Thanks to the value added tax harmonized system between the EU member states and the valid conventions signed with more than 80 countries, cross-border services can flow without hindrance and the significant part of the activities can be carried out in Hungary without any permanent establishment, just in the possession of a Hungarian tax number. Thereby, there are a huge number of foreign companies in Hungary, which carry out (economic) activity under the Hungarian tax number but without creating permanent establishment according to the corporate law. However, due to a nearly 30-year-old Hungarian legislation, it is still not fully cleared which activities can be performed without permanent establishment, mere in the possession of a tax number in Hungary. In the present newsletter we try to draw your attention to the legal controversies that surrounded this topic.
Without fulfilling legal and tax compliance activities, companies can be declared inactive. During their inactivity, taxpayers lose certain deduction rights, this loss of rights extending to their business partners too.
Nowadays, the majority of separate subdivisions of non-residents are working in the IT sector, in Ukraine. For such organizations the operations related to accounting and taxation of royalty payments are routine.
Fast economic growth and changes in legal and tax environment lead to significant increase in the interest of doing business in Poland among foreign entrepreneurs. According to Polish Freedom of Economic Activity Act the undertaking, pursuit and termination of economic activity shall be free to all on an equal-rights basis. Nevertheless there are some exceptions defined by the Act. Foreign persons from the European Union Member States and Member States of the European Free Trade Association (EFTA) may undertake and conduct economic activity on the same rules as Polish citizens.
As follows from recent verdicts of Polish courts regarding cash-pooling agreements, compensation of short-term surpluses shown by entities with shortages reported by other entities from the same group is treated as a loan. As a consequence of this approach, where certain thresholds defined by income tax regulations are exceeded, related parties will be obligated to prepare transfer pricing documentation for these transactions.
Recently, during August and September 2016, a governmental package of proposed amendments to tax law including amendments regarding income tax and VAT was submitted to the parliament. Please find the main proposed changes summarized below. The mentioned changes are proposed to become effective from January 1, 2017, unless otherwise specified below. To become law, they must be approved by the National Council of the Slovak Republic, afterwards signed by the President and published in the Collection of Laws of the Slovak Republic. Until the date of publishing of these News some draft amendments were already approved by the National Council of the Slovak Republic and in such case it is noted below.