31.07.2019

Registration of UBOs in Central and Eastern Europe

New developments with respect to the beneficial owner concept in 12 countries

Registration of UBOs in Central and Eastern Europe

The 2019 summer issue of WTS CEE Tax Bridge has been published. It focuses on new developments with respect to the registration of UBOs in twelve Central and Eastern European countries: Austria, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Russia, Serbia, Slovenia and Ukraine.

In the first issue of our 2019 CEE newsletters we present you the beneficial owner concept applied in twelve countries in Central and Eastern Europe. We have written about the current regulations of this area in different CEE countries in several previous articles, but now we have summarised the situation and we can compare what is happening regarding the registration of UBOs in some EU countries (Austria, Czech Republic, Estonia, Hungary, Latvia, Lithuania and Poland) as well as third countries like Russia, Serbia and Ukraine.

Implementation of Directive (EU) 2015/849

The data reporting obligation affecting ultimate beneficial owner (UBO) data, or in other words, the registration of UBOs, is designed to comply with the provisions of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. The Directive stipulates that “With a view to enhancing transparency in order to combat the misuse of legal entities, Member States should ensure that beneficial ownership information is stored in a central register located outside the company, in full compliance with Union law. Member States can, for that purpose, use a central database which collects beneficial ownership information, or the business register, or another central register.”

For the registration of UBOs some European countries have already launched such a central register, while the non-European countries have their own legislation and specialties too.

Definition, default penalty and court practices

Our articles focus not only on the definition of the beneficial owner, the obligations regarding the registration of UBOs or the status of central registers. In some countries, a default penalty derived from non-compliance with the registration obligation also has to be taken into consideration, and there are still uncertainties in this context. For example, the Russian beneficial ownership concept, which follows the OECD approach, has already become one of the major mechanisms applied by the Russian tax authorities to counteract tax avoidance schemes, limit capital outflow and raise fiscal revenues in Russia, but the number of uncertain issues related to applying the beneficial ownership concept and negative court practices are also growing.

Strange abbreviations in connection with registration of UBOs

After reading the articles about the registration of UBOs in the different countries, you will probably remember that WiEReG or MAMLA are not magic spells but the name of the beneficial owner register in Austria and the related law in Bulgaria. The trends suggest that the number of strange abbreviations used for such registers is set to increase and all countries will introduce this system.

We hope you will find our articles informative and useful, but please bear in mind that before starting anything you should contact your local tax advisor to understand all the rules and requirements in detail.

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