Who needs fiscal representation services in Hungary?

Navigating the business world is not always an easy task, especially when engaging in cross-border activities. In this complex environment, the fiscal representative plays a key role.

As we have previously written in our series of articles on fiscal representation services, to mandate a fiscal representative is mandatory for companies established outside the European Union (e.g. China, United States of America, United Kingdom, Switzerland, etc.) that wish to perform business activity in Hungary, but do not have a fixed establishment in the country. More precisely, companies established outside the European Union, and which do not have a location in any Member State of the European Union should mandate a fiscal representative in Hungary. According to the Hungarian VAT Act, these companies must appoint a fiscal representative in order to be able to fulfill their tax obligations in Hungary. It is important that the fiscal representative should be reported to the Hungarian tax authority and the fiscal representative must be also indicated on the issued invoice.

Thus, fiscal representation services are is especially important:

• for third country companies that sell products or services in Hungary and
• in the case of businesses that remotely provide electronic services to Hungarian individuals or companies.

For companies within the European Union, using fiscal representation services is not mandatory, but they can choose this option.

Why should a company outside the EU mandate a fiscal representative?

Since the convention on legal assistance between Member States is not applicable outside the European Union, companies established outside the EU are required to use fiscal representation services, i. e. appoint a fiscal representative. The fiscal representative shares joint and several liability for the activities and tax obligations of the businesses they represent in Hungary and is also responsible for any potential consequences.

The company providing fiscal representation services acts as the client’s permanent representative when fulfilling all tax-related obligations. This means that as long as the fiscal representation services exist, only the fiscal representative can act on behalf of the foreign company. The foreign enterprise may not act either personally or through another representative.

Thus, the fiscal representation service is a relationship of trust and responsibility between the business and the service provider.

Requirements for the fiscal representative

Fiscal representation services can only be provided by companies that operate as a limited liability company (LLC) or a joint-stock company (JSC) in Hungary and are listed in the Hungarian tax authority’s database as free of public debt.

In addition, the spring-summer 2023 tax package introduced in Hungary a tightening in the area of fiscal representation services, according to which companies must have a registered capital of HUF 150 million instead of HUF 50 million, or an equivalent amount of bank guarantee in the name of the fiscal representative only, in order to qualify as a fiscal representative. The fiscal representative must prove the existence of these conditions to the Hungarian tax authority at the time of the declaration of acceptance of the representation and annually thereafter during the continuous exercise of the activity.

The new conditions had to be met by 1 January 2025 by taxpayers who were already registered as fiscal representatives at the Hungarian tax authority when the amendments entered into force.

What are the tasks of a fiscal representative?

• participating in the Hungarian tax registration process
• opening a bank account for the represented company (since the Hungarian tax authority transfers VAT refunds to foreign businesses exclusively to this account)
• reporting the represented foreign company to the Hungarian tax authority’s key taxpayers directorate (in Hungarian: NAV Kiemelt Adózók Adóigazgatósága)
• managing tax returns
• maintaining communication with the authorities
• providing advice on various aspects of taxation

The tax consulting team at WTS Klient Hungary has considerable expertise and many years of experience in the field of fiscal representation. We can also assist you with acting as a permanent representative before the Hungarian tax authority, preparing VAT returns, supporting compliance with special invoicing regulations in Hungary or performing VAT analysis and consulting on international and domestic transactions. Please contact our experts.

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Which default penalties are affected in Hungary?

The increase in default penalties affects general penalties and two special types of default penalty: 

• The upper threshold for general default penalties in the case of natural persons has risen from HUF 200,000 to HUF 400,000, while for non-natural persons it is now HUF 1 million instead of HUF 500,000.

• Violations of the rules to register employees can now lead to default penalties for taxpayers of HUF 2 million instead of the previous HUF 1 million.

• Violations of the rules on issuing invoices and receipts as well as the obligation to retain documents now also can be penalised up to HUF 2 million instead of HUF 1 million.

The decree, published in issue 74 of the Hungarian Gazette on 8 July 2024, enters into force on 1 August 2024, and the rules must be applied by the Hungarian Tax and Customs Administration for violations of such obligations due from the following day.

How does the NAV impose the penalties?

The following legal means are at the disposal of the National Tax and Customs Administration in Hungary to enforce the norms formulated by the legislators:

• late payment interest
• tax penalty
• default penalty
• measures

As an administrative sanction, default penalties can be imposed if a taxpayer fails to meet a tax liability, or does so late or incorrectly.

When levying default penalties, the willingness of the taxpayer to adhere to the law must be taken into account, along with the gravity, frequency and duration of the illegal conduct, and whether they acted with the due care expected in the given situation. After weighing up these circumstances, the NAV must levy a penalty commensurate with the presumed damage, even repeatedly and at higher amounts. This is dealt with in more detail by the NAV Guideline 3002/2021 on exercising powers of leniency (available in Hungarian here).

In this context, taxpayers can also ask for circumstances substantiating a request for leniency to be considered, thereby achieving a payment reduction or relief.

When imposing default penalties, another important aspect is whether the taxpayer in question is classified as reliable or risky. If deemed a reliable taxpayer, this is looked upon favourably when the penalties are imposed. For default penalties the maximum punishment is 50% of the upper threshold. Risky taxpayers accordingly find themselves in a worse situation; in their case the smallest amount of any default penalty is 30% of the upper threshold for the penalty.

Who may be most affected by the increase in default penalties? 

The quick answer to this question is everyone, since as mentioned above, one of the increased NAV default penalties is the general penalty, which essentially affects all taxpayers in Hungary who fulfil their tax obligations incorrectly, incompletely, with false data, late, or not at all. Consequently, if you fail to submit your local business tax return, the tax authority can impose a default penalty of up to HUF 1 million.

Those who breach the rules on registering employees find themselves in a special group, as the NAV keeps them in a separate database. The list containing roughly 5,500 taxpayers can be viewed on their website (available in Hungarian here). Most of these employers are self-employed businesses, or work in the commercial, construction and hospitality sectors. These taxpayers can be penalised with default penalties of up to HUF 2 million, if they employ or have employed unregistered staff.

The increase in penalties for taxpayers who breach invoice, simplified invoice or invoice-issuing obligations, or issue invoices, simplified invoices or receipts with the wrong amount or who fail to retain documents for the requisite period will also mainly affect those working in the commercial and hospitality sectors.

Such drastic increases in default penalties in Hungary mean it is even more important to pay close attention to the deadlines set by the tax authority and to fulfilling the prescribed obligations. Should you require any assistance with compliance, please contact the tax consulting team of WTS Klient Hungary who are always happy to help.

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Reverse hybrid discharges

Hybrid inconsistencies were already part of the previous CITA in Slovenia. A hybrid discrepancy arises in the case of a double deduction of the same income, or a deduction without being included in two different countries, which means the income is not included in the tax base in any country. Hybrid mismatches occur often between related persons.

According to the Anti-Tax Avoidance EU Directive II (ATAD II), the amendments to the Slovenian CITA also include reverse hybrid inconsistencies, which now cover a larger circle of participants. The new provisions are a must-read for international groups of cross-border operating companies.

Extension of national list of low-tax-countries

Companies from countries classified on the so called “blacklist” are treated less favourably from a tax point of view. These companies are not eligible for the exemption of dividends and dividend-like income, as well as up to 50% of the exemption from profit from share sales, donation allowances and other tax benefits.

There are two blacklists in Slovenia:

• Slovenian national list, includes countries in which the general or average nominal corporate income tax rate is lower than 12.5%, and

• EU list, countries on the list of non-cooperative tax jurisdictions, published in the Official Journal of the European Union.

Tax base assessment from January 2022

The amendment to the Slovenian CITA stipulates several changes that affect the assessment of the tax base. The changes that apply in 2022 for the first time cover the following areas:

Accruals 

In determining the tax base or in recognising the taxpayer’s income, accruals are recognised as an expense in the total amount charged. However, for the following groups of accruals, only a 50% expense is recognised for tax purposes in the amount charged:

• guarantees given when selling products or providing services,
• accruals for expected losses from dubious contracts,
• pension accruals and
• accruals for anniversary awards and retirement severance payments (exception 2022-2026).

It is important to know that the latest amendments to the Slovenian CITA introduce a transition period for the accruals of pensions, anniversary awards and retirement severance payments from 1 January 2022 to 31 December 2026. In this period these accruals are recognised in the total 100% amount for tax purposes too.

Writing off of receivables

According to the amendments to the Slovenian CITA, writing off receivables is now recognised as a tax expense for all reported and confirmed receivables that were reported by the taxpayer in a timely manner in the compulsory settlement procedure or bankruptcy proceedings. The receivables must be confirmed by the liquidator. This means that the taxpayer will no longer have to wait for the issuance of a final court decision on the completed bankruptcy proceedings or a decision on confirmation of the compulsory settlement to write these off.

Expenses for hospitability and payments to Supervisory Board members

Expenses for business hospitability costs and payments to members of the Supervisory Board are deductible for tax purposes in the 2022 calendar year up to 60%, but from 2023 onwards the deductibility will again be only 50%.

Depreciation of leased assets

For the right to use a leased fixed asset, the highest annual depreciation rate corresponding to the term of the contractual lease of the fixed asset is used for tax purposes.

Employment allowance

In accordance with the latest amendments to the Slovenian CITA, in addition to tax-deductible salary costs, an additional employment allowance of 55% of the employee’s salary in the first 24 months of employment is possible if the employee is under 25 years of age and employed for the first time.

An employment allowance of 45% of the salary is possible for an employee in the first 24 months of employment, who:

• is under 29 years of age, or
• over 55 years of age, or
• performs a job for which there is a shortage of job applicants on the labour market (list from Slovenian Labour Ministry).

The main condition for the employment allowance is an increase in the number of employees in a year.

Please note that to claim the benefit, future employees no longer have to be registered with the Employment Service before employment.

Facilitating investment in digital and green transition

Taxpayers in Slovenia can claim a tax base reduction of 40% of digital transformation and green transition investments in the tax period, in particular for:

• cloud computing, artificial intelligence and big data,
• environmentally friendly technologies,
• cleaner, cheaper and healthier public and private transport,
• decarbonisation of the energy sector, energy efficiency of buildings and
• introduction of other standards for climate neutrality.

Facilitating obligatory internships

The tax allowance for practical work in the professional education of an apprentice or student is increased to 80% of the average monthly salary of employees in Slovenia, and can be claimed for each month of practical work in an obligatory internship.

Donation allowance

• Basis allowance 1%: From 2022, corporate taxpayers can claim the allowance for donations of 1% of taxable income (so far only 0.3%) as an allowance for donations for humanitarian, disability, social welfare, charitable, scientific, educational, health, sports, cultural, ecological, religious and generally useful purposes, which are performed not only by such organisations in Slovenia but also in the EU.

• Additional allowance of 0.2% and 3.8%: In addition, 0.2% of the corporate taxpayer’s taxable income in the tax period may be claimed for payments in cash and in kind for cultural and sports purposes and for payments to voluntary associations established to protect against natural and other disasters and acting for those purposes in the public interest. The donation of 8% of the taxpayer’s taxable income for payments in cash and in kind also goes to providers of top sports programmes for investments in top sports.

• Donation beneficiaries: All described donations can be given to an organisation based in Slovenia or in the EU.

Higher deduction for expense reimbursements for employees

The amendments to the Slovenian CITA introduce the following maximum daily allowances for business trips within Slovenia from 1 January 2023:

• over 12 and up to 24 hours: EUR 27.81
• over 8 and up to 12 hours: EUR 13.88
• over 6 and up to 8 hours: EUR 9.69

The mileage allowance for transport costs incurred on a business trip is EUR 0.43 per kilometre.

The business trip surcharge for an employee who works and spends the night away from his usual place of dwelling and the employer’s registered office for at least two consecutive days is set at EUR 5.84 per day.

From 1 January 2023, the anniversary bonus will be determined as a percentage of the last known average annual salary of employees in Slovenia, broken down to one month, and for January 2023 will be as follows:

Compensation for retirement is 300% of the last known average annual salary in Slovenia, calculated per month (January 2023 set at EUR 5,908.77).

Solidarity assistance in the case of death of an employee or their family member is tax-exempt up to the amount of EUR 5,000.

Solidarity allowance in the case of a severe disability or long-term illness of the employee as well as natural disasters or fire incidents affecting the employee are tax-exempt up to the amount of EUR 2,000.

Remuneration for students for obligatory internships is not included in the tax base up to an amount of 15% of the last known average annual salary of employees in Slovenia, broken down into months (for January 2023 set at EUR 295.44).

The meal allowance for employees is tax-exempt in the amount of EUR 7.96/working day (valid from 1 September 2022).

The employee’s commuting costs to and from work are tax-exempt at the rate of EUR 0.21/kilometre (valid from 1 July 2022).

If you need more information on amendments to the Slovenian CITA or other tax news in Slovenia, please visit the website of WTS Slovenia and contact the local experts of WTS Global for Slovenia.

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Abolition of mandatory VAT registration for selected groups

In order to reduce administrative burden, effective from 1 January 2023, the VAT Act of Slovakia defines selected groups of taxable persons who have the possibility to decide whether or not to register for VAT after the turnover exceeds EUR 49,790. These are primarily taxable persons who exclusively provide financial and insurance services or rent out real estate with exemption. These taxable persons also have the option to request cancellation of tax registration or withdraw their registration request. In defined cases, these taxable persons are not required to submit a separate tax return in case of not fulfilling the registration obligation.

Furthermore, the cases of assessment of late payment interest, which is related to the amount of tax on the importation of goods, have been harmonised with the cases of assessment of late payment interest related to customs debt.

New obligation for customers

In accordance with the rule of tax deduction on the customer´s side, a new provision is added to the VAT Act of Slovakia. It introduces the customer’s obligation to correct the deducted tax to the extent of the unpaid liability in the tax period, in which 100 days have passed since its due date.

The amendment to the VAT Act of Slovakia also includes the possibility of correcting the tax base on the side of the supplier in the event that the customer does not pay him the whole or in part for the supply of goods or services, and his receivable becomes unenforceable for the purposes of the VAT Act. The amendment further regulates and specifies the definition of unenforceable receivable. According to the new definition, this is such a receivable that has been due for 150 days.

New exemptions from VAT

In connection with the COVID-19 pandemic, the supply of goods or services to the European Commission, agencies and similar bodies that will be transported to another Member State for the purpose of providing them free of charge is exempt from tax. Also the acquisition of goods from another Member State for the same purpose by the European Commission, agency and similar body is exempt from tax.

From 2023, the method of determining the amount of the correction of deducted tax in the case of theft of small tangible property purchased for a purpose other than resale is established. In such a case, the legal fiction of assessing this property as if it were mandatorily depreciated property, is applied.

Furthermore, the amendment to the VAT Act of Slovakia introduces the obligation for the legal successor to continue adjusting the deducted tax even for movable investment property.

New deadlines and procedures

The amendment to the VAT Act of Slovakia also provides a united time period for the registration of a taxable person, together with the time period during which a taxable person who has not fulfilled the registration obligation or has submitted an application for registration late, is considered to be a taxpayer. This period is framed to 21 days.

The amendment also relieves the foreign taxpayer from the need to submit a nil tax return if he only carried out a supply of goods within the triangulation simplification under VAT ID assigned within the territory of the country.

At the same time, a special deadline has been introduced for paying the tax in the event that the person does not have a personal account number of the taxpayer at the time of acquiring a new means of transport from another Member State. The new deadline for paying the tax is 7 days from the date of delivery of the notification on the assignment of such an account.

The last significant innovation is the adjusted procedure of the Financial Administration in case of not submitting an application for tax registration, or its late filing. In the event that the result of a special tax return is an excessive deduction, the Financial Administration will not automatically check its eligibility through a tax audit, but may choose a different procedure, such as e.g. preliminary tax inspection.

If you want to know more about the latest amendment to the VAT Act of Slovakia or other tax issues in the country, we recommend you visit the website of Mandat Consulting, k.s. and contact the local WTS experts in Slovakia.

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Options for payers in the low-tax scheme

According to the Ministry of Finance, those who do not qualify or cannot opt for the new low-tax scheme have a number of favourable tax options at their disposal. Flat-rate taxation for sole proprietors, small business tax for companies and simplified contribution to public revenues (Hungarian abbreviation: ekho) for artists may be the best alternatives. The latter may be made even more attractive by the ekho reduction, the details of which were published in Government Decree 297/2022 on the application of certain provisions allowing for simplified contributions to public revenues, in Hungarian Gazette No 134 of 9 August.  

Ekho reduction

Under the decree, the ekho reduction means that the so-called paying agent ekho will be abolished from 1 September 2022. In other words, paying agents do not have to pay the simplified contribution to public revenues on the income received as remuneration by individuals – for their occupation – who fulfil their tax liability under the Ekho Act. According to the ministry, this represents a 13 percentage point ekho reduction and ultimately a 15% ekho rate.

Those switching from the low-tax scheme and opting for the ekho are helped not only by the ekho reduction but also by the lower administration, as the ekho income is included in the draft tax return prepared by the tax office in the same way as income from employment. 

Other relief

In addition to the ekho reduction, the decree also helps people transition from the low-tax scheme who do not or cannot opt for the ekho. Although general partnerships, limited partnerships, sole proprietorships and law firms using the low-tax scheme on 31 August will fall under the scope of the Act on Accounting, the new provision does not require them to have their opening balance sheets audited.

Another relief is that if a member/unlimited partner of an existing limited or general partnership registered as a small taxpayer wishes to become a flat-rate sole proprietor, they do not have to wait for the company to be wound up by a simplified liquidation. Under the decree, it is sufficient for the simplified voluntary liquidation to be notified to the tax authority by 30 September 2022, and from the notification date they can be entered into the register of sole proprietors.

Corporate tax paid in foreign currency

Government Decree 298/2022 on the payment of corporate tax in foreign currency was also published in issue 134 of the Hungarian Gazette, which may help companies whose income is received partly or entirely in foreign currency. Under the decree, taxpayers may declare to the tax authority, using the form provided for this purpose – by the first day of the month preceding the first day of the tax year – that they will pay their corporate tax in US dollars or in euros for the whole fiscal year. The amount of the transferred euros or US dollars is credited to the taxpayer’s tax account in HUF at the exchange rate published by the National Bank of Hungary on the day the bank account used for the transfer is debited. The taxpayer can provide this notification for the first time for fiscal years beginning after 30 September 2022. The taxpayer must pay the conversion costs for transfers made using accounts kept in currencies that differ from the notification currency.

The change in the law on the low tax scheme in Hungary and the government regulations brought to alleviate this, i.e. the ekho reduction affect not only small businesses and entrepreneurs, but also, indirectly, large multinational companies, i.e. our clients. Their suppliers are very likely to include taxpayers in the low tax scheme – language teachers, translators, other service providers – who have chosen this favourable tax treatment so far but now need to rethink their operations and fees. If you are interested in how this change may affect your company, feel free to contact the tax consulting team at WTS Klient Hungary.

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Reason for amending the low tax scheme

Based on the reasoning of the bill, the low tax scheme is being changed to ensure that this tax type remains attractive as the primary taxation alternative for those originally targeted, i.e. the smallest taxpayers conducting actual business activities. The goal remains to provide an opportunity for sole traders supplying their own services and products for the public in Hungary to conduct their business by paying a reasonable low tax and with little administration covering all of their tax and contribution obligations.

Who may be eligible for the new low tax scheme?

At present, sole traders, sole entrepreneurs, law firms, unlimited partnerships with only private individual members or limited partnerships who register this choice of taxation with the national tax authority and against whom there are no statutory grounds for exclusion may be eligible for the low tax scheme (referred to in Hungarian as “KATA”).

When the new law for the low tax scheme enters into force, only those who either provide their own services to the public – except for passenger transport services by taxi – or sell goods to the public and are self-employed will be able to use this tax. This means you can only opt for this favourable form of taxation as a sole trader, and only provide services – or where applicable sell products – to private customers.

A sole trader under the Act on Sole Traders and Sole Proprietorships is entitled to opt for the tax if they meet the main occupation criterion of the Act and register their choice of tax with the National Tax and Customs Administration. This taxpayer status takes effect as of the first day of the month following registration. Sole traders starting their activities during the year may choose this form of taxation upon registering with the NAV. However, a self-employed person engaged in the letting or operation of real estate, or whose tax number has been cancelled or is subject to cancellation by the National Tax and Customs Administration in the year of registering, or in the 12 months preceding the registration, cannot opt for this tax.

Changing income threshold

The amendment does not affect the rate applied in the low tax scheme, which remains at HUF 50,000 per month, but the income threshold is changing. This means the limit up to which the tax liability can be met solely by paying the low tax (if the taxpayer pays the tax for every month of the year) will increase from the current HUF 12 million to HUF 18 million. For the income exceeding this threshold, a 40% special tax must be paid.

When do the changes take effect? 

The provisions of the act will enter into force on 1 September 2022, except for the rules on registration. Registrations under the new low tax scheme may be made from 1 August until 25 September. The taxpayer status will be created from 1 September 2022 based on the declaration made. Hungarian sole traders applying the low tax as of 31 August but now not entitled to do so, may register for the flat-rate tax status for sole traders under the Personal Income Tax Act for the year 2022 by 31 October, in the form and manner published on the NAV website by 15 August.

What happens to those currently in the low tax scheme?

Those who remain eligible for the low tax scheme after the amendment will continue to be able to pay tax with simple administration, and will still not have to file a tax return, but will only have to keep simplified  records of revenues. Small taxpayers must only declare the income earned in the fiscal year by 25 February of the following year, with the proviso that if they are also liable to pay the special tax for exceeding the limit, they must also assess, declare and pay it by that date.

Taxable persons who are not self-employed or who do not only sell to private individuals will have to rethink their operational framework and will also face increased administration. Such entities providing services to the corporate world will have to keep their records under double-entry bookkeeping rules, and will in all likelihood have to hire an accountant because of the complexity of the accounting law. In addition, by switching to corporate tax, they may also have to take into account special tax base adjustment items related to accountable income and expenses. In the case of the low tax scheme, the fixed tax rate meant it was not possible to “collect” costs and account for them, but entrepreneurs moving to the new tax types will have to consider these too.

The change in the law on the low tax scheme in Hungary affects not only small businesses and entrepreneurs, but also, indirectly, large multinational companies, i.e. our clients. Their suppliers are very likely to include taxpayers in the low tax scheme – language teachers, translators, other service providers – who have chosen this favourable tax treatment so far but now need to rethink their operations and fees. If you are interested in how this change may affect your company, feel free to contact the tax consulting team at WTS Klient Hungary.

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Postponements of Polish WHT changes 

As we wrote earlier, the Polish income tax laws were amended as of 1 January 2019 to change the Polish WHT collection procedures. Yet the Finance Ministry has already deferred the application of these changes on six occasions for CIT, and on five occasions for PIT, with the most recent delay lasting until 31 December 2021.

The regulations proposed in the draft law introducing the “Polish Deal” are very likely to determine the ultimate structure of the Polish WHT collection framework.

The Polish WHT collection mechanism

The draft proposes a hybrid withholding tax collection mechanism with both the “pay and refund” and the “relief at source” approaches. Which of these applies will depend on the payment type (the what test), the status of the payee as a related vs. unrelated party (the who test), and the total amount of payments made to the given taxpayer (the how much test).

Pay and refund mechanism 

As part of the hybrid Polish WHT collection system, the “pay and refund” mechanism will apply to:

a) income that is passive or should be treated this way, such as:

• dividends and other corporate profit distributions;
• interest, copyrights and related rights, rights (or sale of rights) to inventions, trademarks or industrial designs, royalties for the transfer of a secret formula or production process, or for the use of (or the right to use) an industrial device, including a means of transport, or a commercial or scientific device, or for the transfer of industrial, commercial or scientific know-how;
• income which, for no valid commercial reasons, was not treated as any of the foregoing;

b) income paid to related parties, if the total amount of payments subject to Polish WHT in any way and made to the same taxpayer exceeds PLN 2 million (roughly EUR 433,000) within the withholding agent’s tax year.

Relief at source mechanism

According to the draft, the “relief at source” approach will apply to:

• income other than passive income, such as payments for professional / management services (advisory, accounting, market research, legal, advertising, management and control, data processing, staff recruitment and acquisition, guarantees and suretyships, etc.);
• passive income paid to unrelated parties;
• passive income paid to related parties, if the total amount of payments subject to Polish WHT in any way and made to the same taxpayer does not exceed PLN 2 million within the withholding agent’s tax year.

Other Polish WHT changes 

The draft retains the anti-fraud due diligence rules which require the Polish withholding agent to verify if it is indeed lawful to exempt the payment, to forbear collecting the tax or apply any tax rate other than the standard one. The only change is that whether or not such due diligence is exercised must be determined by reference not only to the nature and size of the Polish agent’s business but also to intercompany relations as defined in transfer pricing regulations.

The draft law introducing the “Polish Deal” modifies the available options allowing the agent to apply WHT collection preferences, such options being:

• representation by the agent’s management, or
• an opinion on preferential treatment (this used to be an exemption opinion).

Currently, an exemption opinion may be requested by foreign taxpayers or Polish withholding agents (with the latter being allowed to do so only if they have incurred the economic burden of the tax) who enjoy WHT exemption under the PS Directive and/or IR Directive. According to the planned changes, opinions on preferential treatment may be requested by foreign taxpayers, withholding agents or entities making payments through entities operating securities accounts or omnibus accounts if the taxpayer is entitled to exemption under the PS Directive and/or IR Directive and/or if he is entitled to preferential WHT treatment under the double taxation treaty. This is undoubtedly the most important change regarding the Polish WHT scheme.

Additionally, the proposal slightly changes the definition of beneficial owner.

Apart from the changes to the Polish WHT framework, the “Polish Deal” draft introduces various relief and incentive measures to spur interest in investing in Poland (including the “Polish holding company” regime) and also makes it possible to opt for the application of VAT on financial services. If you are also interested in reading about these changes, please click here and download the latest WTS Global Financial Services Newsletter to read the full article, or contact the experts of WTS&SAJA Sp. z o.o. directly, the exclusive representative of WTS Global in Poland.

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Advantages of database of companies with no public debts

Inclusion in the database has many benefits. Participating in certain tenders or public procurement procedures may be subject to the tenderer being included in the database of companies with no public debts. In some cases, there is also a legal provision related to inclusion in the database. For example, according to the EKAER regulation in Hungary, companies included in the database are exempt from risk collateral.

Conditions of the database of companies with no public debts

Companies must apply separately for inclusion in the database of companies with no public debts using the KOMA form. This application is free of charge, and can be submitted at any time during the month. As a general rule, the NAV examines the debts and makes decisions about including or deleting the companies concerned on the last day of each month. The KOMA database is updated on the 10^th day of each month.

The following conditions related to the taxpayer are examined by the NAV based on the application submitted:

• no net tax debts or public debts registered with the NAV,
• tax return and payment obligations fulfilled or being fulfilled,
• not subject to bankruptcy, voluntary liquidation, involuntary de-registration or liquidation proceedings,
• as a taxpayer group it has no VAT or corporate tax debts,
• as a taxpayer it has no overdue tax debts.

If the taxpayer meets the above conditions, it will be included and will continue to be included in the database; no separate notification is sent. The NAV may also send a rectification order regarding the above application to the company’s online document storage facility. Generally, a deadline of 10 days is set to rectify any shortcomings. If these are not rectified, the NAV adopts a decision rejecting the admission to the database.

If the taxpayer is already in the database but does not meet any of the conditions at the end of the month, it will be deleted from the database. The NAV sends notification about this via the business gate. In this case, once the rectification ensues, the taxpayer can apply to be re-listed in the database.

Relief in event of emergency

Currently, the relief introduced in relation to the coronavirus pandemic in Hungary may also affect the inclusion of companies in or their removal from the database. According to the relief, if companies submit an extension request they are allowed to submit their returns and pay the corporate tax, small business tax and the innovation contribution until 30 June 2021, without any legal consequences for their default. If a taxpayer is removed from the database for failure to submit a return, but the NAV accepts the extension request, the taxpayer is subsequently re-listed in the database.

In some cases, companies not included in the database can be subject to sanctions so it is important to pay particular attention to ongoing compliance with the conditions of the KOMA database. It is recommended to check the tax account on a regular basis to make sure that tax payments and returns are in order. In addition to the benefits for your own business, the database of companies with no public debts can provide information about the reliability of a new business partner, so it is also worth using the database to obtain information about prospective partners.

Feel free to contact us if you have any questions about the Hungarian KOMA database, the conditions for inclusion in the database, or about checking your tax account, we’re here to help!

A Database of companies with no public debts bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

New tax rates instead of super-gross wage and solidary tax increase 

One of the most important elements of the 2021 tax package for the Czech Republic is that the super-gross wage and 7% solidary tax increase have been cancelled. At the same time

• a 15% tax rate to incomes of up to 48 times the average wage (meaning about CZK 140,000 – roughly EUR 5,360 – per month) and
• a 23% tax rate to incomes which exceed this limit

have been introduced.

Increase of the basic discount per taxpayer 

Another significant element of the 2021 tax package for the Czech Republic is the increase of basic discount per taxpayer by CZK 3,000 (roughly EUR 115) for 2021. The amount is now CZK 27,840 (roughly EUR 1,067). For 2022 it shall be CZK 30,840 (roughly EUR 1,182).

Monetary contribution to meals 

From 2021, employers can contribute a financial contribution to meals which is not subject to tax or insurance levies. The option of providing meal tickets and corporate dining still remains. The limit of the financial contribution and meal ticket is the same – for 2021 maximally CZK 75.60 (roughly EUR 2.90) per one shift.

Write-offs of tangible assets and intangible assets 

The existing limit for the recognition of tangible assets has been doubled to CZK 80,000 (roughly EUR 3000). The increase of the limit also applies to the technical appreciation of assets and to asset items and technical appreciation purchase, respectively completed in the course of 2020.

The 2021 tax package for the Czech Republic presents extraordinary write-offs of assets recognised in the first and second depreciation groups. Tangible assets in the first depreciation group (e.g. computer equipment) can be written off in 12 months (instead of the standard three years). In the case of the second depreciation group (automobiles, machinery), assets can be written off in 24 months (instead of five years), with up to 60% of the input price over the first 12 months. The use of extraordinary write-offs is voluntary and applies to assets purchased between 1 January 2020 and 31 December 2021. 

The provisions on tax write-offs of intangible assets have been cancelled. Accounting write-offs of intangible assets shall constitute the tax expense. The new legislation may be applied to intangible assets purchased form 1 January 2020.

Reporting exempted incomes from abroad 

According to the provisions of the 2021 tax package for the Czech Republic, it is sufficient to report incomes once per year, by 31 January of the following year. It will be necessary to report only incomes which exceed CZK 300,000 (roughly EUR 11,500) per month – instead of the current limit of CZK 100,000 (roughly EUR 3,800).

Amendment to the tax code and introduction of flat tax

Beside the 2021 tax package for the Czech Republic on 1 January 2021 also an important amendment to the Czech tax code came into effect and a flat tax for entrepreneurs has been introduced. About the most important elements of the amendment to the tax code – such as the support of digitalisation, the simplification of inspection procedures, the revision of the sanctioning system and the refund of the tax deduction – you can read in details in the latest article of WTS Alfery by clicking here. About the flat tax you can read here.

Should you have any questions or require any further assistance regarding the 2021 tax package for the Czech Republic or other taxation issues in the country, please feel free to contact WTS Alfery, the exclusive representative of WTS Global for the Czech Republic.

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July 2018: introduction of online data reporting obligation for invoicing

Online invoicing was introduced in Hungary on 1 July 2018, a system for the real-time online reporting of invoice data. According to the rule, taxpayers have to report data to the Hungarian Tax and Customs Administration in real time on invoices which were issued to taxpayers registered in Hungary, and where the output tax amounts to or exceeds HUF 100,000 (roughly EUR 286). Despite initial concerns raised by taxpayers and tax consultants alike, the system launched almost one and a half years ago operates successfully, and it makes a significant contribution to fighting the shadow economy in Hungary.

Our experiences show that despite the successful operation of the system on the whole, it still poses problems at a number of companies in Hungary. There can be differences between the data uploaded to the Hungarian tax authority without human intervention and the data submitted in monthly VAT returns, and significant differences may easily trigger tax inspections. The penalty levied for incomplete, incorrect, delayed or missing data reporting can be up to HUF 500,000 (roughly EUR 1,430) per invoice, so taxpayers are recommended to check their system regularly and reconcile the reported invoicing data with the data in their VAT returns.

July 2020: first stage of expansion to online data reporting obligation for invoicing 

It was already evident for Hungarian taxpayers when the online data reporting obligation for invoicing was introduced in July 2018 that the threshold of HUF 100,000 (roughly EUR 286) would be a temporary condition only. From 1 July 2020, the rule that online data reporting is only mandatory for invoices including output tax in excess of the defined threshold will indeed be abolished by way of an amendment to the VAT Act. This means that from this date forward the online data reporting obligation for invoicing will be extended to include any taxpayer registered in Hungary, and for any invoices issued on transactions in Hungary, irrespective of the amount of VAT they contain. What is more, from 1 July, the online data reporting obligation for invoicing will affect taxpayers who issue invoices on the supply of goods and services which are subject to the reverse charge mechanism in Hungary and/or are VAT-exempt. Such categories affected by the obligation to issue invoices are found in other education, private health-care, dental services or property sales for example, alongside various other services. The deadline set for issuing invoices will be reduced from 15 days to 8 days, and all invoices subject to data reporting must include the first eight digits of the Hungarian-registered tax-paying partner.

The statutory amendment will be supplemented with a transitional rule by the legislators, which defines which invoices are subject to the old rules on data reporting. Among others, the transitional rule prescribes that for invoices issued before 1 July 2020, the old provisions (effective prior to 1 July) must be applied, irrespective of the performance date.

January 2021: the second stage

From 1 January 2021 the data reporting obligation on invoicing shall cover invoices issued to non-taxpayers, such as natural persons, as well as invoices issued on intra-Community tax-exempt goods supplies to taxpayers. This means that together with the afore-mentioned amendments effective as of July, data must be reported on all invoices. However, data does not have to be provided on invoices issued to non-taxpayers regarding transactions in other Member States, and where the taxpayer satisfies its tax payment obligation within the “one-stop-shop” administration system.

Legislators have included a transitional rule with regard to the changes taking effect on 1 January 2021 too. According to this, invoices issued before 31 December 2021 are subject to the rules effective until 31 December.

Anticipated impacts of expanding the online data reporting obligation for invoicing

The introduction of the online data reporting obligation for invoicing brought a significant change for Hungarian companies. Yet while this change has so far only increased administration, the mandatory steps on the way will actually lead to businesses really being able to reduce their financial administration burdens.

Querying the reported data opens up new opportunities. For outgoing invoices this, in itself, does not harbour much potential, since the majority of companies have already connected their accounting and invoicing systems. The radical change will be more apparent in the fact that the data on incoming invoices can be downloaded in xml format – and from 1 July 2020 for invoices containing less than HUF 100,000 (roughly EUR 286) in output tax. So from this point onwards, it will not only be the Hungarian Tax and Customs Administration that sees all invoices, but companies can query all the data of all their incoming domestic invoices, enabling them to pre-book their incoming invoices, support the data content of electronic invoices, or with an appropriate IT programme can check the data of domestic EC sales lists. The Business Automation team at WTS Klient Hungary will gladly help you with this.

WTS Business Automation Kft., the new business line of WTS Klient Hungary established in January, offers support in expanding invoicing software with the required data reporting function and in developing and operating other solutions related to the fulfilment of the online data reporting obligation for invoicing, to ensure compliance with Hungarian laws and regulations. Feel free to contact us.

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