of attention paid by Tax Authority

TA X GUIDE 2018 41

MAZARS Nizhniy-Susalniy pereulok,
IN RUSSIA 5, bld.19 Moscow, 105064
Russian Federation
Phone: (+7) 495 792 52 45
Fax: (+7) 495 792 52 47
Web: www.mazars.ru

Non-residents are subject to personal SOCIAL Russian citizen (foreigner with Foreigner temporary staying in the RF
income tax a 30% rate, unless otherwise FUND residency permit)
provided in the Tax Code. However,
individuals holding a work permit of highly HQS non-HQS
qualified specialist (HQS) are subject to a
13% tax with regard to employment income 22% on gross annual remuneration 22% on gross annual remuneration
received from the Russian company for
which they obtained this migration status. Pension Fund not exceeding 1 021 KRUR (~15.47 exempt not exceeding 1 021 KRUR (~15.47
Dividends payable to an individual being
non-resident are subject to personal KEUR), above - 10% KEUR), above - 10%
income tax at a 15% rate, unless the lower
tax rate applies under the applicable DTT. Social 1.8% on gross annual remuneration exempt 1.8% on gross annual remuneration
Rates for the calculation of social Security not exceeding 815 KRUR (~12.35 not exceeding 815 KRUR (~12.35
contributions vary depending on the type of Fund KEUR), above KEUR), above - 0% KEUR), above - 0%
social fund and the status of an employee
as presented in the table below: Medical Fund 5.1% on gross annual exempt exempt
remuneration

Accident insurance contributions are payable to Social Security Fund in
addition to social contributions (including foreign employees both holding
the HQS work permit and employed without such permit) at the rate that
could vary from 0,2% to 8,5% of the gross annual remuneration payable to
employees.

WAGE-RELATED TAXES IN RUSSIA Minimum wage Average wage in private
sector
Exchange rate RUB/EUR 66
in EUR in RUB in EUR in RUB Contact:
TOTAL WAGE COST 284 18 742 596 39 355 MARIA SEMENOVA
Employer's contribution 369 130% 775 130% Head of Tax and Legal Department
GROSS SALARY 85 179 Mobile: +7 916 403 16 73
Personal income tax (for tax resident) 284 30% 596 30% E-mail: [email protected]
NET SALARY 37 100% 78 100%
247 519
13% 13%
87% 87%

42 TA X GUIDE 2018

SERBIA

CORPORATE TAXES A withholding tax at the rate of 20% There is an obligation to enclose transfer
AND OTHER DIRECT TAXES is applicable on dividends, interests, pricing documentation with the annual
capital gains, royalties and other tax returns.
The general corporate income tax intellectual property rights, income The transfer tax of 2.5% is applied on
rate is flat and amounts to 15%. from rent of immovable and movable transfers listed in the Property Tax
Tax is applied to both resident and property and income from specific Act. There is no surtax or alternative
non-resident companies. Resident services such as market research, minimum taxes.
companies are taxed on their worldwide accounting, audit and other services
income, and non-residents are taxed related to business and legal VAT AND OTHER
only on income generated in Serbia. consulting. Also, there is tax rate of INDIRECT TAXES
The tax base is the pre-tax profit 25% applicable to revenues realized
modified by several increasing and by non-resident legal persons from The general rate is 20%, reduced
decreasing items. Also, capital gains jurisdictions with a preferential tax rates are 10% (e.g. bread, milk,
are included in the annual corporate system. Serbia has a wide international accommodation services, medications,
profits tax return. Losses can be treaty network with more than 50 fertilizer, etc.) and VAT-exemption
carried forward for 5 years while the double tax treaties. for exports, transport and other
carry back of losses is not permitted. services which are associated with the
There are several tax deductions Transfer pricing is a relatively new topic importation of goods. Taxpayers with
available on investments in relation to in Serbia. Transactions between related revenue in excess of approximately
the number of employed persons and parties must be at arm’s length. The EUR 65,000 must register for VAT
investment funds. Serbia applies thin comparable uncontrolled price method purposes. Non-residents may register
capitalization ratios 4:1 (10:1 for banks). may be used, but in the absence of this for VAT purposes only through a tax
Also, there is a requirement that method, the taxpayer may use the cost- representative.
interests paid to a non-resident must plus, the resale price method, the profit The options/limits based on the Serbian
be on arm’s length terms. sharing method or the net profit method. VAT Act are as follows:

TRANSFER PRICING IN SERBIA Exchange rate RSD/EUR 123,5

Arm's length principle since 2013 OPTIONS Applicable / limits
since 2013, prepare and submit transfer pricing
Documentation liability Distance selling No
documentation together with the CIT return Call-off stock
APA No - VAT group registration No
Country-by-Country liability No - Cash accounting approx EUR 405,000/year
Master file-local file Import VAT deferment
(OECD BEPS 13) applicable No - No
Penalty
~ EUR 16.200 for missing documentation Local reverse charge sale of secondary raw materials and
lack of documentation 30% on tax underpayment + late payment interest services that are directly related to these

tax shortage direct or indirect control or common managing goods, transactions of construction
director, close family members, non-resident buildings, construction work

Related parties 25% < entities from tax havens Option for taxation No
Interest as described in Governmental Rulebook, No
Safe harbours - letting of real estate approx EUR 65,000/past 12 months
Level of attention paid by Tax Authority transactions (other than financial) below EUR
65.000 are not subject to TP rules - supply of used real
estate
8/10
VAT registration threshold

Other indirect tax type in Serbia is excise duty.

TA X GUIDE 2018 43

MAZARS Law office Milosavljevic
IN SERBIA 11000 – Belgrade,
Terazije 29/18, Serbia
Phone: (00381) 11 408 1715
Fax: (00381) 11 408 4018

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

In Serbia, resident individuals are taxed The tax rate on income from royalties Only difference is that contributions
based on their worldwide income, while and other intellectual property amounts for pension and disability insurance
non-residents are taxed only on income to 20%. Active incomes fall under the are 12% (2% less than employee’s
in Serbia. There is a flat rate of 10% for scope of the SSC system: individual obligation). Personal deductions are
gross salaries. Capital gains are taxed social contributions are 19.90% applicable.
at 15%. Furthermore, the tax rate on of the gross salary. These include The examples below show the cost of
income from agriculture and forestry contributions for pension and disability the employer and the employee in case
is 10%. Income from the letting of real insurance (14%), health insurance of minimum wage level and the average
estate is taxable at 20%, but before (5.15%) and unemployment insurance wage in the private sector:
that, the gross basis is reduced by (0.75%). Employers contributions
standardized costs equalling 25%. amounts 17.90%.

WAGE- RELATED TAXES IN SERBIA Minimum wage Average wage
in private sector

Exchange rate RSD/EUR 123,1179 in EUR in RSD in EUR in RSD
Non-taxable amount
96 11 790 96 11 790
TOTAL WAGE COST 247 30 465
Social contribution tax 292 117,90% 500 61 559 Contact:
GROSS SALARY 17,90% 590 117,90% Aleksandar P. Milosavljevic
Personal income tax 44 100,00% Attorney at law
Employees' contributions 247 6,13% 90 17,90% Partner – Tax services
NET SALARY* 19,90% 500 100,00% Phone: (00381) 11 408 1715
15 73,97% Mobile: (00381) 63 81 02 914
49 40 8,08% E-mail: [email protected]
183 100 19,90%
360 72,02%

Net salary differs on monthly basis approximately +/- 15 EUR

44 TA X GUIDE 2018

SLOVAKIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

In Slovakia, the corporate income tax A withholding tax of 19% is applicable to In 2018, exit tax and patent box special
is charged at a flat rate 21%. The tax interest, winnings and other income from regime were introduced in Slovakia.
base is calculated from an accounting passbook deposits, income of authors for Starting from 2018, business
profit or loss modified by certain their articles, etc. A 35% withholding tax restructurings (mergers, acquisitions,
increasing and decreasing items. The rate applies for payments to taxpayers in-kind contributions, de-merges) can be
tax losses can be deducted evenly for from non contracting states which do carried out solely in fair market values
four years, i.e. a maximum one quarter not have either a double tax treaty or (only for some specific cases historic
from the total amount annually. Tax a treaty on information exchange with value method can be applied)
incentives may be provided in cases of Slovakia. Interests and royalties paid by
starting new production or modernizing Slovak tax residents to closely related VAT AND OTHER
existing production, doing research or EU entities are under specific rules INDIRECT TAXES
development. Taxpayers undertaking a exempted from taxation.
research and development project are The general VAT rate is 20%, while
eligible for an extra allowance by applying Dividends and other incomes paid to the reduced rate is 10% (e.g.
a so-called “super deduction”. legal entities being Slovak tax residents pharmaceutical products, books, music,
by taxpayer from a non-contracting spectacle and contact lenses, basic
Starting from 1 January 2015 thin state are subject to taxation within food items such as bread, butter, milk
capitalization rules are applied. The the separate tax base at rate of 35%. and cream, freshwater fish and meat).
maximum amount of tax-deductible Dividends and other income are also
interest and related expenses from loans subject to taxation if paid to a taxpayer Starting from 1 January 2016 a special
provided by related parties is calculated from a non-contracting state by a Slovak tax voluntary arrangement based on
as 25% of EBITDA. Taxpayers (legal legal entity. Taxation does not apply to the receipt of payment for goods and
entities) generating tax losses or tax the dividends paid from the profit from services (called “cash accounting”) can
base below minimal amount are obliged 2004 until 2016, i.e. such dividends shall be applied by certain VAT payers.
to pay tax licenses ranging from EUR not be subject to tax even if paid after 1 Other indirect tax types in Slovakia are
480 to EUR 2,880, which represent the January 2017. excise taxes on wine, beer, tobacco,
minimum current tax. As of 2018, the tax Country-by-Country (CbC) Reporting spirits, mineral oils, electricity, coal and
licenses should be abolished. obligations are applicable in Slovakia for natural gas.
periods from 1 January 2016.

The options/limits based on the EU Directive:

TRANSFER PRICING IN SLOVAKIA

Arm's length principle since 1999 VAT OPTIONS IN Applicable / limits
since 2009 SLOVAKIA
Documentation liability since 2004 EUR 35,000/year
APA from FY 2016 Distance selling
Country-by-Country liability Already implemented since 2015
Master file-local file for specific taxpaxers Call-off stock appr. EUR 100,000/year
(OECD BEPS 13) applicable No
Penalty up to EUR 3 000 / missing VAT group registration*
documentation (recurrent basis)
lack of 10% p.a. of tax underpayment Cash accounting - yearly amount
documentation in EUR (approx.)
direct or indirect control or
tax shortage common managing director, close Import VAT deferment
relatives or other control aimed
Local reverse charge construction works; deliveries of goods and certain types
purely on circumvention of tax of services in the Slovakia by a taxable person who is not
Related parties 25% < Not officially published/accepted established in Slovakia (foreign VAT payers); sale of waste,

- but generally accepted: Low specific metal products, emission quotas; sale of
value added services: 5% mark-up agricultural products, specific electronic devices if the

9/10 tax base on the invoice exceeds 5 000 EUR, etc.

Safe harbours Option for taxation - letting of
Level of attention paid by Tax Authority real estate

Option for taxation - supply of
used real estate

VAT registration threshold EUR 49,790
* Available only for domestic related parties

TA X GUIDE 2018 45

MAZARS MAZARS TAX k.s.,
IN SLOVAKIA Europeum Business Center,
Suché mýto 1,
811 03 Bratislava
Phone: +421 2 59 20 4700
Fax: +421 2 59 20 4703

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

The personal income tax rate is rate) or 35% if recipient or payer of security contributions are capped
progressive in Slovakia and it is based dividend is from a non-contracting by a maximum assessment base of
on the amount of income. The income state. Further, dividends distributed EUR 6,384. There is no maximum
tax rate of 19% is applicable on the tax to employees without participation on assessment base for health insurance
base below 176.8 times the amount the registered capital of the company contributions. Health insurance
of the subsistence minimum in effect and/or cooperative are classified as allowance (annually to 4,560 EUR) can
(for year 2018, that amount is EUR employment income taxable by tax be applied by low-income employees on
35,268.06 per year) and 25% for the part advances. employee’s contributions..
of the tax base exceeding 176.8 times Both employers and employees are The examples below show the cost of
the valid subsistence minimum. subject to social security and health employers and employees in case of
Dividends and other income contributions on the employee's gross minimum wage level and the average
(including shares on liquidation monthly wage. The rates are 35.2% wage in private sector.
balances of business companies for employers (social security 25.2%
and/or cooperatives) and shares of and health insurance 10%) and 13.4%
members of land communities paid for employees (social security 9.4%
out after 01 January 2017 are subject and health insurance 4%). Social
to taxation at rate 7% (capped by DTAT

WAGE- RELATED TAXES IN SLOVAKIA Minimum wage Average wage
in private sector

in EUR in EUR

480 925

TOTAL WAGE COST 649 135,20% 1 251 135,20% Contact:
Günter Oszwald
Vocational training contribution - - Partner
Phone: +421 259 204 700
Social contribution tax 169 35,20% 326 35,20% E-mail: [email protected]

GROSS SALARY 480 100,00% 925 100,00%

Personal income tax* 20 19,00% 92 19,00%

Employees' contributions** 57 11,90% 124 13,40%

NET SALARY 403 69,10% 709 67,60%

* The gross salary is decreased by the total amount of a general allowance (319,17 EUR/monthly) and by social contribution tax
** Social and health insurance paid by employee (special health contribution for low-income employees)

46 TA X GUIDE 2018

SLOVENIA

CORPORATE TAXES
AND OTHER DIRECT TAXES

The general corporate income tax rate but thin capitalization does not apply if VAT AND OTHER
is 19% from 2017 on. A special rate of shareholders are financial institutions INDIRECT TAXES
0% applies to investment funds, pension and if the taxpayer provides evidence
funds and insurance undertakings for that they could have received the loan The general tax rate is 22%; a reduced
pension plans, under certain conditions. surplus from a lender that is a non- rate of 9.5% applies to some goods, e.g.
The tax base is the pre-tax (accounting) associated enterprise. There is a range food, books, water supply, carriage of
profit modified by several increasing of tax allowances for new investments passengers and their personal luggage,
and decreasing items. A company may and R&D, new employments and etc. VAT-exempt services are services
request to be subject to tonnage tax employments of disabled persons, as of public interest, as well as banking
instead of corporate tax if it meets certain well as investment incentives. services, insurance, investment-related
conditions (i.e. it operates in international services, gambling, certain services
maritime shipping) and notifies the tax A withholding tax of 15% is applied on provided by medical doctors and
authorities in advance. The tax base for dividend, interest, royalty and rental dentists, etc. EC Sales lists (IC report)
tonnage tax is the sum of the tax bases income paid for by a Slovenian company are obligatory in Slovenia and should be
for each of an entity’s ships that are to a foreign company. However, if submitted by the 20th day of the month
included in the tonnage tax regime. In conditions are met, an exemption is following the taxable period.
addition, taxpayers whose revenue in the applicable to payments to EU residents
previous year did not exceed EUR 50,000 (under parent subsidiary directive & Other indirect tax types in Slovenia
(or EUR 100 000 if employing at least one interest and royalty directive) and under are excise duty, insurance tax, motor
full-time person for a minimum of five international double taxation treaties vehicle tax, customs, etc.
months) can elect to take a lump sum (currently over 50 treaties).
deduction equivalent to 80% of annual
revenue, in lieu of actual expenses. Real estate transfer tax (RETT) is applied
Losses can be carried forward without on the transfer of immovable property at
limitations and can be used only up to the rate of 2%. The tax base is the selling
50% of the tax base. In addition special price of the transferred property and
rules apply in case of M&A transactions. the taxable person is the seller. No tax if
Slovenia uses thin capitalization (4:1), transaction is subject to VAT.

TRANSFER PRICING IN SLOVENIA VAT OPTIONS IN SLOVENIA Applicable / limits

Arm's length principle since 2005 Distance selling EUR 35,000/year
Documentation liability since 2006
APA Available Call-off stock
Penalty
lack of ~ up to EUR 30.000/ missing documents VAT group registration No
documentation
up to 45% of the unpaid tax, but no more Cash accounting EUR 400,000/year
tax shortage than EUR 300.000; EUR 5.000 for the
responsible person Import VAT deferment
direct or indirect control or
common managing director Local reverse charge construction works and supply of staff in relation
to construction works, supply of immovable prop-
For interest rates in line with Governmental erty (limited), supply of waste and used material
Rulebook, for thin cap 1 : 4 ratio based on specification, transfer of greenhouse gas

8/10 emission allowances

Related parties 25% < Option for taxation

Safe harbours - letting of real estate Yes
Level of attention paid by Tax Authority
- supply of used real
estate

VAT registration threshold EUR 50,000/year *

* special rules for agricultural activites

TA X GUIDE 2018 47

MAZARS CROATIAN OFFICE IS RESPONSIBLE
IN SLOVENIA FOR EX YUGOSLAVIAN COUNTRIES
Mazars Cinotti Consulting d.o.o.
10000 – Zagreb, Pile I br. 1., Croatia
Phone: (00385) 1 4864 420
Fax: (00385) 1 4864 429
www.mazars.hr

PERSONAL INCOME TAX / Social security contributions apply
SOCIAL SECURITY SYSTEM on income from employment and are
16.10% for the employer and 22.10% for
Personal income tax rates are the employee. Self-employed individuals
progressive from 16% to 50%, and (business income) pay their own social
apply on active income sources security contributions depending on the
(employment, business income, circumstances of the case.
agriculture and forestry, other income. The examples below show the cost of
Income from capital and rental income the employer and the employee in case
is taxed at flat rate (dividends at 25%, of minimum wage level and the average
interest at 25%, capital gains from 0% wage in the private sector. There are
to 25%, depending on holding period, a number of personal allowances that
rental income at 25% (10 % lump sum apply individually depending on the
costs or actual costs deductible)). personal status of the individual.

IF A YEARLY TAX BASE AMOUNTS TO THE TAX AMOUNTS TO

above below 116,10% + 27% 16%
8.021,34 1.283,41 + 34% 8.021,34
8.021,34 20.400,00 4.625,65 + 39% 20.400,00
20.400,00 48.000,00 14.009,65 + 50% 48.000,00
48.000,00 70.907,20 22943,46 70.907,20
70.907,20

WAGE- RELATED TAXES IN Minimum wage Average wage
SLOVENIA in private sector

TOTAL WAGE COST in EUR 116,10% in EUR 116,10% Contact:
Employer's contribution 978 16,10% 2 040 16,10% Kristijan CINOTTI
GROSS SALARY 136 283 Partner – Advisory services
Employees' contributions 843 100,00% 1 757 100,00% Phone: (00385) 1 4864 420
Tax and surtax* 186 22,10% 388 22,10% Mobile: (00385) 99 4877 112
NET SALARY 61 7,24% 222 12,64% E-mail: [email protected]
596 70,66% 1 147 65,26%

*Tax base differs from the gross salary, deductions apply.

48 TA X GUIDE 2018

UKRAINE VAT AND OTHER
INDIRECT TAXES

CORPORATE TAXES There is 15% withholding tax on dividend, As non EU member, Ukraine does not
AND OTHER DIRECT TAXES interest, royalty, etc., paid to a foreign comply with EU VAT Directives. Standard
company. However, in most cases a lower VAT rate is 20% (7% for pharmaceuticals
CIT in Ukraine is taxed at the flat rate rate or exemption may be applied under and medicinal products; 0% for export
of 18%. Taxable profit is calculated as the respective double tax treaty. Ukraine of goods).
financial profit before tax (reported in has a wide double tax treaty network with There is no concept of B2B and B2С
P&L statement according to Ukrainian more than 70 countries. services in Ukraine. Under the general
GAAP or IFRS) adjusted by certain tax TP rules in Ukraine apply not only to rule, the place of the supply of services
adjustments (depreciation, accruals controlled transactions with related is the place where the supplier is
and provisions, thin capitalization, tax non-resident parties, but also to registered. However, there are some
losses, etc.). Thin capitalization rules transactions with non-related non- exceptions (e.g. in respect consulting,
apply to loans granted by non-resident resident companies, which are registered marketing, information services, etc.).
related parties (debt-to-equity ratio is in low-tax jurisdictions or which are In respect of services provided by a
3.5). Insurance companies are liable considered as non-payers of CIT. Ukraine non-resident, the reverse-charge
to pay additional 0% or 3% income tax has not yet adopted country-by-country mechanism is applicable.
for life insurance and other insurance and masterfile reporting standards in Ukraine introduced the electronic VAT
respectively. Tax losses can be carried local legislation. administration system in 2015. Taxpayer
forward, while loss carryback is not is entitled to issue VAT invoices for the
permitted. Sole traders, companies with annual amount within the certain cap. To get
Companies with annual income not income not exceeding UAH 5 million VAT credit a taxpayer should receive
exceeding UAH 20 million (approximately (approximately EUR 149 thousand as of 1 from the supplier a VAT invoice in
EUR 597 thousand as of 1 January 2018) January 2018) and agricultural producers electronic form, which is registered in
are entitled not to make any adjustments may apply for a simplified taxation the Unified Register of VAT invoices. VAT
(except for tax losses carryforward). system (paying single tax instead of CIT). refund is provided under unified register
Companies with annual income not Property tax, which consists of real with chronological order of repayment.
exceeding UAH 3 million (approximately property tax and land tax, is charged as There are number of temporary VAT
EUR 90 thousand as of 1 January a local tax in Ukraine, and respective tax incentives, such as exemptions for
2018) may apply 0% CIT rate, if certain rates are set by local authorities. supplies of certain goods and services
additional conditions are met. (software, electric vehicles, waste and
scrap metals etc.) or possibility to defer
VAT payment on certain transactions
(e.g. import of equipment).

Exchange rate EUR/UAH 33.5 VAT OPTIONS IN UKRAINE Applicable / limits

TRANSFER PRICING IN UKRAINE Distance selling No
Call-off stock No
Arm’s length principle since 2013 VAT group registration No
since 2013 Cash accounting*
Documentation since 2013 (applicable for large taxpayers) Import VAT deferment**
liability
No
APA

Country-by-Country liability

Master file-local file Local reverse charge Imported services
(OECD BEPS 13) applicable
Penalty No

lack of report up to 1% of the value of controlled transactions, but Option for taxation - letting of real No
not more than UAH 528,600 (app. EUR 15,780) estate
lack of documentation Revenue of UAH 1 million
up to 3% of the value of controlled transactions, but not Option for taxation - supply of used (app. EUR 29,850)
more than UAH 352,400 (app. EUR 10,520) real estate

25% of tax underpayment; 50% in case of recurrent VAT registration threshold**
violation during 1095 days + late payment interest
tax shortage Direct or indirect or common control; or control in * For certain types of operations (e.g., construction works; supply of heat, water,
gas to individuals or governmental agencies)
Related parties 20% < practice independently from the ratio
** Possibility to pay VAT on import of certain equipment by monthly instalments for up
Safe harbours No 7/10 to 2 years
** Voluntary registration is allowed without any limitations
Level of attention paid by Tax Authority
The other indirect tax in Ukraine is excise tax.
The excisable goods are spirits, beer, tobacco,
petroleum, cars, trailers, motorcycles, electricity.

TA X GUIDE 2018 49

MAZARS MAZARS UKRAINE LLC
IN UKRAINE 15A Kyrylivska Street,
Kyiv, 04080, Ukraine
Phone: +38 044 390 71 07
Fax: +38 044 390 71 06
www.mazars.ua

PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM

PIT rate applicable to both active income (e.g. There is a temporary military tax (until the completion
employment, benefits in kind, assignment fee) and of the military reform) applied to the monthly income
passive income (e.g. interest, royalties, investment at the rate of 1.5%.
income) for both residents and non-residents is 18%. Most active incomes fall under the scope of SSC
Tax residents of Ukraine pay PIT on their worldwide with employer’s contribution of 22%, no employee’s
income. Non-residents pay PIT on their Ukrainian contribution. Maximum chargeable amount per
source income. Dividends are subject to 9% PIT, month is 15 months’ minimum wages – UAH 55,845
except for dividends distributed by Ukrainian CIT (approximately EUR 1,667 as of 1 January 2018).
payers, which are subject to 5% PIT. For the specific The examples below show the cost of the employer and
types of passive income, the tax rates of 5% and 0% the employee in case of minimum wage level and the
may be applied. average wage in the private sector.

WAGE- RELATED TAXES IN Minimum wage Average wage
UKRAINE in private sector

Exchange rate UAH/EUR 33,5 in EUR in UAH in EUR in UAH
(as of 1 January 2018) 111 3 723 328 11 000
TOTAL WAGE COST 135 400 122,0% Contact:
Social contribution tax 24 122,0% 72 22,0% Gregoire Dattee
GROSS SALARY 111 22,0% 328 100,0% Managing Partner
Personal income tax 20 59 18,0% Mobile: +38 044 390 71 07
Military tax 2 100,0% 5 E-mail: [email protected]
NET SALARY 89 18,0% 264 1,5%
1,5% 80,5%
80,5%

50 TA X GUIDE 2018

LABOUR-RELATED TAX BURDENS
IN THE CEE REGION

The charts below show the wage-related tax and contribution The ratio of the total related costs of the employer and the

burdens in each country, for two different monthly gross employee’s net income (on the chart “wage cost for the employer

income levels: EUR 500 and EUR 2,000 and for two different / net income”) is particularly suitable for comparison, as it shows

options for each income category: for an individual having no how much does it cost for the employer to provide the same level

family ties and for someone who hasMthorenethclhyildgrreons.s salary of EoUf nRet5i0nc0omanedtontohefaemmpilloyyteieeisn the different tax jurisdiction.

800 Monthly gross salary of EUR 500 and no family ties 200%

700 180%

600 160%

800 214000%%
500
700 112800%%

400 116000%%
600

300 18040%%
500

200 1602%0%
400
100 4100%0%

300 2800%%
-

200 60%
Austria Kosovo Greece GerRumsasniyaCzechBLiRSBHStlUleu(holkopvuRrvgueaeaaabinnplrkii.iini)caaaae CzechBLiRSBHStlUleu(holkopvuRrvgueaeaaabinnplrkii.iini)caaaae Serbia
Estonia BRHoP(omFlaeandin.)ad
Albania MonHtueLnnagetavgirrayo
Croatia
FYROM
100 40%

- 20%

Austria Kosovo Greece GerRumsasniya Serbia
Estonia BRHoP(omFlaeandin.)ad
Albania MonHtueLnnagetavgirrayo
Croatia
FYROM

Net income in EUR Contributions and taxes paid by the employee
Contributions paid by the employer Wage cost for the employer / net income in %

Net income in EUR Contributions and taxes paid by the employee
Contributions paid by the employer Wage cost for the employer / net income in %

Monthly gross salary of EUR 500 with three children

800 Monthly gross salary of EUR 500 with three children 200%
700 180%

600 160%

800 214000%%

500 118200%%
700

400 110600%%
600
300 1804%0%

500 6120%0%
200
400 14000%%

100 2800%%
300
- 060%%
GSelrGorvmeeaennciyea
LBiBBtUHuHhkl((rugRaaFaieenrpnii.deaa.))
200
40%
Czech Republic Czech RepublicAustria HuKnogsaorvyo Latvia LatviaSlovakia Russia FYROM RoSemrabniiaa MontPeonleagnrdo
Estonia Albania Croatia
100 20%

- 0%

Austria HuKnogsaorvyo Slovakia Russia FYROM GSelrGorvmeeaennciyea RoSemrabniiaa MontPeonleagnrdo
Estonia Albania Croatia LBiBBtUHuHhkl((rugRaaFaieenrpnii.deaa.))

Net income in EUR Contributions and taxes paid by the employee
Contributions paid by the employer Wage cost for the employer / net income in %

Net income in EUR Contributions and taxes paid by the employee
Contributions paid by the employer Wage cost for the employer / net income in %