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The amendment to the Accounting Act no. 431/2002 Coll. from November 2, 2021 brings digitalization of accounting. From January 1, 2022, several areas affected by this amendment are changing, e.g., accounting documents activation or inventory of stocks. The overview of the most important changes has been summarized below.
Due to larger share of electronic accounting records in practice, one of the most significant changes in the amended Accounting Act are represented by the additional and specified conditions which accounting entity must obey when processing these accounting records.
The definition of the accounting record was clarified – its forms and their mutual digitalization. The forms of the accounting record have been amended in the amended Act to:
The provisions on paper and electronic form of the accounting record are clarified and simplified. The possible ways of digitalization of the accounting record when the form of the accounting record changes are re-established. In addition to guaranteed conversion, scanning can be used for the process of digitalization the accounting record from paper to electronic form, which will significantly simplify this process.
These changes were regulated in § 31 to § 33 of the Accounting Act, where the accounting entity is obliged to ensure:
The credibility of the origin and inviolability of the content of the accounting record at the issuer as well as the recipient of the accounting record is ensured by:
The amendment to the Accounting Act (§ 10) also made it possible to replace the handwritten signature with any electronic signature that will enable demonstrable identification of the person.
The obligation to indicate on the accounting document the designation of the accounts on which the accounting case is recorded has been deleted.
For audit purposes, disclosure and tax office purposes, the accounting records are presented in the form in which they are maintained and retained by the accounting entity, it does not require the submission of the accounting record in its original form, unless special regulations provide otherwise.
An entity accounting in a double-entry bookkeeping that keeps accounts in a way that uses software, is required to provide the tax office or authorized persons with access to accounting software and to provide the accounting records with an indication of the accounts in which the accounting units are accounted for. An entity has these responsibilities for the period during which it is required to maintain or keep accounting records.
Digitization of an accounting record represents a change in the form of a provable accounting record during its processing in an accounting unit i.e., a change from the paper form of the accounting record to an electronic form, or a change from the electronic form to a paper form.
We would like to draw attention to the fact that digitization can only be done on an accounting record that has not been digitized yet and is stored in this digital form. Digitization can also be performed retrospectively for previous accounting periods.
The accounting entity is obliged to follow the specified method of keeping accounting documentation. Electronic storage of accounting documentation means storage of accounting documentation on a data carrier.
The accounting entity is also obliged to fulfil the conditions according to the § 31 par. 3 i.e., credibility of origin, inviolability of content and human readability of the accounting record, if it keeps only accounting records that are a result of the accounting records digitalization.
Electronic storage of accounting documentation can simplify work with accounting records and documents, including searching and making them available, even over time or in the event of staff changes.
Depending on the circumstances, applicable regulations and the type of accounting record and materiality, it may still be appropriate to keep selected accounting records in their original form, in order to protect or enforce rights against third parties or government authorities.
Last but not least, the obligations of entities and their bodies even after the end of the business must not be forgotten. In these cases, the accounting entity is obliged to inform the tax office about the demonstrable assurance of keeping its accounting documentation by another accounting entity or a natural person.
The changes also affected non-business entities whose share of the 2% tax exceeded EUR 35,000 per accounting period and thus they became subject to an audit and must also draw up an annual report, which should include:
Extension of the public part of the register of financial statements
The amendment to the Accounting Acts also extended the public part of the register to other legal forms of legal persons. It mostly includes landowners’ association, but also non-governmental non-profit organizations such as civic association, homeowners’ association and non-residential communities, interest associations of legal entities and more.
Accounting documents of natural persons – entrepreneurs’ organizational units of foreign persons remain in the non-public part of the register.
To § 30 par. 4, the possibility of performing an inventory of stocks the following month after the day on which the financial statements are prepared (also for tangible assets) was added.
The lower limit of the fine for serious infringements of the Accounting Act, which has not yet been set, has been for the sum of EUR 1,000. The upper limit of this fine remains unchanged at EUR 3,000,000.
Sanctions have also been determined in cases where an entity fails to comply with the obligation to deposit or publish accounting documents in the register, the amount of which is set at from EUR 100 to EUR 10,000.
The amount of the sanction for breaches of the provisions on the storage and protection of accounting records was also determined at from EUR 100 to EUR 100,000.
A sanction was also determined for non-compliance with the obligation of the last statutory body registered in the Commercial register before the deletion of a company or cooperative from the Commercial register and for breach of obligations related to the storage of accounting documentation, ranging from EUR 100 to EUR 100,000.
As today’s world becomes increasingly connected, it’s no wonder that the transfer of personal data abroad is becoming more and more common for multinational companies and for many smaller companies. The rapid development of modern technology and the shift of corporate activities to the online space allows companies to share data in real time. Such sharing very often involves the transfer of personal data to third countries.
In 2018, the General Data Protection Regulation (hereinafter “GDPR”) set standards for the transfer of personal data abroad. However, since the GDPR came into force, the Court of Justice of the European Union (hereinafter “CJEU”) has had to deal with several issues relating to the transfer of personal data abroad and ensuring that the processing of personal data in non-EU/EEA countries complies with the requirements of the GDPR. Also, the European Commission (hereinafter “Commission”) has adopted decisions concerning new standard contractual clauses that reflect the requirements of the GDPR.
The aim of this article is to provide a brief summary of the rules on the transfer of personal data abroad in light of the CJEU’s case law and the European Commission’s decisions, as well as recommendations on how to effectively manage the issue in practice.
When we are talking about transfers of personal data abroad, we mean transfers to third countries, i.e. non-EU countries. There is no need to regulate data transfers within the EU as the legal framework for personal data protection is fully harmonized after GDPR. A transfer of personal data to a third country is any communication, disclosure or other provision of personal data to the controller, processor or other recipient in a third country outside the EU, regardless where the data are physically stored. To legally transfer data to third countries, the conditions of at least one of the legal grounds defined in GDPR have to be met. These legal grounds are as follows:
If the European Commission decides that a third country ensures adequate level of protection, it is possible to transfer personal data to such country without any specific authorization. It is currently possible to transfer data on this basis only to Andorra, Argentina, Canada, Switzerland, Israel, Japan, New Zealand, Uruguay, the Faroe Islands and Guernsey Islands, Man and Jersey. The US was also a part of this group but was removed from the list by the recent CJEU decision.
GDPR distinguishes between two categories of appropriate safeguards based on which transfers to third countries may be carried out. The first category includes those safeguards that must be approved or are created by a Supervisory Authority or by the European Commission. Once these safeguards are approved, they can be used as such. These are as follows:
The binding corporate rules is a document that sets out common binding rules for holding groups or groups of companies conducting joint economic activity. These internal rules must include, in particular, a specification of the type of data transfers, an indication of the third countries, the liability of individual companies involved, and other matters.
The standard contractual clauses are a model text for a contract that an EU controller or processor concludes with a controller or processor in a third country. This text can be incorporated into another contract or terms and conditions or used as a separate contract text. The standard contractual clauses contain the different options (modules) for the transfer of personal data to third countries and are intended to ensure that the processing of personal data in third countries complies with the requirements and standards observed in the EU/EEA. The controller and processor can thus choose the most appropriate option for them. Standard contractual clauses are also one of the most used tools for the transfer of personal data to third countries outside the EU/EEA due to their relative ease of use.
In July 2020, the CJEU ruled in Case C-311/18 (hereinafter “the Schrems II judgment”) that the so-called Privacy Shield was invalid without any transitional period. The Privacy Shield constituted the legal basis for the transfer of personal data to the US. The Commission’s decision finding that the US ensures an adequate level of protection of personal data was annulled by this judgment. The Schrems II judgment has thus made the transfer of personal data to the US much more difficult. In Schrems II judgement, the CJEU held that personal data transferred to third countries must be provided with equivalent protection to that provided by the GDPR. In the Schrems II judgment, the CJEU also dealt with the question of the validity of the Commission’s decision on standard contractual clauses for the transfer of personal data to processors established in third countries under Directive 95/46/EC. The CJEU concluded that the Commission’s decision was valid but emphasised that if a given contract containing such clauses does not provide the personal data transferred in a third country with equivalent protection to that provided by the GDPR, it is the responsibility of the importer and exporter of personal data to provide additional guarantees to ensure the required protection.
Following this CJEU judgment, the Commission adopted in July 2021 a decision on new standard contractual clauses which takes into consideration the requirements of the GDPR and replaces the old standard contractual clauses with effect from 27 September 2021. It will be possible to use the “old” standard contractual clauses until 27 December 2022, but only if the processing operations remain unchanged. After 27 December 2022, it will be necessary to replace the ‘old’ standard contractual clauses with new ones. The approved Codes of Conduct and the mechanism for issuing certificates are rather dead letter law now. Currently there is a code of conduct only for cloud services and the mechanisms for issuing certificates do not work in practice yet.
The second category of appropriate safeguards includes custom contractual clauses, which the parties prepare themselves. However, these clauses must be approved by the Supervisory Authority before they can be used as a basis for data transfers to third countries.
In cases where there is neither decision on adequacy, nor appropriate safeguards described above, a transfer shall take place only in the following situations:
The answer to this question depends on the particular situation. The use of one of the abovementioned exceptions would be appropriate in cases where an organization normally does not transfer personal data to third countries, but a rare situation occurs that requires a third-country transfer. However, also regular transfers that qualify for one of the exceptions may be based on this legal ground.
In most cases, however, it would not be possible or practical to use one of the exceptions. The easiest way, then, is to use standard contractual clauses as a basis for transfers. Considering the Commission’s new decision, we also recommend reviewing the existing contractual documentation relating to the transfer of personal data to third countries to see what standard contractual clauses are used and to ensure that they are amended if necessary.
Binding corporate rules would be the most appropriate instrument for multinational groups where data transfers abroad are a regular part of their business. In these cases, it certainly makes sense to adopt unified, sophisticated and robust rules that govern all the transfers. Custom clauses can be recommended in those cases where standard contractual clauses are inadequate, and adopting binding corporate rules would be an unnecessarily robust solution.
If you need help with setting up GDPR processes, do not hesitate to contact us. We will be happy to help you with a review of your company’s process setup.
Our experts bring you a comprehensive overview of the most significant changes in Slovak legislation that came into force in 2021.
The eBook contains a valuable information thanks to which you can keep on top of new obligations in the field of tax, accounting, payroll and other legal changes.
The new updates from 2021 cover changes in the e-commerce, CFC rules, tax residency, micro-taxpayers, DAC 6, minimum wage and contributions to social and health insurance, housework, telework and more.
From January 1, 2021, a possibility to correct a tax base when suppling goods or services is introduced directly into the act, if the taxpayer or the supplier didn’t receive a payment or if his receivable became uncollectible. This applies to the supply of goods and services in the domestic country, at a price at which the tax was applied by the taxpayer.
The receivables are considered as uncollectible for this purpose when it may concern cases such as receivables recovered in execution proceedings, receivables from customers in bankruptcy proceedings, in the process of discharge from debt or in a case of the customer´s extinction or death.
The receivable or its part with a value not exceeding EUR 300 including the tax becomes uncollectible after 12 months from the due date of the receivable, if the taxpayer can prove that he took the steps to collect the receivable within his regular business activities.
The taxpayer might not be able to correct the tax base in case of, e.g. supply of goods and services to persons with a special relationship to the taxpayer, i.e. persons with close business, employment and family ties with the taxpayer, who have a high probability of jointly coordinated business proceedings.
If any payment is received after the adjustment of the tax base in connection with an uncollectible receivable, the taxpayer is obliged to make a correction of the reduced tax base in the amount corresponding to the tax base and the tax calculated from the received payment. The recognition of a tax base adjustment at the supplier is conditioned by the preparation and distribution of the correction document.
The possibility of a tax base correction applies as well to cases when a taxpayer supplies goods and services for which the tax base is specifically determined (sale of tourism services, supply of used goods, antiques, collectibles and artworks) and when a customer or a third party doesn’t pay the taxpayer or pays only partially.
The period within which the taxpayer can correct the tax base in case of total or partial non-payment of the consideration is 3 years.
From January 1, 2020, an option is given to the taxpayer to prove the dispatch or transport of the goods which he supplies to the destination in the territory of third countries, in cases when:
From July 1, 2021, the term “distance sale” shall be replaced by the term “intra-Community distance sale of goods” and by term “distance sale of goods imported from third countries”.
The place of the delivery of goods shall be the member state in which the dispatch and transport of goods for the customer ends (so-called the member state of consumption).
The threshold EUR 10.000 for the application of the exemption:
The place of the delivery shall be determined based on the facts whether the member state of the import is identical to the member state of the dispatch or transport termination. If this is not the case, the place of the delivery of the goods is the member state in which the dispatch or transport to the buyer ends (so-called member state of consumption).
In case when the goods are sold at distance and are imported to the same member state as the member state of the dispatch and transport termination, the place of the delivery of the goods is in this member state only in a case, when the supplier applies a special scheme for such sale of goods (“one stop shop”) according to § 68c. If the supplier doesn’t apply the mentioned special scheme to such deliveries, the place of the delivery shall be determined according to the basic principle and the tax shall be levied exclusively on the import of goods.
If a taxable person facilitates the supply of goods in the territory of EU made by a taxable person not established in the EU through electronic interface, he shall be deemed in accordance with the amendment as a person who received these goods from the supplier and who supplied them to the buyer himself.
The legal fiction in the sale of goods to the final consumer via the online platform, this from economic point of view one transaction shall be considered, for the VAT purposes, as two transactions. Separately shall be determined the place of the delivery of goods for the first supply to the platform operator and separately for the second supply to the customer by the platform operator. The transport will be assigned to the supply of goods by the taxable person to the final customer and at the same time, the supply of goods by the original supplier to this taxable person in the EU shall be exempt from VAT with the right to deduct the tax.
If the taxable person facilitates the distance selling of goods imported from the territory of third countries in consignments with their intrinsic value not exceeding EUR 150 through the use of an electronic communication interface, the fiction that the taxable person has received and delivered the goods shall also apply.
From July 1, 2021, the exemption from tax on the imports of consignments with a value not exceeding EUR 22 is abolished.
The optional one-stop-shop scheme will be possible from July 1, 2021 also for other services provided to non-taxable persons whose place of the delivery is in the member state of the consumption, as well as for the intra-Community distance sale of goods and certain domestic supplies of goods. The possibility to apply OSS to certain distance sales of goods imported from third countries shall be also introduced.
The persons applying the special schemes of the OSS shall submit only single tax return in a single member state of the EU for all deliveries in the whole EU.
More detailed information about OSS scheme and VAT changes can be found HERE or in our eBook about VAT changes in the EU and their impact on e-commerce valid from July 1, 2021 HERE.
The registration of taxpayer ex officio should be postponed from January 1, 2021 to January 1, 2022 due to technical reasons of the Financial Administration and the individual registers. The current method will be valid until December 31, 2021.
From January 1, 2021, the obligation to register taxpayers who have a business license granted in another state, but due to the existence of a place of effective management in Slovakia, they are taxpayers with unlimited tax liability in Slovakia.
From January 1, 2021, an employee may ask any employer for the annual settlement, who is a taxpayer and who has paid him a taxable wage during the tax period.
From January 1, 2021, the law should explicitly regulate that if an employee´s employment is terminated, the employer will take into account the tax bonus and the non-taxable part of the tax base for the last time in the calendar month in which the employee´s employment ended, unless declared by employee otherwise.
In the case of advances on corporate income tax, the obligation to pay the difference on tax advances paid from the beginning of the next tax period to the deadline for submitting a tax return should be cancelled from January 1, 2021, in case that on the basis of the submitted tax return, the taxpayer would be obliged to pay higher tax advances for the following tax period.
The tax administrator will send a notification on the amount and maturity of income tax advances to all taxpayers from January 1, 2022.
The income of a taxpayer with limited tax liability from a source in Slovakia shall include also the income from the sale of virtual currency if the payment comes from a taxpayer with unlimited tax liability in the territory of Slovakia.
In order to limit a tax avoidance and to tax in Slovakia shares in profits (dividends) of a foreign company or of an entity, whose income weren´t tax at least at the minimum effective tax rate or are domiciled in non-cooperating countries, the amendment to the Income Tax Act shall introduce rules for controlled foreign companies (so-called CFC rules) from January 1, 2022, even for natural persons. Originally, the change was proposed to be accepted from January 1, 2021, but it was approved with a delayed effectiveness from January 1, 2022.
By applying the CFC rules, in Slovakia, the profit shares (dividends) in a CFC company shall be taxed at the moment of their potential claim of a natural person’s taxpayer.
The tax rates apply the same as for the taxation of profit shares, i.e. 7 % or 35 % for non-cooperating countries. The taxpayer will be able to set off the tax paid in the following tax periods when the dividends are essentially paid.
More detailed information about the amendment to the act from the natural person point of view in Slovakia can be found HERE.
In connection with the implementation of Council Directive (EU) 2017/952 (the so-called ATAD 2 Directive), the proposed act supplements the Income Tax Act with legislation concerning a reverse hybrid entity. At the same time, the definition of a transparent company was introduced,
Pursuant to the new provision of the Income Tax Act for a reverse hybrid entity, the incomes attributable to foreign (non-resident) shareholders meeting the criteria of 50 % or more in relation to transparent companies will be taxed at the level of a transparent company at corporate income tax rate of 21 %, if these incomes of the non-resident cannot be taxed through a permanent establishment in Slovakia according to Section 16 (3) or according to Section 16 of the Income Tax Act and the incomes will not be taxed in the country of residence of the non-resident, nor abroad.
The subjects of collective investment that have a wide range of unit-holders where the ownership of the fund is dispersed and where no unit-holder has a controlling interest, diversified portfolio of securities and are subject to investor protection regulation in Slovakia are granted the exemption to the application of this provision.
The provisions concerning the tax regime of a reverse hybrid entity shall apply for the first time in a tax period beginning on January 1, 2022 at the earliest.
From January 1, 2021, the Income Tax Act cancels the exemption from tax residence for natural persons who cross the borders of the Slovak republic on a daily basis for the purpose of performing a dependent activity in the Slovak republic and who would otherwise be taxpayers with unlimited liability in Slovakia. The aim is that the tax residence of natural persons who cross the borders of Slovakia on daily basis for the purpose of performing dependent activity should be determined according to the tie-breaker rule in the relevant double tax treaty.
Besides, the definition of the place of the effective management of a legal person for the purposes of determining tax residence is clarified. The place of effective management is considered a place where most of the business and management decisions are made or taken on behalf of the legal entity, regardless of who makes these decisions.
More detailed information about the changes in the Income Tax Act in Slovakia can be found HERE.
From 2021, new institute of so-called “micro-taxpayer” came into effect in Slovakia and its main purpose is to support SMEs. A micro-taxpayer is a natural person – entrepreneur, i.e. a self-employed person or a legal person whose taxable incomes (revenues) for the taxation period don’t exceed the amount of EUR 49,780. The definition also contains a negative description, e.g. for dependant persons carrying a controlled transaction.
Taxpayers who are considered as „micro-taxpayers“ apply several benefits, such as:
More detailed information about the „micro-taxpayer“ institute in Slovakia can be found HERE.
The reportable cross-border arrangement is every cross-border arrangement if it contains at least one of the hallmarks listed in the Annex no. 1a of Act no. 442/2012 Coll. as amended. The first reporting obligations must be fulfilled by January 31, 2021 and by February 28, 2021 in relation to reportable cross-border arrangements introduced between June 2018 and December 2020.
Information on the reportable cross-border arrangement shall be notified by the obliged person to the Financial Directorate of the Slovak republic, electronically via the financial administration portal and using the electronic structured DAC6 Notification form.
In relation to the new arrangements from January 1, 2021, the obliged person is obliged to file the information within 30 days from the availability, preparation or implementation of the reportable arrangement and subsequently within 30 days from the last day of the calendar quarter, if new information is available to the intermediary since the last submission.
The tax office is entitled to impose a fine of up to EUR 30,000, even repeatedly, in the event of non-compliance with the above obligation.
More detailed information about the reporting obligation for the cross-border arrangements can be found HERE.
Interest for late payment and imposition of a sanction for not paying or levying tax, tax difference or tax advances which became due from March 12, 2020 to December 31, 2020 within the statutory period and amount are exempted, if the taxpayer pays for them or levies them no later than June 30, 2021.
A new annex to the Act no. 1a is being introduced, and it sets fixed tax rates specifically for tractors and semi-trailers. For every tractor and semi-trailer without semi-trailer combination of vehicles, the next lower tax rate for the relevant category will be applied. At the same time, obligatory pairing of tractors and semi-trailers to semi-trailer combination of vehicles in order to apply the next lower tax rate was abolished.
A preferential adjustment of the annual tax rate according to the age of the vehicle was introduced for vehicles of categories M2, M3, N3. The tax rate for vehicles of a category M2, M3, N3:
The annual tax rate for vehicles of a category O4 is decreased by 60% regardless the age of the vehicle.
More detailed information about the motor vehicle tax can be found HERE.
New package of obligations called „Lex korona“ made changes also in § 19 Verification of financial statements by an auditor in the Accounting Act.
Since 2021, companies are obliged to audit their financial statements for two consecutive accounting periods, if they meet at least two of following criteria:
These limits will increase again from 2022.
Act no. 349/2020 Coll. with effect from December 9, 2020 changed Act no. 71/2013 Coll. on the provision of subsidies within the competence of the Ministry of Economy of the Slovak Republic (referred to as “Act No. 71/2013 Coll.”), to pay rent in the next wave of a pandemic related to the spread of COVID-19.
A landlord in the name of a tenant and on his own behalf applies for rent subsidy. Upon request, the tenant shall immediately provide the landlord with the cooperation necessary for the purpose of providing the rent subsidy. The rent subsidy may be provided to the tenant in the amount in which the rent discount was provided upon agreement between the landlord and the tenant, but not more than 50 % of the rent for the period of difficult use.
More detailed information can be found on the website of Ministry of Finance of the Slovak republic.
In § 52a of the measure of the Ministry of Finance of the Slovak Republic no. 23054/2002-92, by which the details on accounting procedures and framework financial statements for entrepreneurs accounting in double-entry bookkeeping (referred to as „DE accounting procedures), paragraph 8 is added, according to which in the tenant´s accounting on the basis of the subsidy approval notice, the regulation of the rent subsidy is charged to account 346 – Subsidies from the state budget and with a corresponding entry in favour of account 648 – Other income from economic activity in material and temporal connection with the incurred rental costs.
The amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged to account 321 – Suppliers and with corresponding entry in the favour of account 346 – Subsidies from the state budget. In the landlord´s accounting, the amount in which the tenant waived the performance from the rent subsidy in favour of the landlord is charged in favour to the materially relevant receivables account and with a corresponding entry to the debit of account 315 – Other receivables.
From December 31, 2020 (Measure no. MF/011805/2020-74), the second sentence is specified in § 37 par. 11 of accounting procedures, which adjusts the calculation of goodwill on a merge if the merging entity has an interest in the successor entity, whereas it is not a merge in which own shares or own business shares are created according to the Commercial Code (it is not a merge according to the § 26 par. 7 of accounting measures).
In this case, the goodwill shall be booked as a difference between the real value of the share attributable to the carrying amount of the assets and liabilities in the successor entity and the value of equity of the successor entity, which falls on the share of the merging entity in the successor entity.
From January 1, 2021 (Measure no. MF/011805/2020-74), in § 52 par. 11 of accounting measures, a method of accounting is established: – reduced VAT, if after the tax liability arose, the taxpayer did not pay in full or partially for the supply of goods or services and his receivable from this supply became unforeseeable according to the § 25a of Act no. 222/2005 Coll. on value added tax, as amended by Act no. 344/2020 Coll. Such VAT reduction shall be charged to account 343 – Value added tax with a corresponding entry in the accounts receivable; – corrections of deducted VAT in case of unforeseeable receivable according to the § 53b of the cited act. Such a correction of deducted VAT shall be charged to account 343 – Value added tax with a corresponding entry in the accounts payables.
From January 2021, the minimum wage was increased from EUR 580 to the amount of EUR 623. The hourly minimum wage increased from EUR 3.333 to EUR 3.580 per hour.
Increase in the minimum wage will also affect the amount of minimum wage entitlement that is based on the degree of work difficulty and wage benefits for night shifts, on-call duty, Saturday work and Sunday work.
The non-taxable part of the taxpayer also increases to EUR 375.95 per month. The maximum assessment base for social insurance is also increased from January 1, 2021 to EUR 7,644.
January 1, 2021 – June 30, 2021
July 1, 2021 – December 31, 2021
From March 1, 2021, it is possible to provide financial contribution for meal to employees other than those listed above, with an exception of those whom the employer provides meals in his own catering facility or a catering facility of another employer.
The employer is obliged to allow his employees to choose between a meal voucher or a financial contribution for meal.
More information about meal vouchers and financial contribution for meal in Slovakia can be found HERE.
The amendment to the Labour Code introduced clarification of the conditions for housework and telework. If the employee performs work that could be performed at the employer´s workplace, regularly and within specified weekly working time or its part in his/her household, it is considered as a housework, respectively a telework, if he performs work using information technologies, in which electronic data transmission at a distance takes place on a regular basis.
The amendment also specified obligations of the employer regarding the measures to be taken by employees in such a form of work and extended them to housework. On the employee side, a new obligation for employee performing housework or telework is to immediately inform the employer about technical issues associated with malfunction of technical or software equipment, malfunction of internet connection or other similar causes that prevent him from performing work.
More information about the housework and telework can be found HERE.
On 15 May 2021 a draft amendment to the PIT, CIT and certain other acts was revealed (Journal of Laws of 2020, item 1905, hereinafter: the Draft). We have listed the most significant changes from the Polish Deal that taxpayers – individuals and companies – might expect.
The Draft provides for the obligation to pay health insurance contributions by persons running a business in proportion to their income, i.e. under the terms analogous to regular employment contracts.
The proposed change applies to all Social Security Institution-contributions (ZUS) payers yet given the introduction of a new tax relief structure dedicated to staff hired under employment contracts (with a salary of PLN 70,000 – PLN 130,000), it will in fact be felt primarily by entrepreneurs with relatively high income.
9% health rate on income will also be paid by members of the management board appointed by a resolution. Under the legislation currently in place the remuneration paid under a resolution is not a separate legal title to social insurance or health insurance.
The Draft provides for a PLN 30,000 tax-exempt amount.
Under the planned amendment, the second tax threshold will apply to income above PLN 120,000.
Under the Draft assumptions, the rate for tax on registered income without deductible costs will go down from 17% to 14% for representatives of medical professions, i.e. doctors, veterinarians, dentists and dental technicians, medical assistants, midwives and nurses, psychologists, physiotherapists. It will be irrelevant whether the services will be provided by representatives of the indicated professions in person or with the help of employed persons. They will pay 14% on revenues, regardless of whether they will provide their services in person or with the help of employees. Also, the 14% rate will apply to the taxation of services provided by architects and engineers. Certain revenues related to the provision of IT services (currently taxed at a 15% flat rate) will be subject to a lower 12% tax rate.
The health insurance contribution for these taxpayers will be one third of the applied lump sum and like in the case of other taxpayers it will not be tax deductible at all.
Under the Draft, starting 1 January 2022, lump-sum tax-rate will no longer be an option to choose from by new taxpayers. This form of taxation will be only available for taxpayers who used it in 2021. For these taxpayers the lawmaker also provided for different rules for calculating health insurance contributions. The contribution will be calculated on the basis of the average monthly salary in the enterprise sector in the fourth quarter of the previous year, including payments from profit announced by the President of the Central Statistical Office. Such a remuneration in Q4 in 2020 amounted to PLN 5,656.51. The contribution will not be tax deductible.
The limit for cash payments between companies is to be reduced from PLN 15,000 to PLN 8,000. Thus, any payment of an invoice exceeding PLN 8,000 made outside of a bank account will not be tax deductible. A quantitative limit is also planned: PLN 20,000 for cash transactions with consumers. The new regulations are to apply to entrepreneurs with an annual retail turnover exceeding PLN 20,000.
Under the new regulations the income of natural persons from rental, sublet and lease can only be subject to tax on registered income without deductible costs (as a rule 8.5% of the revenue and 12.5% on the excess of revenue over PLN 100,000 per year). Entrepreneurs may still choose one of these taxation methods: tax on registered income without deductible costs, tax-rate scale and flat tax.
Under the regulations revealed in the Draft, the initial value of an asset that was acquired into private property and then entered into the company’s records must be valued at the purchase price or market value, if lower than the purchase price.
Under the amended regulations, it will be impossible to purchase a car used previously in business activity and sell it further privately without tax. The revenue from the sale of a post-lease car, purchased for personal property, will be an income from business activity until 6 years elapse between the first day of the month following the month in which the car was withdrawn from business activity and the date of its sale.
The new regulations provide for an income tax relief for taxpayers who settle in Poland and change their tax residence. It will consist in the possibility of deducting part of the tax due for four years following the year of the change of residence or the next one (the so-called base year). The deduction in the first year will be 50% of the tax due for the base year, in the second – 50% of the tax due for the first year of applying the relief, and in the third and fourth year it will be 50% of the tax due for the previous year of applying the relief, i.e. for the second and third respectively year of application of the deduction. The deduction will be available provided income comes from specific sources.
The proposed regulations clearly specify that debt financing costs may be classified as tax deductible up to PLN 3m or 30% of EBITDA. In addition, any interest on loans granted by a related entity, if the funds will be used directly or indirectly to finance capital transactions, will not be tax-deductible.
Under the Draft, if a real estate company depreciates buildings for accounting purposes using lower rates than for tax purposes, the depreciation write-offs in the amount adopted for accounting purposes may be included in tax deductible costs.
In accordance with the amendment, it will be possible to use the R&D and IP Box relief at the same time by taxpayers who earn income from intellectual property rights subject to the IP Box principle. Currently, the R&D relief cannot be included in the calculation of the tax base subject to 5% tax with IP Box, so it is not possible to apply the R&D relief and the preferential IP Box rate to the same income at the same time.
The Draft introduces numerous changes in income taxes with regard to transfer pricing regulations:
In accordance with the proposed changes, the new method of taxation for holding companies assumes the CIT exemption of 95% of the amount of dividends received by the holding company from subsidiaries and full CIT exemption of profits from the sale of shares or stocks in subsidiaries.
The Draft provides for the introduction of the right to deduct from the tax base an additional 50% of the cost of obtaining revenues for robotic automation, similar to the current tax relief for research and development. The additional deduction cannot exceed 50% of the costs incurred.
Two Orders of the Romanian Minister of Finance were published in the Official Gazette, which have an impact on the financial statements and the accounting reporting system.
The Order of the Minister of Finance no. 762 of July 5, 2021, for the regulation of certain accounting aspects, was published in the Official Gazette of Romania, Part I, number 697 of July 14, 2021.
The Order no. 762/2021 amends and completes the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements, approved by the Order of the Minister of Public Finance no. 1.802/2014, published in the Official Gazette of Romania, Part I, no. 963 of December 30, 2014, with subsequent amendments and completions, in the following two areas:
Order no. 762/2021 comes with additional modifications and clarifications regarding the obligation to prepare the annual financial statements and the accounting reports required by the accounting law, as well as with the applicable accounting regulations.
Order no. 762/2021 introduces a new section regarding the accounting of operations carried out by foreign legal entities that have the place of effective management in Romania, which details the requirements regarding the applicable accounting regulations and the obligation to prepare annual financial statements, both in the first year of application and in the following years.
It is specified that the annual financial statements provided by this section are special purpose financial statements, being intended to fulfill the obligations provided by the Fiscal Code. The provisions regarding the audit obligation and those regarding the preparation of the consolidated annual financial statements, contained in the approved accounting regulations by Order 1802/2014, are not applicable.
The Order of the Minister of Finance no. 763 of July 5, 2021, for the approval of the Accounting Reporting System on June 30, 2021 of the economic operators, was published in the Official Gazette of Romania, Part I, number 699 of July 15, 2021.
The deadline for filling the accounting reports as of June 30, 2021 is August 16, 2021.
The accounting reporting system as of June 30, 2021 of the economic operators is applicable to the entities that, in the previous financial year, registered a net turnover higher than the RON equivalent of EUR 1,000,000 and that apply the following:
The provisions of this order also apply to economic operators whose financial year is different from the calendar year.
Moreover, the provisions of this order apply to the subunits opened in Romania by companies resident in states belonging to the European Economic Area, as well as permanent establishments in Romania belonging to legal entities based abroad, regardless of the financial year chosen, under the law. These entities are checking if they meet the criteria regarding the net turnover higher than the RON equivalent of EUR 1,000,000 based on the indicators determined according to the annual accounting reporting on December 31, 2020.
In addition, the order stipulates how to proceed in the situation where the legal person with headquarters abroad carries out its activity in Romania through several permanent establishments.
Foreign legal entities that have the place of exercising effective management in Romania are not subject to accounting reporting as of June 30, 2021.
The entities authorized, regulated and supervised by the National Bank of Romania, respectively by the Financial Supervision Authority submit accounting reports as of June 30, 2021 in the format and terms provided by the regulations issued by the National Bank of Romania, respectively by the Financial Supervision.
Entities that have not been active since the date of establishment until June 30, 2021, those that were temporarily inactive in the first half of 2021, those created during 2021, as well as legal entities that are in the process of liquidation, according to the law, do not prepare accounting reports as of June 30, 2021.
Within the Official Gazette 474/6.05.2021 was published the Emergency Ordinance 37/5.05.2021 for the amendment and completion of the Labor Code.
After a year with COVID Polish economy seems to be extremely immune to the economic crisis. Poland has experienced a recession for the first time in 30 years. According to the Central Statistical Office in the preliminary estimate, in 2020 the country’s Gross Domestic Product fell by 2.8 percent. In 2019, the Polish economy grew by 4.5 percent. Although recession is always bad, initial projects at the mid of 2020 was that numbers will be even double worst. There are even business sectors showing significant growth during the COVID time which nobody would expect like construction growing approx. 10% comparing to last year, obvious one is ecommerce growing by approx. 22%. These, to some extent, positive data encourage the business and Polish Ministry of Finance to continue with the tax policy which focuses on fighting the tax optimization and on the other hand introduce reliefs designed to help economic sectors which suffer due to COVID.
It is already a tradition that turn of February and March every year brings the announcements of the Ministry of Finance, more or less expected by taxpayers. It is also our new reality that changes important for taxpayers are announced from the media (Twitter). Although the manner of communicating seems to be a bit not formal, after few lessons, we learned that we should take them seriously. The tweet was followed by the draft of the bill which is now processed by the Parliament and will be binding soon. Here are recent news which are of great importance for the taxpayers.
Public Finance Committee adopted the amendment, thanks to which the deadline for settlement and CIT payment will be postponed from March 31st to June 30th, 2021. The Ministry assumed that such a move would improve the financial liquidity of entrepreneurs in a difficult period of state pandemic. Very similar solution has been adopted last year, it will again give taxpayers more time to settle the liabilities and for sure will improve their cash flow. According to the estimations this solution will leave on the taxpayer’s account approx. PLN 10 billion.
Another important twitter sourced amendment is related to Brexit. Due to large VAT gap, Poland has very strict rules applying to the VAT settlements of the taxpayer from outside of European Community, as a rule if such entity is performing VAT taxable activities in Poland it should act via fiscal representative. It can be tax adviser or accountant which will be jointly liable for tax arrears. This solution is a costly one and have number of additional formal requirements.
After Brexit suddenly, UK moved outside of EC, but Polish Government wants to keep the business and investors inflow from the island, therefore it was decided to introduce exception from fiscal representative obligation for the taxpayers seated or having permanent establishment in UK, Ireland and Norway.
Although the most important obligation is postponed – filing and payment of CIT, there is no such sing in other obligation which should be observed by most of the taxpayers. CbC notification must be submitted until end of March. The same deadline applies for withholding tax reporting and filing of IFT-2R forms.
It is announced that mid of 2021 new withholding tax regime will become binding for the taxpayer. This regulation is postponed since almost two years, Polish Government will resign from so called relief at source rule. It means that taxpayers which are fulfilling conditions for exemption or lower withholding tax rate will be obliged to pay the tax upfront and then apply for a refund. Bottom line in the economic sense should be the same but this amendment will influence cash flows of the entities which will not prepare their structure upfront.
Due to COVID Polish Government decided to postpone by additional 3 months deadline for preparation of transfer pricing documentation, effectively, this year deadline for preparation of TP is 12 months after the end of the tax year, usually TP for 2020 will be prepared until end of 2021.
Due to the third wave of the COVID pandemic, the Hungarian Government issued decrees which contain several restrictions and economic measures.
Between 5 am and 8 pm, individual leisure sports activities may be carried out on the outdoor and in the interior of the administrative area, preferably in green areas, alone or with people living in the same household, with a distance of at least 1.5 meters from others. You do not have to wear a mask during such sports activities. When leaving the buildings, on the street, in public areas, everyone is obliged to wear a medical mask, occupational safety mask, or a mask made of textile or other material in such a way that it constantly covers the nose and mouth.
Parks, arboretums and forests on the outdoors and in the interior of administrative areas shall remain open and may be visited in accordance with the rules in force when this regulation enters into force.
In case of a violation of the rules, the minimum amount of the fine is five thousand forints, the highest amount is five hundred thousand forints, and the amount of the on-site fine is from five thousand forints to one hundred and fifty thousand forints, and in case of repeated violations, two hundred thousand forints.
As general rule stores shall be closed. Exceptions:
By default, spaces or locations providing services which require personal appearance shall be closed.
Exceptions:
Adult education must be organized and completed in a relationship that does not require a personal meeting between the participants and the instructor – using a digital device or in the form of closed electronic distance learning or distance learning – even if it is not permitted by law, letter of support, grant agreement, an adult education contract, official contract, or training program. An exam cannot be organized in adult education.
Ice rinks, swimming pools, gyms and fitness facilities and sports facilities are open to competitive athletes for training or sporting events.
Compliance with the measures is monitored by the police with the assistance of the Hungarian Armed Forces. If the police become aware of a breach of duty during an inspection or on the basis of a notification from a soldier
The penalty does not apply if the operator or shopkeeper has taken the necessary measures, meaning that if the infringer has been called to leave and if he/she has not left, the police has been notified.
The payer performing an actual main activity shall be exempted from paying social contribution tax for the month of March with regard to natural person employees.
Sole trader and partnerships are exempted as well.
Staff costs performed in November, December of 2020, January, February and March 2021 by the small business taxpayer are not included in the contribution base for the tax year.
Small business taxpayer are exempted from paying small tax.
This provision may be applied by a small tax enterprise carrying out an exempt activity falling within the scope of the small tax law in February 2021.
The new beneficiary activities are the following:
These main activities shall be entitled to a tax payment allowance and wage subsidy for the month of March 2021.
The lessor may not claim the part of the rent for the month of March 2021 from the lessee in the respect of premises owned by the state of the local authority OR a company controlled by the majority of the state of a local authority.
The lessor may not claim the rent in respect of the premises for which the lease agreement was concluded before the entry into force of the government decree and in which the lessee on 3rd March 2021 performed
Under the existing lease agreement, the lessor shall reimburse the lessee for the rent already paid for March 2021 by 16 March 2021.
In the Official Gazette no. 1266 was published Law no. 295/2020 for the amendments to the Romanian Fiscal Procedure Code and completion of Law no. 207/2015 on the Fiscal Procedure Code, as well as the approval of some fiscal measures.
The fiscal administrative act becomes null if:
Therefore, a new situation arises, in which the prescription term is suspended, respectively for the period between the date of communication to the criminal investigation bodies of the documents provided by the law and the date of the final solution of the criminal case.
The right of the taxpayer to be informed about any other means of proof obtained by the fiscal body is implemented, as a result of the actions that constituted the causes for the suspension of the fiscal inspection.
There is also the possibility to request the re-verification of certain types of fiscal obligations by the taxpayer, in situations where the tax return cannot be corrected.
Clear specifications are brought regarding the minimum term for establishing the final discussion, which must not be earlier than 3 working days from the date of communication of the draft fiscal inspection report, respectively 5 working days in the case of large taxpayers.
Special provisions are instituted regarding the results of the anti-fraud control.
The term regarding the verification of the personal fiscal situation is modified, which cannot exceed 270 days calculated from the date of starting the fiscal verification (previously 365 days).
The provisions regarding the settlement by compensation are applied accordingly in the case of the fiscal group constituted in the field of corporate income tax.
New special provisions regarding the refund of the dividend tax are constituted.
The reduction of the non-declaration penalty by 75% is carried out by the fiscal body without request from the taxpayer.
The prescription term of 5 years for the taxpayer’s request on the interest for the amounts to be reimbursed from the budget is initiated.
New provisions for payment rescheduling are implemented.
The competence for solving the fiscal appeals from ANAF is transferred to the specialized structure for solving the appeals within the Ministry of Public Finance.
In certain situations, the taxpayer has the possibility to request the re-examination of the settlement decision,
In the Official Gazette no. 1269 of 21.12.2020 was published the Law no. 296 of December 18, 2020 for the amendment and completion of Law no. 227/2015 regarding the Fiscal Code provision, which allows companies to sustain teleworking employees in Romania with monthly amounts.
According to the law, employers can offer up to RON 400 per month to employees working in telework system. The amount is granted without an obligation to present supporting documents and accordingly to the number of days in the month in which the employees carry out teleworking activity.
The amount is not subject to income tax, according to the Fiscal Code, nor to social contributions.
Also, the value of the expenses incurred by the employer with performing medical tests to diagnose COVID-19 infection, on its initiative, for individuals who earn income from salaries and assimilated to salaries, is not subject to income tax and social contributions.
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