CONTENTS

AUSTRIA | Mag. Martin Hummer page 3Increasing PE risk based on update of OECD-Commentary 2017

BELARUS | Alexey Fidek page 4Local specifics of PE concept still cannot be ignored

CzECh REPUBLIC | Roman Pechacek page 5National specifics of a service PE

hUNgARy | Tamás Gyányi page 7Stricter PE rules can be implemented in future

POLAND | Lidia Adamek-Baczyńska page 8More focus on the issue of fixed establishments for VAT purposes

RUSSIA | Vladislav Donchenko page 9Development of permanent establishment concept

SERBIA | Bojan Radojičić page 11Tax authorities increase the focus on PE existence

SLOVAkIA | Lukáš Mokoš page 12More stringent definitions related to PE

SLOVENIA | Mateja Babič page 13Dependent agent rule in the past and in the future

UkRAINE | Ivan Shynkarenko page 14Extension of transfer pricing control to permanent establishments of non-residents

Spring 2018

wts CEE | taxbridgePermanent Establishment Riskin Central and Eastern Europe

Dear Readers,

I am happy to introduce you to our first TaxBridge this year. In order to place strongeremphasis on regional tax problems inCentral and Eastern Europe, and to rise tothe challenges of our era, we have renewedand refreshed not only the content but alsothe format of our publication.

From 2018 our Tax Bridge doubles up as ourCentral and Eastern European Newsletter.We still address a specific issue every quarter,just like before, but now the selected issuewill also be examined from the viewpoint ofdifferent countries and WTS Global partnerfirms in the CEE region. We are proud to saythat we were able to collect expertise from10 different countries for our first regionalTax Bridge, focusing on the latest develop-ments in permanent establishments in ourregion. This means you can read about theregulations in Austria, Belarus, the CzechRepublic, Hungary, Poland, Russia, Serbia,Slovakia, Slovenia and in Ukraine.

BEPS (base erosion and profit shifting)Action 7 (Preventing the Artificial Avoidanceof Establishment Status) on permanentestablishments (PE) and the profit attribut-able to permanent establishments willsooner or later become a very hot topic in all CEE countries too, as it is now in Polandfor example (where not only the corporate

income tax but also the VAT aspects can be challenging). Keeping the tax base in thecountries where the actual work or service is performed will be more and more impor-tant. At this stage we see that CEE tax autho-rities do not follow a uniform approach withrespect to permanent establishments. Somecountries apply only the minimum standardsin the Multilateral Instrument (MLI), whileothers focus more closely on the topic andhave strict rules to conclude that a perma-nent establishment actually exists, and thusto tax the profit created in the given country.

If you are contemplating cross-border activities, it is good to know at least thebasic tax rules in the country where the service or work will be performed. Never-theless, we recommend contacting our colleagues directly before starting activitiesin these countries to avoid tax exposure and excess tax administration related to retrospective tax compliance for permanentestablishments.

On behalf of all our regional staff, WTS hopesyou will enjoy reading our Tax Bridge.

Zoltán LambertWTS Klient HungaryManaging PartnerRegional Coordinator CEE

2

taxbridge | 1 | 2018 FOREWORD PE risk

Zoltán Lambert Managing Partner

WTS Global partner firms from

10 different countries

CEE tax authorities do not follow a uniform approach

avoid tax exposure and excess tax administration

Being innovativemeans alwaysbeing one stepahead by beingcreative and delivering some-thing unique.

Our clients’ successis our passion.

To us, excellencemeans providingthe highest qualityconsulting solu-tions.

Our actions are basedon a reliable systemof values. We keepour promises.

WTS global is a leading independent tax networkOur values

Innovative Passionate Excellent Reliable

taxbridge | 1 | 2018 AUSTRIA PE risk

3

Mag. Martin Hummer Senior Manager Tax

agency PE

auxiliary establishments

anti-fragmentationrule

dividing contracts

Principal Purpose Test (PPT)

regulations of existingDTAs are to be mergedwith the regulationsadopted from the MLI

do not represent new codifications, but rather just clarifications

”micro-businesses”should be assumed

Increasing PE risk based on update of OECD-Commentary 2017 Author: Mag. Martin hummer

Austria acted with great caution when itadopted the amendments proposed in BEPSAction 7. During the implementation of theMLI approximately 40 contracting stateswere named from an Austrian perspective(Covered Tax Agreements).

Several rules have not been adopted byAustria

The Austrian tax authorities have not under-taken a strict, formal interpretation of whatis meant by an agency permanent establish-ment, but instead interpreted it from an economic standpoint. There was also no hesitation to accord commissioning agentsthe character of a dependent agent. As aresult, Austria – as well as Germany andSwitzerland – has not implemented Article12 para 1 and 2 MLI (agency PE).

With regard to auxiliary establishments,Austria has decided to adopt Option A (Article 13 para 2 MLI), according to which all activities referred to in Article 5 (4) OECD-Model Tax Convention (MTC) 2017 shall notconstitute a permanent establishment unlessthey are of a preparatory nature or ancillaryto the overall activity of the company. The Austrian tax authorities have previouslytaken the view that the catalogue of excep-tions only applies if the activities listedtherein are not the core functions of thecompany. Therefore, in future the companywill have to examine overall whether theactivities mentioned contribute significantlyor only slightly to its added value. Austria has not adopted the anti-fragmentation rule (Article 13 para 4 MLI).

Article 14 para 1 of the MLI seeks to enablestates to prevent the avoidance of perma-nent establishments through dividing con-tracts into various elements of the contract(for the purpose of falling below the estab-lishment threshold) (Article 14 para 2 MLI).Up to now, the Austrian tax authorities havedealt with the artificial division of contractsbetween two affiliated legal entities byapplying national anti-abuse defences(Section 21 et seq Austrian Federal FiscalCode). In addition, Austria had to incorporatethe Principal Purpose Test (PPT) in its CoveredTax Agreements as stipulated in Article 7 MLI.This makes it possible to deny double taxa-tion agreement (DTA) benefits if it can beassumed that one of the main reasons for an agreement or transaction was to gain an advantage. However, this regulation does not depend on whether the separation

of the contract is motivated by taxation or if non-tax-related reasons were decisive. Not least because of this, Austria has not incorporated this provision into its MLI-compliant DTA.

Consolidated version of double taxationagreement

The MLI requires national implementation in the form of a law (expected in 2019). In order to make it easier for the taxpayer to apply a DTA, taking into account thechanges and adjustments made by the MLI,the Austrian Federal Ministry of Financeannounced that it would publish a “consoli-dated” version of the respective DTA. In this,the regulations of existing DTAs are to bemerged with the regulations adopted fromthe MLI.

The adjustments to the term definition pro-posed in BEPS Action 7 and Articles 12 to 15MLI have been included in the 2017 updateof the OECD-MTC and OECD Commentary andcan therefore be used during DTA renegotia-tions and revisions regarding the Austriantreaty law. Moreover, practice shows thatsome states, including many developing and emerging economies, believe that thechanges to the wording of Article 5 OECD-MTCand the OECD Commentary 2017 proposedby BEPS Action 7 do not represent new codi-fications, but rather just clarifications. Thesestates could therefore be tempted to inter-pret existing, unchanged DTAs in light of the2017 update. It is incomprehensible why“micro-businesses” should be assumed infuture if no profit is attributable to them anyway due to a lack of definitive personnelfunctions. The OECD report AdditionalGuidance on the Attribution of Profits toPermanent Establishments of 22.3.2018 was thus keenly awaited.

→ Mag. Martin hummer Senior Manager Tax+43 732 69412 9894martin.hummer@icon.at

→ ICON Wirtschaftstreuhand gmbhStahlstraße 144020 LinzAustria

→ www.icon.at

WTS in Austria

taxbridge | 1 | 2018 BELARUS PE risk

Alexey Fidek Senior Associate

in practice such foreign company

will not be able toregister its PE

rules on a servicesPE from the

Tax Code apply

a dependent agent of a foreign companyinvolved merely innegotiating the essential conditions of transactions

do not recognise the concept of a virtual PE

Local specifics of PE concept still cannot be ignored Author: Alexey Fidek

Belarusian rules on the taxation of perma-nent establishments have peculiar local features in comparison to the OECD approach.This article briefly outlines some key specificsof the permanent establishment concept inBelarus, which foreign companies shouldtake into account when entering the Bela-rusian market.

Sale of goods through a fixed place of business

A fixed place of business (e.g. a warehouseor an office) in the territory of Belarus throughwhich a foreign company regularly sells goodscan constitute a permanent establishment ofthe foreign company. However, in practicesuch foreign company will not be able toregister its permanent establishment withthe Belarusian tax authorities and fulfil itstax obligations. This is because the law doesnot establish a tax registration procedure inthis case.

Under effective laws, foreign companies cannot open Belarusian branches and arenot allowed to run business activities throughtheir representative offices in Belarus. There-fore, in order to sell goods through a fixedplace of business in Belarus a foreign com-pany should either consider opening a Bela-rusian company or approaching a Belarusianintermediary.

Services permanent establishment

Under the Tax Code of Belarus, if a foreigncompany performs work or renders servicesin the territory of Belarus for 90 days (con-tinually or on aggregate) in any 12-monthperiod, the place for performing the work orrendering the services normally constitutes a permanent establishment of the foreigncompany.

The majority of Belarusian double tax trea-ties do not contain specific rules on a servicespermanent establishment. In practice, how-ever, rules on a services permanent estab-lishment from the Tax Code still apply. Thereare also certain double taxation treaties thatprolong the term for recognising a servicespermanent establishment to 6 months in any12-month period.

Dependent agent negotiating transactions

The vast majority of Belarusian double taxa-tion treaties recognise a permanent estab-lishment only if a dependent agent has and habitually exercises powers to concludecontracts in the name of a foreign companyin the territory of Belarus. However, the TaxCode can be interpreted broadly in that adependent agent of a foreign companyinvolved merely in negotiating the essentialconditions of transactions on behalf of theforeign company can constitute a permanentestablishment. This should be taken intoaccount especially if the foreign companyresides in a country which has no double taxation treaty with Belarus.

Virtual permanent establishment

Effective Belarusian legislation and taxauthority practices do not recognise the concept of a virtual permanent establish-ment. At the same time, the provisions of the Tax Code can be interpreted broadly inthat a server in the territory of Belarus effec-tively controlled by a foreign company canconstitute a permanent establishment ifbusiness is run through this server.

Permanent establishment and VAT

Belarusian law does not recognise the concept of a fixed establishment for valueadded tax (VAT) purposes. Normally, a foreign company incurs VAT obligationswhen it registers its permanent establish-ment with the Belarusian tax authorities.

4

→ Alexey Fidek Senior Associate+37 517 306 2102alexey.fidek@sorainen.com

→ Sorainen Belarusul Internatsionalnaya 36-1220030 MinskBelarus

→ www.sorainen.com

WTS in Belarus

taxbridge | 1 | 2018 CZECH REPUBLIC PE risk

5

Roman PechacekTax Advisor

withholding tax of15% or even 35%

a workshop, office, a place of extraction of natural resources,

place of purchase(outlet) or

construction site

6-month rule applicable to any consecutive 12-month period

defined by the duration of such activities

a large number oftreaties do not includea definition

National specifics of a service permanent establishmentAuthor: Roman Pechacek

According to Czech law, any active profitsfrom business and self-employment are subject to taxation either as income of a resident taxpayer or income gained by anon-resident taxpayer from sources in theterritory of the Czech Republic.

Basic principles

According to one of the key principles in double taxation treaties (DTTs), the taxation of active incomes gained by non-resident taxpayers is limited to caseswhere such incomes meet the parametersgiving rise to a permanent establishment.

Incomes gained by residents of contractingstates before the existence of a permanentestablishment are not taxed in the sourcecountry, while the same incomes gainedfrom sources in the Czech Republic by taxresidents of countries with no double taxa-tion treaty are subject to withholding tax of 15% or even 35%.

Thus in practice, the active incomes of a taxpayer resident in a contracting state are generally not subject to tax withheld at source by the payer of the income, withthe exception of selected individuals’ in-comes (such as artists and sportspeople).

If the activity of taxpayers resident in con-tracting states gives rise to a permanentestablishment, their income from sources in the Czech Republic shall be taxed basedon a tax return.

Existence of a permanent establishment

Permanent establishment parameters aredefined both by the national rules containedin the Czech Income Tax Act (ITA) and by therespective DTT.

According to the ITA, a permanent establish-ment means a place of business in the CzechRepublic, such as a workshop, office, a placeof extraction of natural resources, place ofpurchase (outlet) or construction site. A siteor place of construction and assembly worksand activities and services carried out by ataxpayer, its employees or persons workingon behalf of the taxpayer are considered apermanent establishment if their durationexceeds six months within any period of 12 consecutive calendar months.

The above definition of a permanent estab-lishment is very broad and is considerablymodified or reduced by DTTs (DTTs define the institution of a dependent agent morebroadly for example than Czech law). In particular, DTTs emphasise the permanentnature of the place of business.

Thus, most disputes arise with regard to a service permanent establishment, which is not defined in the OECD Model Tax Convention either.

Specifics of a service permanent establishment

Service permanent establishments are governed by the 6-month rule applicable to any consecutive 12-month period withoutthe need for a permanent place of business.

According to the ITA, this applies to incomesfrom services, with the exception of con-struction and assembly projects, incomesfrom business, technical or other consultancyservices, management and brokerage activi-ties as well as similar activities carried out inthe territory of the Czech Republic.

The application of this provision does notraise any doubts with service permanentestablishments of taxpayers resident incountries that have not concluded a DTT with the Czech Republic.

Likewise, there are no problems with entities from countries that have agreed with the Czech Republic in their respectiveDTT that a service permanent establishmentis defined by the duration of such activities.Most often a six-month period is specified,like in the ITA.

Currently, more than half of the treaties stipulate the period giving rise to a servicepermanent establishment. However, a largenumber of treaties do not include a defini-tion of a service permanent establishment,such as with Germany, Italy, Japan, theNetherlands, Sweden, United Kingdom or Switzerland.

continued on the next page

WTS in the Czech Republic

taxbridge | 1 | 2018 CZECH REPUBLIC PE risk

the views of the courtsfundamentally contra-dict the opinion of the

Czech Republic

there is a risk of aservice PE that is notdependent on a fixedplace of business

Disputed opinion of the Czech tax administration

The Czech Republic infers the existence of a service permanent establishment evenin the case of entities resident in countrieswith which there is no special regulation inthe DTT.

However, a number of experts do not agree with this opinion. Those opposed to this interpretation supported by theMinistry of Finance of the Czech Republic rely on case law, including that of theSupreme Administrative Court, since theviews of the courts fundamentally contra-dict the opinion of the Czech Republic.

Also, foreign tax authorities often disagreewith the opinion of the Ministry of Finance of the Czech Republic. For example,Germany’s Ministry of Finance has longopposed the concept of service permanentestablishments.

Consequently, if the duration of services inthe territory of the Czech Republic exceedsthe set period, there is a risk of a service permanent establishment that is notdependent on a fixed place of business.Taxpayers should always consider whetherthey should respect the opinion of the Czech tax administration or oppose it, thereby risking a legal dispute.

6

→ Roman Pechacek Tax Advisor+420 221 111 777roman.pechacek@alferypartner.com

→ WTS Alfery s.r.o.Vaclavske nam. 40110 00, Prague 1Czech Republic

→ www.alferypartner.com

WTS global - what makes us uniqueWTS Global is a leading independent tax network.

Tax-focusedNo audits

Exclusivity

Dedicated Managementhand-picked

partner firms

taxbridge | 1 | 2018 HUNGARY PE risk

7

Tamás GyányiPartner

domestic PE definition has been

practically unchanged for many years

2017/2018 tax lawchanges do not

include any special DAPE rule

it is challenging toanswer the legalquestion as towhether a branch /company is needed orsimple PE registrationis sufficient

Stricter PE rules can be implemented in futureAuthor: Tamás gyányi

At this stage there are no special HungarianPE rules tailored to the BEPS initiatives. In June 2017 Hungary also signed the MLI,including only the minimum standards (preamble, principal purpose test (instead of limitation on benefits) and mutual recon-ciliation processes). It seems that Hungarianlawmakers do not treat action 7 as a highpriority but may reconsider the applicationof stricter rules in future, i.e. after thoroughconsideration the provisions related to per-manent establishments can be implemented.

Unchanged dependent agency PE rules

The domestic permanent establishment definition has been practically unchangedfor many years now. However, the Hunga-rian Act on Corporate Income Tax clearly provides rules on the application of transferpricing measures, i.e. transactions have to beset taking the arms’ length rule into account,and TP documentation has to be prepared for transactions between the non-Hungarianhead office and the Hungarian PE providedthat the market value of the transaction ismore than HUF 50 million (EUR 160,000) in a tax year.

As far as special schemes are concerned, until now the Hungarian tax authority hasnot reviewed any agent / commissionaireschemes or warehousing taking the newapproach of the OECD BEPS Action Plan into account, and the 2017/2018 tax law changes do not include any special depend-ent agent permanent establishment (DAPE)rule. In our practice, an agent scheme wasnever re-classified as a PE of a foreign (non-Hungarian) entity. There are no publiclyavailable reports or information on the plans of the Hungarian Ministry of Economyto implement stricter provisions relating tothe new dependent agent definition basedon the final report of the OECD.

PE or a branch office is needed?

In Hungary, construction projects are oftencarried out with the participation of foreigncompanies. Companies registered within theEU are allowed to provide cross-border ser-vices without establishing a formal presencein the country in certain cases (Hungarian-registered company or branch). However, it is sometimes challenging to answer thelegal question as to whether a branch / com-pany is needed or simple PE registration issufficient. This stems from the fact that thereis a special Hungarian act on foreign invest-ments, which does not really contain straight-forward rules. The period for creating a con-struction or supervisory PE is set at 3 monthsby Hungarian law. In cases where the foreigncompany is resident in a country with whichHungary has concluded an agreement forthe avoidance of double taxation, the provi-sions of the treaty prevail over the domesticregulations. So in most cases, the period provided in the respective treaties applies(generally 12 months as in the case of thetreaty between Germany and Hungary), but the period can also be 24 months, like in the case of the Indian and Austrian doubletax treaties.

→ Tamás gyányi Partner+36 1 887 3736tamas.gyanyi@wtsklient.hu

→ WTS klient kft.Stefánia út 101-103.1143 BudapestHungary

→ www.wtsklient.hu

WTS in Hungary

taxbridge | 1 | 2018 POLAND PE risk

Lidia Adamek- BaczyńskaPartner

the company shallregister for Polish VATpurposes and charge

Polish VAT on itsdomestic supplies

definition implemented by

the EU is also applicable in Poland

could result in doubleor non-taxation

broadening the scopeaccording to which a company may beviewed as having afixed establishment

a foreign entity has a fixed establishmentin Poland under VATregulations even if it has no human ortechnical resourcesthere

More focus on the issue of fixed establishments for VAT purposesAuthor: Lidia Adamek-Baczyńska

Permanent engagement by a foreign com-pany conducting business in Poland mayimply a risk of having to create a permanentestablishment for corporate income tax (CIT)purposes and a fixed establishment for VATpurposes in Poland.

Generally, the issue of fixed establishmentsaffects the taxation of services provided byPolish entities to foreign businesses. If a foreign company has a fixed establishmentin Poland, the services supplied to the com-pany for the purposes of such establishmentare subject to Polish VAT. Moreover, the com-pany shall register for Polish VAT purposesand charge Polish VAT on its domestic supp-lies of services, unless the fixed establish-ment is not involved in the transaction.

No legal definition for fixed establish-ments in the VAT Act

Even though identifying whether the foreignentity has a fixed establishment in Poland isnecessary for a proper VAT settlement, thereis still no legal definition for fixed establish-ments in the Polish VAT Act.

Such a definition is provided in EU regula-tions (Article 11 of Council ImplementingRegulation (EU) No 282/2011 of 15 March2011 laying down implementing measuresfor Directive 2006/112/EC on the commonsystem of VAT). As implementing regulationsapply as a legal act in each EU country with-out the need to transfer into national law,the definition implemented by the EU is alsoapplicable in Poland.

According to the definition for a fixed estab-lishment, a company must have a sufficientdegree of permanence as well as humanand technical resources to allow it to receiveand use the services supplied to it for its ownneeds.

Taxpayer-unfriendly approach

So, one crucial issue is what scale of humanand technical resources are required for thefixed establishment to exist? As a differencein opinion across EU countries about what

constitutes a fixed establishment could resultin double or non-taxation, or at least time-consuming clarifications, it is important to know how the different Member Statesdefine a fixed establishment.

Polish tax authorities and courts recentlytend to prefer a taxpayer-unfriendly app-roach to the issue of fixed establishments for VAT purposes by broadening the scopeaccording to which a company may beviewed as having a fixed establishment inPoland. They are also becoming more andmore focused on this issue.

Foreign business presence in Poland hasbeen increasingly considered to meet theconditions of a fixed establishment for VATpurposes, even though not all the relatedrequirements are met to reach such a con-clusion. According to some recent tax rulingsand court decisions, a foreign entity has afixed establishment in Poland under VAT regulations even if it has no human or tech-nical resources there. It suffices if it transactsin Poland on a permanent basis, using itsPolish subcontractors' infrastructure and personnel for this purpose.

Bearing the above in mind, the existence ornon-existence of a fixed establishment andpermanent establishment is critically impor-tant and should be taken into considerationwhen doing business in Poland.

8

→ Lidia Adamek-Baczyńska Partner+48 61 643 45 50lidia.adamek@wtssaja.pl

→ WTS&SAJA Sp. z o.o.Budynek Bałtyk XIII p., ul. Roosevelta 2260-829 PoznańPoland

→ www.wtssaja.pl

WTS in Poland

taxbridge | 1 | 2018 RUSSIA PE risk

9

Vladislav DonchenkoCorporate Tax

Consultant

similar to the listestablished by the

OECD Model Convention

three types of PE

from the momentbusiness activity is

regularly carried out

through a person(entity or individual)which represents itsinterests in Russia

related to the construction or repair of real estate

minimum period considered in the corresponding double tax treaty

Development of permanent establishment concept Author: Vladislav Donchenko

According to the general rule, a permanentestablishment of a foreign company in theRussian Federation means a branch, repre-sentation, division, bureau, office, agency or any other economically autonomous subdivision or other place of business where that company regularly carries outsome kind of business activity in the territoryof the Russian Federation (Article 306 of theRussian Tax Code).

List of activities and types of PE in Russia

The activities of a preparatory or auxiliarynature as per Russian tax law that do notlead to the formation of a PE is similar to the list established by the OECD ModelConvention, for example:

→ Use of facilities solely for the purpose of storage, display and (or) delivery of goodsbelonging to said foreign company, before the beginning of such delivery;

→ Maintenance of a permanent place of business solely for the purpose of pur-chasing goods;

→ Collection, processing and (or) dissemi-nation of information, accounting, marketing, advertising or market research of goods (works, services) sold by a foreign company if such activity is not the main (ordinary) activity of this company;

→ Simply signing contracts on behalf of the foreign company, if the signing of contracts takes place in accordance with detailed written instructions from the foreign company.

Russian tax law covers three types of PE:

→ Basic PE→ Agency PE→ Construction PE

A permanent establishment of a foreigncompany is deemed formed from themoment business activity is regularly carried out through a subdivision of thatcompany. Please note that establishing asubdivision without carrying out businessactivity does not result in a permanent establishment.

A foreign company acting through a PE inRussia has to submit a registration applica-tion to the Russian tax authorities within 30 days of beginning its business activity.

Description of PE types

Basic PE

A basic PE is a branch, separate subdivision or any other economically autonomous sub-division or other place of business throughwhich a foreign company regularly carriesout business activities in the territory of theRussian Federation.

Agency PE

An agency PE is formed if a foreign companycarries out business activities through a per-son (entity or individual) which represents its interests in Russia (concludes contracts onbehalf of that foreign company; negotiatessignificant contractual conditions on behalfof that foreign company), thereby creatinglegal consequences for that foreign company.As for the practical aspect, an agency PE inRussia may be created without any fixedplace of business for the foreign company to act through.

Construction PE

A construction PE is formed if the foreigncompany carries out activities in the territoryof the Russian Federation related to the construction or repair of real estate (exceptfor airplanes, ships and space objects) andthe construction or repair of floating anddrilling rigs, as well as different machinesand equipment which require fixation onfoundations, or elements of buildings.

Russian tax law does not set a minimumterm for the period of a construction PE.Therefore, a taxpayer has to apply the minimum period considered in the corresponding double tax treaty. A con-struction PE is recognised as formed from the beginning of regular business activity if there is no DTT between Russia and thecountry of the foreign company actingthrough the PE in Russia.

A permanent establishment of a foreigncompany is recognised as the taxpayer of the following Russian taxes:

→ Corporate income tax (CIT)→ Value added tax (VAT)→ Excise duties→ Corporate property tax→ Land tax → Transport tax

continued on the next page

WTS in Russia

taxbridge | 1 | 2018 RUSSIA PE risk

CIT should be calculated at 20%

of the correspondingtax base

VAT should be calculated at a rate of 18%

tax disputes

the distributor benefited from freepromotion providedby the parent company

tax authorities candeprive the Russiantaxpayer recognisedas a dependent agentof its right to deductincome paid to a foreign company

Taxation features of a Russian PE

CIT

The amount of PE corporate income taxshould be calculated based on one of thefollowing approaches:

→ taxation of PE profit (PE income reduced by expenses)

→ expense-based taxation

PE expenses should be used as the tax baseif a foreign company carries out activities of a preparatory or auxiliary nature in the interests of third parties, without anyremuneration.

Irrespective of the mentioned approaches,the amount of CIT should be calculated at20% of the corresponding tax base.

VAT and other taxes

The taxation of Russian PEs regarding VAT and other taxes is based on generalRussian tax laws. Sales of goods and services performed by a Russian PE are subject to Russian VAT, and the amount of VAT should be calculated at a rate of 18%(10% for specified goods).

Current application of PE concept in Russia

There are wide-ranging tax disputes regard-ing Basic PEs and Construction PEs in Russia.For example, the Russian tax authoritiessometimes cast doubt over the accuracy of documented confirmation of expensestransferred by the foreign company’s head office to the Russian PE (case No. A40-121559/16-20-1035; A40-3279/14).

Also, a Russian PE of a foreign company may find itself subject to the focused attention of the Russian tax authority

when the Russian PE performs activities of a preparatory or auxiliary nature in theinterests of third parties, without any remu-neration. One example of this is case No. A40-155695/12. According to this tax dispute, a foreign company carried out promotion activity through its Russian PEfor goods which were sold by the Russiansubsidiary company (distributor) of said foreign company. As a result, the distributorbenefited from free promotion provided by the parent company. The promotionexpenses should be subject to CIT in Russia.

The application of agency PEs in Russia isdeveloping very slowly. Russian tax autho-rities currently do not have the tools to re-cover tax from income of a foreign companywhich has an agency PE in Russia. As a resultof tax disputes, the Russian tax authoritiescan deprive the Russian taxpayer recognisedas a dependent agent of its right to deductincome paid to a foreign company. Thisapproach was adopted in the largest agencyPE case: No. A40-138879/14 (“LLC OriflameCosmetics” vs. the Russian tax authorities)

The concepts of Service PE and Server PE are not implemented in Russian tax law, and there is no draft law reflecting such PE concepts either.

10

→ Vladislav Donchenko Corporate Tax Consultant+7 499 678 2298vdonchenko@althausgroup.ru

→ ALThAUS groupSamotechnaya str . 7 build 2127473 MoscowRussia

→ www.althausgroup.ru

taxbridge | 1 | 2018 SERBIA PE risk

11

Bojan RadojičićManaging Partner

shall be deemedto have a

PE in Serbia

determined bymandatory conditions

last more than6 months

tax authorities estimate tax facts inaccordance with theireconomic nature

commissioner, brokeror any other person

storage, presentationand delivery

being processed inanother enterprise

procuring goods orcollecting information

Tax authorities increase the focus on PE existence Author: Bojan Radojičić

Since the Republic of Serbia signed the Multi-lateral Agreement in June 2017, which governsthe implementation of BEPS regulationmeasures, changes in the Serbian regulationof PE status can be expected in near future.Namely, BEPS Action 7 states that where aperson is acting in a Contracting State (Serbia)on behalf of an enterprise (non-residententity) and in doing so, habitually concludescontracts, or habitually plays the principalrole leading to the conclusion of contractsthat are routinely concluded without materialmodification by the enterprise, and thesecontracts are: → in the name of the enterprise or→ for the transfer of the ownership of,

or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use or

→ for the provision of services by that enterprise

such enterprise shall be deemed to have a PEin Serbia in respect of any activities which theSerbian resident undertakes for the enter-prise (non-resident entity).

Current regulation of PE

The existence of the PE is determined bymandatory conditions prescribed in Article 4,Paragraph 1 of the Corporate Income Tax Lawthat says: a PE is any permanent place ofbusiness through which the non-residentconducts its business, in particular:branch; plant; representative office; place of production, factory or workshop; mine,quarry or other place of exploitation of natural resources.

A PE may also comprise a permanent or mov-able site, construction or assembly work ifthey last more than 6 months, including:

→ one or several construction or assembly projects executed concurrently, or

→ several construction or assembly projects executed one after the other without interruption.

In addition, according to Article 4, Paragraph 3of the Corporate Income Tax Law, if in repre-senting a non-resident taxpayer, a personhas a power of attorney to conclude con-tracts on behalf of that taxpayer, it shall bedeemed that the non-resident taxpayer hasa PE with regard to the operations per-formed by the representative on behalf ofthe taxpayer. In other words, if the residentperson representing the non-resident tax-payer conducts commercial activities andmakes a sales deal with a local customer,

but the director of the non-resident entitysigns the contract, formally there is no PE risk given that the local person did not signthe contract.

Special tax authorities view

However, according to Article 9 of the Law on Tax Procedure and Tax Administration, taxauthorities estimate tax facts in accordancewith their economic nature. Accordingly, ifthe commercial representative makes a salesdeal, tax authorities may assume that thisperson basically concludes the agreementwith the local customer, which means a PE iscreated, regardless of the fact that the agree-ment is formally signed with the director ofthe non-resident entity.

A PE shall not be created if the non-residenttaxpayer conducts its business through acommissioner, broker or any other personwhich, in conducting its own business, acts inits own name and for the taxpayer's account. A PE shall not be created either when:

→ keeping stocks of goods or materials belonging to any non-resident taxpayer exclusively for purposes relating to storage,presentation and delivery, or using prem-ises intended for such purposes exclusively;

→ keeping stocks of goods or materials belonging to any non-resident taxpayer exclusively for the purpose of them being processed in another enterprise or by a sole proprietorship;

→ keeping a permanent place of business exclusively for the purpose of procuring goods or collecting information for the needs of a non-resident taxpayer or for the purpose of engaging in other activi-ties of a preparatory or ancillary nature for the needs of a non-resident taxpayer.

→ Bojan Radojičić Managing Partner+381 11 441 4590bojan@wtsserbia.com

→ WTS SerbiaGTC Fortyone – Milutina Milankovića 9ž11070 Novi BeogradSerbia

→ www.wtsserbia.com

WTS in Serbia

taxbridge | 1 | 2018 SLOVAKIA PE risk

Lukáš MokošAssistant of Tax Advisor

new definition of adigital platform

since 1 January 2018

interconnected taxpayers

irrespective where theservices are provided

More stringent definitions related to permanent establishmentAuthor: Lukáš Mokoš

The local definition of a new type of perma-nent establishment was introduced by theTax Reform Law for 2018.

Digital platforms

Carrying out business through a digital plat-form used to habitually conclude contractsfor the provision of transportation andaccommodation services in the SlovakRepublic will result in the creation of a permanent establishment.

The new definition of a digital platform covers a hardware or software platformrequired to create and administer applica-tions. Legislators are pursuing the identifi-cation of a modern technological businessmodel.

Since 1 January 2018 foreign operators ofdigital platforms for such services must re-gister a PE in the Slovak Republic, otherwise,the Slovak tax resident using the platform tosell their services must deduct tax from thepayments made to the platform for the inter-mediary service provided.

Construction sites

The definition of the so-called construction(assembly) permanent establishment wasamended too, in order to avoid an artificialdivision of the activities of interconnectedtaxpayers into several shorter activities. The location for implementing constructionand assembly projects will result in the crea-tion of a PE in Slovakia if these activities takemore than 6 months on aggregate.

So, when assessing a construction PE, theentire period for completing the constructionwill be considered as well as the construc-tion and assembly projects and the involve-ment of related parties.

Dependent agents

Amendments also cover the definition of so-called agent permanent establishments,to avoid the misuse of commissioning struc-tures. The activity of a dependent agent inSlovakia, acting on behalf of an enterprise,will result in the creation of a permanentestablishment if this person plays a main rolein the contract conclusion without any funda-mental change of this contract at the end.

Miscellaneous

Income of a non-resident from Slovak sourcesshould also be considered income from pay-ments from residents and Slovak permanentestablishments of non-residents for:

→ commercial, technical or other advisory services,

→ data processing,→ marketing services, → management or mediation services.

Irrespective where the services are provided,as far as expenses on such payments are taxdeductible expenses the income is subject towithholding tax.

12

→ Lukáš Mokoš Assistant of Tax Advisor+421 2 571042 66lukas.mokos@mandat.sk

→ Mandat Consulting, k.s.Námestie SNP 1581101 BratislavaSlovakia

→ www.mandat.sk

WTS in Slovakia

taxbridge | 1 | 2018 SLOVENIA PE risk

13

Mateja BabičPartner Tax

fiscal authorities tested the dependent

agent rule based oncontracts only

tax inspections were rare

OECD Model 2017

Slovene tax authorityalready has all theinformation on“future” dependentagents

Dependent agent rule in the past and in the future Author: Mateja Babič

Slovenia is a small market with only 2.1 million inhabitants. The purchasingpower of the individual is high, but thecumulative purchasing power of the in-habitants and businesses combined is comparatively small relative to otherEuropean countries. This is also the reasonthat foreign enterprises see the potential for selling products on the Slovene market,but not enough to establish a company inSlovenia.

Rare tax inspections in the past

Most foreign enterprises are present inSlovenia through agents, whose activity on the Slovene market is just to representthe foreign enterprise and present its products on the Slovene market. Agents arenormally Slovene residents, acting solely for one foreign enterprise. Up until recently,the Slovene fiscal authorities tested thedependent agent rule based on contractsonly. The authority would contact Slovenecustomers of the foreign enterprise to checkwhat the role of the Slovene dependentagent was:

→ Did the Slovene agent only present the products or also negotiate prices and delivery terms?

→ Does the sales contract bear the signatureof the agent or the foreign company’s representative?

→ Does the business card of the agent include information about the foreign company and that the agent is a sales-person?

Tax inspections on the dependent agent PEwere rare in the past in Slovenia, due to the:

→ high procedural costs in determining the tax base and proving the PE status of the dependent agent by the tax authorities,

→ lack of knowledge about PE taxation by the tax administration and last but not least

→ understaffed tax administration.

Current and future definitions

Article 6/3 of the Slovene CIT Act provides fora PE in the case of a person acting on behalfof an enterprise and who has and habituallyexercises an authority to conclude contractsin the name of the foreign enterprise, unlessthe activities of such person are limited to acti-vities of a preparatory or auxiliary character.

The current wording in the Slovene nationallegislation is aligned with the “old” defini-tion in Article 5 (5) of the OECD Model 2014.

Will the legislator in Slovenia align Article 6 (3)of the CIT Act to the new wording in interna-tional taxation, which is embedded in Article5 (5) of the OECD Model 2017, saying that aPE shall be deemed to exist when a person isacting on behalf of a foreign enterprise and,in doing so, habitually concludes contracts,or habitually plays the principal role leadingto the conclusion of the contracts that areroutinely concluded without material modi-fications by the enterprise, and these con-tracts are in the name of the enterprise, orfor the transfer of the ownership of property,or for the granting of the right to use propertyowned by the enterprise or that the enter-prise has the right to use that property, or forthe provision of services by that enterprise.

Just a matter of time

It is important to point out that the Slovenetax authority already has all the information,systematically organised, on “future” depen-dent agents, especially those who have anemployment contract with the foreign enter-prise. Those dependent agents already sub-mit monthly reports to the tax administrationfor the calculation of social security contribu-tions and income tax because the foreignenterprise is not considered to be a payer inSlovenia.

In our opinion it is just a matter of timebefore the new wording from the OECDModel Tax Convention 2017 is adopted into national legislation, and therefore the range of foreign enterprises which will suddenly have a PE in Slovenia willincrease dramatically.

→ Mateja Babič Partner Tax+386 40 509 499mateja.babic@wts-tax.si

→ WTS Tax d.o.o.Poljanski nasip 81000 LjubljanaSlovenia

→ www.wts-tax.si

WTS in Slovenia

taxbridge | 1 | 2018 UKRAINE PE risk

Ivan ShynkarenkoPartner

documented and non-documented

transactions are subject to TP control

special valuationthreshold for

recognising controlledtransactions

taking into accountthe arm’s length value

transactions betweenPEs are not yet considered to triggerTP control

absence of officialguidelines

Extension of transfer pricing control to PEs of non-residents Author: Ivan Shynkarenko

The Ukrainian law “on the amendment of theTax Code and some other legislative acts tobalance budget revenues for the year 2018”amended the Tax Code in such a manner thattransfer pricing (TP) control applies to PEs inUkraine starting from 1 January 2018.

As such, transfer pricing rules may nowapply, inter alia, to transactions between a non-resident entity and its permanentestablishment, and, possibly but not defi-nitely, to transactions between permanentestablishments inside Ukraine.

Both documented and non-documentedtransactions or deemed transactions are subject to TP control. This means thatalthough from a civil law point of view there are no transactions between the PE and non-resident as such, “deemed”transactions between the PE and its non-resident are identified for TP purposes.

Legal basis for TP control of PEs

Such an approach follows the principle of distinct and separate taxpayers, as envis-aged in paragraph. 141.4.7 of the Tax Codeof Ukraine. In accordance with this principle,a PE for tax purposes is deemed to be a taxpayer, which conducts its own businessactivity separately from the non-resident.

For instance, Article 7 of the Double TaxationTreaty between Ukraine and Germany of 3 July 1995 envisages a similar approach.Paragraph 2 establishes that a PE for the pur-poses of attributing profits should be treatedas “…a distinct and separate enterpriseengaged in the same or similar activitiesunder the same or similar conditions anddealing wholly independently with theenterprise of which it is a permanent estab-lishment”.

Alongside supplementing the list of businesstransactions for TP purposes the law alsoadded the special valuation threshold forrecognising controlled transactions betweenthe PE and the non-resident entity (para-graph 39.2.1.7 of Article 39 of the Tax Code).

According to this rule, transactions betweenthe PE and the non-resident fall under TPcontrol provided that the annual value of

such transactions exceeds UAH 10 million(around EUR 386,000 at the current ex-change rate).

Moreover, the recent amendments of TP rules also envisage the established valuethreshold being calculated not just based on accounting records but taking intoaccount the arm’s length value of trans-actions, including deemed transactions.

For the purposes of TP control, “deemed”transactions between the PE and non-resi-dent shall be determined which may include(1) functions of the PE in Ukraine conductedfor the benefit of the non-resident and (2)support from the non-resident to the PE.

Such functions of PE/support from non-resi-dent would be considered “deemed” trans-actions between the PE and its non-residentfor TP purposes, irrespective of whether theyare documented as a transaction or not.

Based on current legislation and previouspractice we conclude that the transactionsbetween PEs are not yet considered to trig-ger TP control in Ukraine, yet this may stillchange.

Implications of new TP rules for PEs

In general, the introduction of TP control forPEs in Ukraine triggers the need for PEs tocomply with Ukrainian TP rules, which meansconducting a TP analysis, preparing and sub-mitting the Report on Controlled Transactionsand the TP Documentation detailing the TPanalysis.

In the absence of official guidelines regard-ing TP analysis for the PEs, we tentativelyconclude that the authorised OECD approachon the attribution of profits to PEs may beapplied. Thus, the purpose of extending theTP rules to PEs is to ensure the fair attributionof profits to the PEs.

As such, TP analysis would require identifyingall the functions of the PE in Ukraine andattributing the proper amount of profit forsuch functions applying the TP tools.

During the process of TP analysis we expect it would be necessary to define the functionsof the PE and use TP tools compute the arm’slength remuneration of such functions.

14

WTS in Ukraine

taxbridge | 1 | 2018 UKRAINE PE risk

15

special rules for calculating the

taxable profit of PEs of non-residents

starting from 1 January 2018

little real experience

For the sake of completeness, the Tax Code ofUkraine contains special rules for calculatingthe taxable profit of PEs of non-residents(paragraph 141.4.7 of the Tax Code). Thus,there are options for such a calculation:

→ direct calculation;→ if the non-resident does not calculate the

PE profit, a separate balance sheet of activities via the PE should be drafted subject to approval of the fiscal service;

→ if such an estimate of PE profit is not possible, then “deemed” profit is cal-culated as 30% of the revenue of the PE.

Alignment of new rules with rules on profittaxation of Pes

These rules of the Tax Code were amended inconnection with extending TP control to PEs.According to these amendments, startingfrom 1 January 2018 the above calculationsof PE profits should be done with due con-sideration of TP rules, as set forth in Article39 of the Tax Code.

However, we tend to conclude that the existing rules (as well as the regulationsdetailing the procedure of profit tax report-ing by PEs) are not entirely aligned with thenew approach that relies on TP principlesand rules.

This conclusion is also confirmed by repre-sentatives of the State Fiscal Service, whostated that changes to these rules are ex-pected.

We will monitor the possible changes andfollow up with updates. At the same time,since the above-mentioned provisions arenew and there is little real experience on the matter, it is highly recommended to startsuch an analysis now, as soon as possible, in order to ensure respective PEs located inUkraine are compliant with the new Ukrai-nian requirements.

→ Ivan Shynkarenko Partner+380 67 4933 100i.shynkarenko@wts.ua

→ WTS Tax Legal Consulting, LLC5 Pankivska St., 5th floor01033 KyivUkraine

→ www.wts.ua

We offer innovative and customised solutions andstand for high implementa-tion competency. It is ouraspiration to be reliable business partner.

global

Tax-focused

We are represented in more than130 countries through our own"WTS Global" network, which is

coordinated by WTS Germany.

We have a clear tax focus and offer a fully-fledged tax service portfolio. Toround our services we offeradjoining legal and financialadvisory service.

InnovativeFree of conflictWe deliberately refrain from

conducting annual audits in order to avoid potential

conflicts of interest.

Our key differentiatorsWTS Global is a leading independent tax network.

This WTS information does not constitute advice and it serves only toprovide general information about selected topics.

Any information contained herein shall thus not be consideredexhaustive, and nor may it be relied upon instead of advisory servicesin individual cases. We accept no liability for the accuracy of the con-tent.

Should you have any questions regarding the above or any other pro-fessional issues, please do not hesitate to get in touch with your WTSadvisor or use any of the contact details below.

WTS Klient Hungary is the coordinator within WTS Global for the Central and Eastern Europe Region. We focus on regionallyimportant topics and support our multinational clients head-quartered in the region. Our clients always have one lead partner for all the countries involved in a project, so they receive a solution from one source but drawing on the know-ledge of all the colleagues from different countries.

WTS klient hungary H-1143 Budapest • Stefánia út 101-103.Telephone: +36 1 887 3700 • Fax: +36 1 887 3799info@wtsklient.hu • www.wtsklient.hu

taxbridge | 1 | 2018 PE risk

4 May 2018

It looks like the live system of online data reporting will finally beintroduced in Hungary from 1 July 2018. Any further extension tothe deadline seems quite unlikely, especially given that the EUhas accepted the system too. Therefore the documentation avail-able on the NAV’s online test page is not expected to change, andthe applicable government decree will soon be announced as well.

What can be expected?

Things will pick up pace in the next few months. This period will be important for developers as well as taxpayers, and weare confident we will only find out how prepared everyone isonce the live data reporting system is turned on. We can safelyassume it will not be 100% perfect.

Right now the specifications and the XSD scheme are consideredfinal, but they can be altered slightly based on the informationcoming from taxpayers and testing. All the amendments to thespecifications and the system will be announced by the NAV.(Hopefully this will not mean multiple notifications per year).

The online testing system will not be usable as the live systemand for the purposes of obligatory data transmission, but it willstill be available for taxpayers if they wish to test the system.Registration (primary, secondary and technical) in the live sys-tem will probably be available earlier than 1 July. Ideally, youwill be able to register in the live system at least 30 or 15 daysin advance to avoid the possibility of the first data reportingfailing on 1 July due to registration problems. Data may only be uploaded to the live system from 1 July.

How prepared are we?

The NAV has been highlighting this new obligation on severalplatforms in Hungary, but the results of the survey conducted

CHECK YOUR INVOICING SOFTWARE

One important prerequisite of successful online data reporting in Hungary is preparing your systems for the change in good time, with joint assistance from IT and tax consultants. Our expert team will gladly help you check your invoicing software.

Tamás Gyányi partner+36 1 887 3736tamas.gyanyi@wtsklient.hu

by WTS Klient Hungary at the beginning of this year clearlyshowed that many taxpayers are still not familiar with all theelements of the system. This obligation is nothing new for chief accountants, tax consultants and employees working in the financial field, but the decision-makers at tax-payingentities do not always know which elements will be obligatoryin the final system.

It is a common misunderstanding that data must be reportedwithin 24 hours in the case of invoices issued by a software programme. Hungarian legislation prescribes immediate data reporting with no human intervention. There were several companies in our survey who understood data report-ing to be just the online forwarding of the amount on theinvoice, whereas in actual fact, all the obligatory invoicingdetails must be forwarded to the NAV.

The situation is exacerbated at companies where more thanone invoicing software programme is used, possibly alongsidehandwritten invoices as well. For handwritten invoices theinvoice data needs to be entered into the online platform within 5 days (in the case of invoices with VAT of HUF 500,000(roughly EUR 1,600) or more: on the day after the issuance ofthe invoice). Relief may come for those working with Hungarianaccounting software in that the software will likely handleonline data reporting by default.

wts klient newsflash WTS Klient. The Bridge.

www.wtsklient.hu 1

Online data reporting: only 2 months to go!

You can listen to the radio interview about this topic by clicking here:

wtsklient.hu/2018/04/26/online-szamlazas/Please note that the conversation is available only in Hungarian.

Appeals in tax cases

Author: dr. Tamás Felsmann tamas.felsmann@wtsklient.hu

In an earlier article we re-viewed the rules of legal re-medies, including appeals ingeneral. The Hungarian Act onTax Administration Rules effec-tive from 2018 reformulated therules of appeals to some extent.I will cover this below, as wellas the fact that from 2018,business entities and soletraders are only allowed tosubmit appeals electronically.

What purpose do appealsserve, and what are the dead-lines?

Appeals are the most funda-mental tool for seeking legalremedy within the tax admi-

nistration system. An appeal and the supporting evidence can be filed within 15 days, or in the caseof a retrospective tax assessment, within 30 days of notification of the written decision. The samedeadlines apply for the electronic submission of appeals too. An appeal deadline shall be consi-dered met even if the appeal was submitted on time but not to the competent authority.

continued on page 2

April 2018

wts klient newsletter WTS Klient. The Bridge.

Contents

Appeals in tax cases » page 1

Hungarian-Turkish social security agreement takes effect » page 3

Electronic communication from the perspective of local business tax returns » page 5

Review of HR activities and processes in Hungary based on GDPR » page 6

Dear Readers,

A few months ago we announcedhere in our newsletter the launch ofour research survey for the 2018financial year. We surveyed more than 100 large,mainly international corporationsthat cooperate with our group: inperson, on the phone and by email.We wanted to see what changesthey were planning for 2018 in theirtax, bookkeeping and payroll sys-tems, and what obstacles they facein realising their goals. The resultsclearly show that the lack of an ade-quate workforce constitutes thegravest challenge for companies thisyear, but the continuous changes toHungarian taxation rules and legis-lation are also a major hindrance inreaching their objectives. Most of thecompanies asked are focusing on taxplanning and tax optimisation in2018 to boost their profits by reduc-ing expenses.Thank you for answering our ques-tions and thus helping our research.You can review the results in theradio interview on page 7, and wewill soon share the detailed statisticswith you in a more extensive study.Although we are still incapable ofcloning employees, we can certainlyhelp you navigate better around themaze of continuously changing taxa-tion rules and legislation, and wewill gladly assist you in optimisingtaxes and reducing expenses too. Feel free to contact us.

Tamás Delybusiness development director CEE

What to look out for when submitting an appeal?

→ failing to meet deadlines can result not only in losing the possibility to appeal to the tax authority, but also to bring the case to court

→ from 2018 business entities and sole traders will only be allowed to submitappeals electronically

→ the Act on Tax Administration Rules e%ective from 2018 significantly limitsthe possibility of bringing up new factsand evidence in an appeal, so it is worthsubmitting evidence in due time

WTS Klient Hungary is among the nominees of EuropeanTax Awards 2018

WTS Klient Hungary has been shortlisted this year in two categories – Hungary Tax Firm of the Year and European TaxCompliance and Reporting Firm of the Year – in the EuropeanTax Awards, the most relevant tax contest in Europe. Thewinners will be revealed and the awards will be presentedon 17 May in London.

www.wtsklient.hu 1

by WTS Klient Hungary at the beginning of this year clearlyshowed that many taxpayers are still not familiar with all theelements of the system. This obligation is nothing new for chief accountants, tax consultants and employees working in the financial field, but the decision-makers at tax-payingentities do not always know which elements will be obligatory

t is a common misunderstanding that data must be reportedwithin 24 hours in the case of invoices issued by a software

ungarian legislation prescribes immediate . There were

everal companies in our survey who understood data report-ing to be just the online forwarding of the amount on theinvoice, whereas in actual fact, all the obligatory invoicing

The situation is exacerbated at companies where more thanone invoicing software programme is used, possibly alongsidehandwritten invoices as well. For handwritten invoices theinvoice data needs to be entered into the online platform within 5 days (in the case of invoices with VAT of HUF 500,000(roughly EUR 1,600) or more: on the day after the issuance ofthe invoice). Relief may come for those working with Hungarianaccounting software in that the software will likely handle

wwww.wtsklient.hu

they were planning for 2018 in theirtax, bookkeeping and payroll sys-tems, and what obstacles they facein realising their goals. The resultsclearly show that the lack of an ade-

rkforce constitutes thegravest challenge for companies this

ontinuous changes toungarian taxation rules and legis-

are also a major hindrance inreaching their objectives. Most of theompanies asked are focusing on tax

ax optimisation2018 to boost their profits by reduc-

Thank you for answering our ques-tions and thus helping our research.You can review the results in theradio interview on page 7, and wewill soon share the detailed statisticswith you in a more extensive study.Although we are still incapable ofcloning employees, we can certainlyhelp you navigate better around themaze of continuously changing taxa-tion rules and legislation, and wewill gladly assist you in optimisingtaxes and reducing expenses too. Feel free to contact us.

business development director CEE

Tax and Investment FactsA Glimpse at Taxation andInvestment in Hungary2017

Hungary

Hungary

Our latest publications