MAZARS CENTRAL AND EASTERN EUROPEAN TAX GUIDE 2018
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TA X G U I D E 2 018 1
MAZARS
CENTRAL AND
EASTERN EUROPEAN
TAX GUIDE
2018
6TH
EDITION
Albania | Austria | Bosnia and Herzegovina
Bulgaria | Croatia | Czech Republic | Estonia | FYROM
Germany | Greece | Hungary | Kosovo | Latvia
Lithuania | Montenegro | Poland | Romania | Russia
Serbia | Slovakia | Slovenia | Ukraine
TAX | LAW | AUDIT | OUTSOURCING
2 TA X G U I D E 2 018
TA X BE YOND BORDERS -
AN OVERVIEW OF THE MULTI-FACE TED
REGIONAL TA X L ANDSCAPE / 0 4
A LBA NI A / 06
AUS T R I A / 08
BOSNI A A ND HER Z EGOV IN A / 10
BULGA R I A / 12
CROAT I A / 14
C Z E CH R EPUBLIC / 16
E S T ONI A / 18
F Y ROM / 20
GER M A N Y / 22
GR EE CE / 2 4
HUNGA RY / 26
KOSOVO / 28
L AT V I A / 30
LI T HUA NI A / 32
MON T E NEGRO / 3 4
POL A ND / 36
ROM A NI A / 38
RUS SI A / 4 0
SER BI A / 4 2
SLOVA K I A / 4 4
SLOV E NI A / 4 6
UK R A INE / 4 8
SUMM A RY / 50
“CREATING
CON TAC T S / 53
SHARED
VALUE”
TA X G U I D E 2 018 3
WELCOME TO THE
CEE TAX GUIDE
2018
W
elcome to Mazars’ sixth annual Central and Eastern
European (CEE) tax guide.
The main purpose of this guide is to provide you with an
overview of the tax systems in the CEE region. I would also
highlight the expansion of our coverage: from 1th January 2018 we are
proud to report that the guide has increased its scope to cover 22 CEE
countries.
As always, this publication strives to help investors understand the
complexities of the various CEE tax regimes. In the first section, the tax
systems of the CEE region are presented country-by-country, based on data
provided by the relevant Mazars offices. At the end of this guide you will find
summary tables that allow side-by-side comparisons of the relevant tax
environments.
Before making any strategic business decision further discussion and
detailed analysis is always required. To that end, we have included direct
contact information for our offices and experts. Please feel free to get
in touch with the relevant people with any questions or clarifications
you might have.
We hope you find this guide useful.
Sándor Szmicsek
Partner
Tax and legal services
Mazars Hungary
4 TA X G U I D E 2 018
TAX BEYOND BORDERS - AN OVERVIEW OF THE
MULTI-FACETED REGIONAL TAX LANDSCAPE
VAT collection goes digital, employers’ contributions declining
T
his is the sixth occasion that
Mazars offices around Central Value-added tax
and Eastern Europe (CEE) and
beyond have cooperated to Thanks to the positive economic A persistent trend is that states
produce and publish our report on climate of recent years, in most attempt to collect value-added taxes
current taxation in the region. CEE states the government budget more efficiently with the help of digital
In actual fact, this 2018 summary balance improved and consumption technology. Efforts are in place for the
extends well beyond the CEE region; has started to increase. Governments identification of transactions for which
each year we have added new countries try to build upon this momentum by due taxes were not paid, the reduction
to the initiative and it now numbers 22 giving an increasingly large role to of tax evasion and the “whitening”
participants, with Bulgaria, Kosovo and consumption-type taxes when planning of the shadow economy. Further
Germany the latest entrants. fiscal revenues. Accordingly, one of measures include the introduction of
A quick look at the map on the previous the most important sources of income on-line cash registers and increased
page reveals that the publication also for the budgets is value added tax. attention to the monitoring of
covers the Visegrad (V4) countries, as Owing to EU regulations the rules are transactions involving the transport of
well as South-Eastern Europe, Russia, mostly harmonized, but the tax rates goods. From 2018 in Hungary invoicing
Ukraine and the Baltic States. applied vary widely across the region. software must be connected to the tax
Regarding the content, we can The average of normal VAT-rates is authority’s system, which will result
safely declare that investors around 20%; in 2018, only Montenegro in the supply of relevant real-time
interested in the region will receive a increased its rate by a few percentage electronic information.
comprehensive overview of the taxation points. The 25% and 27% rates in
conditions in the CEE region. Our Croatia and Hungary, respectively, are
publication also allows a comparison still particularly high.
of the fundamental factors of
competitiveness.
“Significant changes have been introduced in
the Romanian tax legislation in the last period of
time below some of the highlights.
• From the 1st of January 2018 approximately
20% of the Social Security Contributions have
been transferred from the employer to the “Over the last few years the Slovak
employee which makes the gross to net salaries tax system is becoming stricter
to be more transparent. in the area of international
• In addition the split VAT payment system as taxation including transfer pricing.
introduced in 2017 continues to be applicable The current trend is taking a closer
however for most business on an optional basis, look at substance requirements
being mandatory only for taxpayers under insolvency as well as at beneficial ownership.
procedures or with outstanding VAT liabilities. During the course of tax audits
Which is intended to improve VAT collection. in the area of transfer pricing,
• The so called micro-company has become more standard documentation is often
beneficial as the revenue threshold is increased to regarded as insufficient proof
EURO 1M and when having 1 employee the tax on by Slovak tax authorities. More
revenue is 1%. extensive materials and additional
• Romanian Transfer Pricing audit by the Tax documents are requested
Authorities are intensifying which gives good frequently.”
grounds to concluded APA’s. In addition part of ATAD
has been implemented from the 1st of January 2018” Günter Oszwald/ Tax Partner/
Slovakia
Edwin Warmerdam/ Partner / Romania
TA X G U I D E 2 018 5
“Following BEPS Actions’ adoption, the Greek Tax
Authorities are focusing on the strict implementation
of anti-abuse provisions, preventing tax evasion
and artificial arrangements especially through
preferential tax jurisdictions in the region. The tax
rates remain high and the business environment is
tight, however some recent decisions of the Greek
Supreme Court in the field of tax residency for
individuals and statute of limitation for the unaudited
years gave to the taxpayers an optimistic feeling.”
Theodoros Kintis/ Director/ Greece
Estonia and Hungary do not impose a
Across the other CEE countries it is withholding tax on capital gains.
Taxes on increasingly apparent that different A clear trend of recent years is the
employment
emphasis is placed on taxing acceptance of IFRS-based financial
corporate incomes. The difference statements: in two-thirds of the region
between the lowest and the highest tax taxpayers are allowed to prepare IFRS-
rates is now less than 20 percentage based separate financial statements
The proportion of taxes and points. We again have one country and to use these also for taxation
contributions on employment where the corporate income tax rate purposes. Finally, it should be noted
continues to decrease. Despite decreased by a few percentage points that the tax systems of more than
these changes, the total wage cost (Croatia), while in another there was half of the countries surveyed support
of employers in the region is still a comparable increase (in Slovenia). research and development (R&D)
approximately 160% of the net wages. Overall, the average corporate income activities in some form.
It should be noted that Hungary tax rate in the CEE region is a little
has made progress in reducing the over 17% (calculating with the highest
large burden on employers. Effective
2018, the Romanian system of social
rate in case of countries where several
rates are used).
Transfer pricing
contributions has been completely All of the CEE countries with
overhauled. Further, Romania, Croatia traditional income tax schemes allow The BEPS (“base erosion and profit
and Montenegro each found ways to losses generated in previous years to shifting”) initiative of the OECD
decrease personal income tax rates. be carried forward and used against alerted tax authorities to concentrate
The most important challenge that the positive tax base of subsequent more on intra-group or cross-
the CEE region must face in the near years. Generally, this amount can border transactions. Transfer pricing
future is increasing labour shortages. only be used for a limited period of regulations have earlier appeared in
How government measures aimed at time, usually 5-7 years, but in some the tax systems of almost all of the
combatting this problem will impact countries only for 3-4 years. Only six countries concerned, and now there is
employment costs remains an open countries allow losses to be carried an increasing emphasis on the related
question. forward indefinitely. documentation obligations. The
The majority of the countries examined fundamental aim of the “country-by-
Corporate used some kind of interest limitation
rule, which determines what part of
country reporting” (CBC-R) required
by OECD is to improve transparency by
income taxes the interest paid on corporate loans
can be deducted from the income
way of providing local tax authorities
with the information necessary for
tax base. Thanks to the EU’s Anti assessing tax risks. In the past year,
Methods of calculating the tax base Tax Avoidance Directive (ATAD), taxpayers in the CEE region had to
vary across the region, and some of the earlier thin capitalisation rules actively participate in launching the
the countries have also introduced tax are increasingly being replaced by CBC reporting system.
schemes that are altogether different methods linked to EBITDA-based
from traditional, profit-based taxation. calculations. The standardisation of
Earlier, only Estonia had its own, the Controlled Foreign Company (CFC)
unique system, whereby companies rules is also due to the same directive.
did not have to pay the 20% corporate States in the region have a penchant
income tax as long as there was for imposing withholding taxes on
no withdrawal of income from the payments of interest, dividends and
company. From 2018, Latvia chose this royalties (at rates of 15%, or even 19-
same path, and also made distributed 20%). Naturally, these may be applied
profits the tax base. with attention to the provisions of
the relevant tax treaties. Lithuania,
6 TA X G U I D E 2 018
ALBANIA
CORPORATE TAXES
AND OTHER DIRECT TAXES
Resident companies are subject to cor- The gross amount of interest, royalties, 2018 is triggered when annual turnover
porate income tax on their worldwide in- dividends, and shares of partnerships’ exceeds ALL 5 million (approximately
come, while non-resident companies are profits paid to non-resident companies EUR 36,000). From 01 April 2018 the
taxed only on their income derived from is subject to a withholding tax of 15%, threshold for VAT registration will be ALL
sources in Albania. Resident companies unless a Double Tax Treaty (DTT) provides 2 million (approx. EUR 14,800) Persons
and sole traders having an annual turno- for a lower rate. Albania has established involved in import or export activities
ver above ALL 8,000,000 (EUR 57,000) are agreements with 41 countries for and taxpayers supplying professional
subject to corporate income tax. Capital avoiding double taxation. 39 of them are services must register for VAT regard-
gains, dividends, interests, and royalties ratified and currently in force. less of the amount of turnover.
are included in the income of compa-
nies and are taxed as part of corporate Customs duty in the Republic of Albania
income tax. Income tax is assessed on a
VAT AND OTHER is applied by the custom authorities
current-year basis at the rate of 15% and INDIRECT TAXES on the import of goods. The liability to
5% for the entities which operate in pro- pay the duty is always on the importer
duction and development of IT software’s The new law of VAT entered in force in of goods, but it is added to the cost of
activities. The assessment of CIT is based January 1, 2015 has been harmonized goods and in this way it is finally passed
on the FS prepared in accordance with with the “acquis communautaire” in on to the consumers. The customs
the National Accounting Standards or almost all respects. Any person (entity duty rates range between 0% and 15%,
IFRS, subject to certain adjustments for or individual) that makes supplies in depending on the type of goods and the
tax purposes as specified in the Albanian the course of the person’s independent country of the origin.
Tax Laws and other supplementary legal economic activity is required to pay VAT.
acts. Fiscal losses may be carried for- For domestic supplies and for services Local taxes consist of different catego-
ward up to three consecutive years. The subject to the reverse-charge mecha- ries of taxes
law does not provide for consolidated tax nism. The obligation to register for VAT
returns. Each company forming part of a purposes and charge VAT until 31 March
group must file a separate tax return.
TRANSFER PRICING IN ALBANIA VAT OPTIONS IN ALBANIA Applicable / limits
Distance selling N/A
Arm’s length principle since 1998 Call-off stock N/A
Documentation liability since 2014 VAT group registration N/A
APA since 2014 Cash accounting N/A
Country-by-Country liability No Import VAT deferment N/A
Master file-local file (OECD BEPS
No for all services from non
13) applicable
Local reverse charge resident entities that are
Penalty subject to VAT in their country
lack of ~ Documentation submited on delay -EUR 70 / for Option for taxation
documentation each month of delay
letting of real estate
0.06% on daily bases (not more than 365 days)
tax shortage supply of used real estate N/A
on tax underpayment + late payment interest
VAT registration threshold* EUR 14,800/year**
direct or indirect control or common managing
Related parties 50% <
director
Safe harbours Rational value added service from 5% to 15% mark up * Persons involved in import or export activities and taxpayers who
supply professional services must register for VAT regardless of the
Level of attention paid by Tax Authority amount of turnover.
**This limit of threshold for VAT registration is in force from 01 April 2018.
5/10
TA X G U I D E 2 018 7
MAZARS SHPK,
Rr. Emin Duraku,
Pall. “Binjaket”, Nr.5, Tirana
Albania
MAZARS Phone: +355 (0) 42 278 015
IN ALBANIA www.mazars.al
PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM
Mandatory social security and health insurance Employed persons are subject to income tax on remu-
contributions are due on employment income. The neration and all benefits received from employment.
social security contribution is calculated on a monthly Entities are required to withhold personal income tax
gross salary, from a minimum amount of ALL 24,000 from the gross salaries of their employees. In Albania
(approximately EUR 178) to a maximum amount of a progressive rate is applicable since 2014; no tax is
ALL 105,850 (approximately EUR 784). Social contri- applicable up to a monthly salary of ALL 30,000; above
bution payable by the employer is 15%; while the rate that 13% applies between ALL 30,000 and 130,000.
payable by the employee is 9.5%. The health insurance Above that level ALL 13,000 plus 23% of the amount
contribution rate is 1.7% for both the employer and the above ALL 130,000 is payable.
employee.
Average wage in
WAGE-RELATED TAXES IN ALBANIA Minimum wage
private sector
Exchange rate ALL / EUR 135 in EUR in ALL in EUR in ALL
178 24 000 407 55 000
TOTAL WAGE COST 207 116,70% 475 116,70%
Social Contribution tax 27 15,00% 61 15,00%
Health Insurance Contribution 3 1,70% 7 1,70%
GROSS SALARY 177,78 100,00% 407,41 100,00%
Contact:
Personal income tax* - 0,00% 24 13,00%
Teit GJINI
Employees’ Social contributions 17 9,50% 39 9,50% Managing Partner
Employees’ Health contributions 3 1,70% 7 1,70% Mobile : +355 (0) 29 30 37 456
NET SALARY 158 88,80% 337 82,79% E-mail : teit.gjini@mazars.al
*Salary 0 -30,000 ALL PIT rate 0%.
Salary 30,001 -130,000 ALL PIT rate 13% of the amount over 30,000 ALL.
Salary over 130,001 ALL PIT 13,000 All + 23% of the amount over 130,000 ALL.
8 TA X G U I D E 2 018
AUSTRIA
Thin capitalization is not subject to Losses from nonresident companies
CORPORATE TAXES any specific regulations. However, can be used in Austria (again, the 75%
AND OTHER DIRECT TAXES in order to avoid insolvency, the limitation is applicable and the foreign
reorganization law stipulates losses have to be calculated by applying
The Austrian corporate income tax is guidelines. The standard tax rate on Austrian accounting rules if extensive
flat with a rate of 25%. The Austrian capital gains is 27.5%. Dividends paid mutual assistance exists. These losses
Corporation Tax Act defines the tax out from resident companies to the can be subject to a recapture in cases
framework for corporations, setting an resident shareholder (not individuals) of liquidation or if they are used
annual minimum tax of EUR 3,500 for in Austria are exempt regardless of abroad.
public companies (AG) and a minimum the participation percentage. Several
tax per year of EUR 1,750 for limited important exemptions exist, such as an
international participation exemption
VAT AND OTHER
liability companies (GmbH). These
minimums are to be considered as a tax for dividends from non-resident INDIRECT TAXES
in advance, and as such, the amounts companies. These dividends are tax free
can be set off against any future if a minimum of 10% direct or indirect The general rate is 20% for the sale of
corporate tax obligation. The company’s shareholding has existed for at least goods and services. A reduced rate of
profits are computed by summing up one year (applicable also for less than 10% is used for agricultural products
the income generated by business 10% shareholding if extensive mutual and rentals with a residential purpose
activities performed, the passive income assistance exists with such countries). (in certain cases 13% for entertainment,
and the capital gains. In principle, all Royalties and licenses are also subject art). Exemptions are in place for banking
expenses linked to the conduct of the to exemptions in accordance with tax transactions, and no VAT is levied on
business are deductible. Losses can treaties and EU directives; otherwise exports. Entrepreneurs with annual
be carried forward indefinitely (but the standard tax rate is 20%. Austria, sales below EUR 30,000 are exempted
only 75% of one year’s profit can be with 90 tax treaties, offers double from VAT obligations. Non-residents
offset), carry back is not permitted. taxation conventions with a large trading in Austria are also subject
Incentives concerning R&D are provided number of countries. to registration. Monthly returns are
in the form of a 14% premium in Austria has a group taxation regime: electronically recorded, and annual
cash for certain types of expenditure. profits and losses of the group returns are to be completed by 30
An expert report from the FFG members are attributed to the group June of the following year. Companies
(“Forschungsförderungsgesellschaft”) is holder and the aggregated balance represented by a tax advisor can have
compulsory to request this tax incentive. is subject to taxation. the deadline substantially extended.
TRANSFER PRICING IN AUSTRIA VAT OPTIONS IN AUSTRIA Applicable / limits
Arm’s length principle since 1988 Distance selling EUR 35,000/year
Documentation Call-off stock
since 1988 / 2016
liability
VAT group registration
APA since 2011
Cash accounting* EUR 700,000/year
Penalty
Import VAT deferment
lack of
CbCR not provided up to KEUR 50 gas, electricity, heating, emission quotas,
documentation
Local reverse charge mobile phones, game consoles, construction
late payment interest if fraud: fiscal services, scrap, compulsory auction
tax shortage
penal code of immovable property
Related parties 20% < direct or indirect ownership Option for taxation
Safe harbours No letting of real estate
Level of attention paid by Tax Authority increasing supply of used real estate
8/10 VAT registration threshold EUR 30,000/year
* Not applicable for capital companies
TA X G U I D E 2 018 9
MAZARS GMBH
Am Heumarkt 10
PERSONAL 1030 Vienna
INCOME TAX / Tel : +43(0) 1 367 16 67 0
SOCIAL SECURITY MAZARS Fax : +43(0) 1 367 16 67 20
SYSTEM office@mazars.at
IN AUSTRIA www.mazars.at
The Austrian income tax rate is
progressive (maximum of 55%).
The personal income tax progression
adds up as follows:
• annual income up to EUR 11,000
is not taxed,
• from the 11,001st to the 18,000th Euro
earned, the marginal tax rate is 25%
• from the 18,001th to the 31,000th Euro
earned, the marginal tax rate is 35%,
• from the 31,001st to the 60,000th Euro 1. Salaried employees: 2. Self-employed persons:
earned, the marginal tax rate is 42%,
• from the 60,001st to the 90,000th Euro Social security contributions are partly For self-employed persons also a
earned, the marginal tax rate is 48%, paid by the employee and partly paid by maximum contribution base is in
• from the 90,001st Euro earned, the the employer. The base is the monthly use (2018: EUR 5,985 per month and
marginal tax rate is 50%, gross salary and special payments. EUR 71,820 per year). Based on the
• part of the earnings which exceeds Generally, a maximum contribution maximum contribution base the social
1 mio. Euros is taxed with 55%. base is in use (2018: EUR 5,130 per security contribution amounts to 26.15%.
month, EUR 10,260 per year for special This insurance covers health insurance,
Concerning capital gains, a 27.5% tax payments.) Based on the maximum pension insurance and accident
rate is applied to all capital income from contribution base the social security insurance. For the first 3 years lower
both Austrian and foreign sources. contribution amounts to 39.60% (18.12% contributions can be paid.
employee and 21.48% employer).
In Austria a statutory compulsory social Additionally employers are obliged Minimum wages depend on the sector’s
security system is in use. All employees to pay various other payroll-related collective agreement. Therefore, no
are subject to this system. The two most costs such as a contribution of 1.53% standard minimum wage exists.
important schemes are the Austrian to the employee pension provision
General Social Insurance Act (“ASVG”), fund (“BVK”), a contribution of 3,9%
which is used for dependent employees to the family allowance fund (“DB”), a
(blue and white-collar workers) and the surcharge of approx. 0.40% to contribute
Austrian Commercial Social Insurance to the family allowance fund (“DZ”), and
Act (“GSVG”) which is used for the self- a municipal tax of 3%.
employed.
Average wage in private
WAGE RELATED TAXES IN AUSTRIA Minimum wage
sector
in EUR in EUR
1 806,7* 3 498**
TOTAL WAGE COST 2 746 130,27% 5 316 130,27% Contact:
Employer's SS and other contri-
638 30,27% 1 235 30,27%
Günther MAYRLEITNER
butions***
Partner - Tax Advisor - CPA
GROSS SALARY**** 2 108 100,00% 4 081 100,00% Phone: +43 (0) 1 367 16 67 13
Personal income tax 41 1,95% 629 15,41% Mobile: +43 (0) 676 8495966 13
Employees' contributions 379 17,98% 734 17,98%
E-mail: guenther.mayrleitner@mazars.at
NET SALARY 1 688 80,07% 2 719 66,62%
* Payroll accountant in Austria, 2nd professional year
** Average monthly salary of full time employed persons in Austria in 2016.
*** In addition to SSC contribution to family equalization fund, surcharge, severance pay and community tax is also payable
**** Monthly gross salary (12 months)
10 TA X G U I D E 2 018
BOSNIA AND HERZEGOVINA
CORPORATE TAXES
AND OTHER DIRECT TAXES
It is important to note that Bosnia and Dividends profit is not included in the obligation to pay withholding tax.
Herzegovina (BiH) is divided into three calculation of the tax base. In the FBiH, The group taxation concept is allowed in
tax jurisdictions: the Federation of BiH taxpayers who make investments from BiH for a group of resident companies
(FBiH), the Republika Srpska (RS) and its own resources in production equip- with a minimum of 90% (FBiH). Moreover,
Brčko District (BD). For the sake of sim- ment worth more than 50% of the profit mother company and its subsidiaries
plicity we will focus on the RS and FBiH. of the current tax period, reduces liabili- constitute a group of companies if among
The CIT rate is flat and amounts to 10%. ties of corporate income tax for 30% of them there is direct or indirect control
A company in FBiH/RS is resident if it is the amount in the year of investment. over 50% of the shares or stakes.
registered as legal entity in the relevant The taxpayer who invests more than
jurisdiction, or in other case its activities 20 million BAM (10,2 million EU) in five In case of acquiring real estate in the
in BiH qualify as PE (PE requirements are consecutive years (minimum investment FBiH, the transfer is taxable at cantonal
similar to those defined by OECD Model in first year equals to 4 million BAM (2,04 level. In the RS, there is no transfer tax,
treaty). In all tax jurisdictions, losses can million EUR), reduces its CIT liability for but the owner of the real estate has to
be carried forward for up to 5 years. Loss 50% of the investment in each of 5 years. pay property tax up to 0,20% of the mar-
carry-back is not permitted. There are no ket value. (decreased rules for production
special limitations in case of M&A trans- Withholdings rate is 10%, for dividends RE applies).
actions. In FBiH, interest expenses taken amounts to 5% in FBiH unless an DTT
from related parties are tax deductible in applies (currently, around 30 active
debt / equity ratio of 4: 1 (thin cap rule). In DTT’s). Interests, royalties and technical
RS, interest expenses are not recognized fees paid by a BiH company to a foreign VAT AND OTHER
for the amount of net interest expenses company are subject to withholdings at INDIRECT TAXES
exceeding 30% of the tax base (without the rate of 10%. In RS there is a flat rate
financial items). In the RS, R&D costs are withholding tax (10%) on all payments to
The general rate is 17%. There are
recognized in line with IAS. In FBiH and foreign legal person in which there is an
no reduced rates beside the 0% rate
BD, R&D costs are recognized.
(mainly for the export of goods).
VAT-exempt services are mainly
banking services, insurance, healthcare,
TRANSFER PRICING IN BOSNIA AND HERZEGOVINA etc. Export exemption as well as exemp-
Arm’s length principle since 1998 tion for deliveries to free zones apply.
Documentation Certain thresholds are as follows.
It is necessary. It is prescribed the content of transfer pricing documentation.
liability
APA No Other indirect tax types in BiH are cus-
Country-by-Country tom duties and excise duties on goods
prescribed both by FB&H Rulebook on transfer pricing as the RS since 2016
liability imported into BiH.
Master file-local
file (OECD BEPS 13) expected to be applicable from FY 2018 on
applicable
VAT OPTIONS IN BOSNIA Applicable /
Penalty
AND HERZEGOVINA limits
RS: 10.226,00 EUR-30.678,00 EUR for legal person and 2.556,00 EUR-7.669,00
lack of Distance selling No
EUR for responsible person. FBIH: 1.534,00 EUR-51.130,00 EUR for legal
documentation
person and 1.278,00 EUR-5.113,00 EUR for responsible person. Call-off stock
tax shortage No There is no interest rates defined by Governmental Rulebook VAT group registration No
direct or indirect control (25% for FBIH, 25% for RS) or common managing Cash accounting No
director or significant influence on decisions. One person is connected
25% with another when that person participates directly or indirectly in the Import VAT deferment No
Related parties
(25%) < management, control or capital of that other person or where the same
person or the same persons participate directly or indirectly in the Local reverse charge Yes
management, control or capital of both persons. Option for taxation
In FB&H, safe harbour rate for support services is 5%. Support services include: letting of real estate No
Safe harbours Yes IT maintenance services, accounting and auditing, administration, legal services,
HR menagement, employees training and education and tax advisory services. supply of used real estate No
Level of attention We believe that the attention of the tax authorities will be increasing, given the new VAT registration threshold approx.
paid by Tax Authority provisions of the Act and Regulations relating to transactions with related parties. EUR 25,510/yearTA X G U I D E 2 018 11
THE CROATIAN OFFICE
IS RESPONSIBLE FOR EX
YUGOSLAVIAN COUNTRIES
Mazars Cinotti Consulting d.o.o.
10000 – Zagreb,
MAZARS Strojarska cesta 20, Croatia
IN BOSNIA AND Phone: (00385) 1 4864 420
HERZEGOVINA Fax: (00385) 1 4864 429
www.mazars.hr
PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM
Personal income is taxed at a flat rate of In the RS, the employee contributes 33% In FBiH, the lowest hourly wage cannot
10%, and it is applicable on the active (e.g. of the gross salary. In the FBiH, the em- be less than 1,75 BAM (0,895 EUR) net,
employment, assignment fee) and pas- ployer contributes 10.5%, and employee or 2,96 BAM gross (1,51 EUR). In RS,
sive income (interest, real estate rental, contributes 31% of the gross salary. the lowest salary is determined as a net
etc.). Dividends are not taxable in BiH. amount in the amount of 395,00 BAM
(201,96 EUR).
Average wage in the
2018 IN FBIH AND RS Average wage in FBiH
RS
Exchange rate BAM/ EUR 1,96 in EUR in BAM in EUR in BAM
679 1 331 683 1 338
TOTAL WAGE COST 750 110,50% 683 100,00%
Employer's SS and other contributions 71 10,50% - 0,00%
GROSS SALARY 679 100,00% 683 100,00%
Employees' contributions 211 31,00% 225 33,00%
Personal income tax* 32 4,65% 36 5,21%
NET SALARY 437 64,35% 422 62,97%
Average wage in the
2018 IN FBIH AND RS Average wage in FBiH
RS
Exchange rate BAM/ EUR 1,96 in EUR in BAM in EUR in BAM
267 524 202 394,94
Contact:
TOTAL WAGE COST 295 110,50% 318 100,00%
Kristijan CINOTTI
Employer's SS and other contributions 28 10,50% - 0,00%
Partner – Tax & FAS services
GROSS SALARY 267 100,00% 318 100,00% Phone: (00385) 1 4864 420
Employees' contributions 83 31,00% 105 33,00% Mobile: (00385) 99 4877 112
Personal income tax* 3 1,17% 11 3,49% E-mail: kristijan.cinotti@mazars.hr
NET SALARY 181 67,59% 202 66,07%
* Tax base differs from the gross salary, deductions apply.12 TA X G U I D E 2 018
BULGARIA
CORPORATE TAXES
AND OTHER DIRECT TAXES
Bulgaria has a flat corporate income It applies for entities, which fulfill specific • tax on the acquisition of property for a
tax rate of 10% applied on the annual conditions. The tax rate is 10% and it consideration – applies for real estates,
tax profit. The tax profit may be also is applied to the calculated base for all vehicles and limited real estate rights,
deducted by tax losses to be carried ships - the ship’s net tonnage, by law acquired for a consideration. The tax
forward within five subsequent amounts for each type of ship and the rate range is between 0.1 and 3% of the
financial years. Bulgaria applies thin days in exploitation of the ship. value of the property, or of the value of
capitalization rules to interest expenses Local taxes are determined by each the more expensive property in case of
from loans provided or guaranteed by municipality in ranges, stated in Local exchange;
related parties. taxes and fees Law. Local taxes and fees • inheritance tax - exempt in a limited
The financial result of collective include: extent (family members);
investment schemes and enterprises • tax on the carriage of passengers by
with special purposes are not taxable • real estate tax – its ratio is in the range taxi – fixed amount between 300 and
with corporate income tax. between 0.1 and 4.5‰. Base for taxation 1 000 BGN for each car, used for
Advance tax payments should be made for non-living real estates of companies providing taxi services;
each month or quarter, based on the is the highest of book value or calculated • patent tax – it’s applied for micro entities
estimated tax profit for the current year. by municipality tax valuation. Base for or individuals, which activities are small
Withholding tax rates are 5 % for taxation of all living real estates is the services like tailoring, very small stores,
dividends and 10 % for interests, municipality’s tax valuation; carpentry, etc. There are fixed amounts,
royalties and other (Double tax treaties • transportation vehicle tax – determined determined by each municipality;
between Bulgaria and other countries as exact amount, depending on vehicle • garbage fee – fee collected from
could also be applied in order the type, and power; municipalities for maintaining of waste
withholding tax rate to be decreased). • tourist tax – applicable for each disposal, and cleaning the public areas
There is no withholding tax if the overnight in place of accommodation. (parks, streets, sidewalks, etc.);
dividends, interests and royalties are The range of tax is between 0.20 and 3 • wide range of other fees, usually
paid in favor of EU member state parent BGN for overnight; imposed for specific services, like social
company. • gift tax – applied for gifts of all kind, with services, technical and other services,
Social, representative expenses and the very limited exemptions. Applies also for rent of plots for sale at market places,
expenses for vehicles are also taxable forgiven payables. There are the two rate sidewalks, etc.
with 10 % tax rate. ranges applicable – between 0.4 and
There is also tax for operating of ships. 0.8 % for gifts between brothers and
sisters and their children; and between
3.3 and 6.6 % for all remaining;
TRANSFER PRICING IN BULGARIA VAT OPTIONS IN BULGARIA
Arm’s length principle since 1989 Distance selling approx. EUR 35,790/year
Documentation Call-off stock No
No
liability VAT group registration
APA No Cash accounting* 500,000 EUR/last 12 months
Penalty
Import VAT deferment No
lack of documentation No
all types of waste (construction, household,
production, hazardous); services related to waste
tax shortage No late payment interest Local reverse charge
processing; different types of agricultural production
(seeds and grain)
direct or indirect control
Related parties 50% < Option for taxation
or personally related
Safe harbours No Letting of real estate
Level of attention paid by Tax Authority Supply of used real estate**
5/10 VAT registration threshold approx. EUR 25,565/last 12 months
* If specific conditions are fulfilled and after permitment from tax authorities
** 5 years time testTA X G U I D E 2 018 13
2 Tsar Osvoboditel Boulevard,
BNP Paribas Office Building,
1000 Sofia- Bulgaria
MAZARS Mobile: +359879435999
IN BULGARIA www.mazars.com
VAT AND OTHER
INDIRECT TAXES
For year 2018, the standard VAT rate
is 20%, while the reduced rate is 9%
(applicable for accommodation,
provided by hotels and similar places
for accommodation, including holiday
accommodation and renting of places
for caravans and camping). VAT-
exempt services include financial and
insurance services, the transfer of
buildings and some land plots, and
rights related to them, rent of real
PERSONAL INCOME TAX / There is minimal basis for social and
estate to individuals for housing, post SOCIAL SECURITY SYSTEM health contributions for each position
services and post stamps, education (mostly divided by sectors of economy).
services, gambling, supplies, related Personal income tax is applied at a flat The maximum assessment base
to culture, religion, medical and social rate of 10% on most of the incomes. for social and health insurance
care services and, also supplies, for Income from employment and self- contributions is BGN 2 600 BGN
which no tax credit has been used. employment is subject to social security (app. EUR 1 329).
VAT payers are obliged to submit VAT and health insurance contributions. In Tax rate for dividends or liquidation
returns, sales and purchase registers, case of employment, the employee’s shares paid in favor of natural person
VIES and Intrastat declarations on contribution amounts to 13.78% is 5 %.
monthly basis. (10.58% social security and 3.2% Tax rate applicable to the gross amount
health insurance). For the employer, of interests, received from bank
Other indirect taxes include excise the contributions are 18.92% (14.12% accounts, is 8 %.
duties (on mineral oils, spirits, beer, and 4.8% respectively). For specific Tax rate for amounts received after
wine, tobacco and tobacco products, positions there are different rates for expiry of Life insurance, if its duration
gas, electricity and solid fuels). contributions. was more than 15 years, is 7 %
Average wage in private
WAGE RELATED TAXES IN BULGARIA Minimum wage
sector
Exchange rate BGN/EUR 1,95583 in EUR in BGN in EUR in BGN
261 510 541 1059
TOTAL WAGE COST 310 119% 641 118%
Social security contribution - employer 36 13,72% 74 13,72%
Contact:
Health insurance - employer 13 4,80% 26 4,80%
Milena Mladenova
GROSS SALARY 261 100% 541 100% Head of Audit Services
Employees' contribution 36 13,78% 75 13,78% Mobile: +359879435999
Calculated personal income tax after
23 10,00% 47 10,00% E-mail: milena.mladenova@mazars.bg
employees' contributions
NET SALARY 202 77% 419 77%14 TA X G U I D E 2 018
CROATIA
A withholding tax of 15% is applied
CORPORATE TAXES on interest, royalty and business VAT AND OTHER
AND OTHER DIRECT TAXES consultancy services paid by a Cro- INDIRECT TAXES
atian company to a foreign company.
Exceptionally, WHT on dividends and
From 2017 onwards, CIT rates are profit shares are taxed at the rate of The tax rate is 25%; a reduced rate of
18% or 12% for enterprises with 12%. However, Croatia has more than 13% applies to tourist accommodation
annual revenues below HRK 3 million 60 active DTT treaties used to avoid services, newspapers, specific input
for taxable periods which ends after withholding tax. A withholding tax of for agricultural production, delivery
1.1.2017. The tax base is accounting 20% is applied on all payments to off- of electrical energy, etc., while a
profit modified by several increasing shore companies for the services not reduced rate of 5% applies on milk,
and decreasing items. Enterprises mentioned in Law. The EU Directives books, etc. VAT-exempt services are
with annual revenues below HRK 3 on withholding tax apply. mainly banking services, insurance,
million have the option of determining investment-related services, educa-
the profit tax base by cash flow prin- Real estate transfer tax (RETT) is tional services (under certain condi-
ciple. Losses can be carried forward applied on the transfer of immovable tions), games of luck, certain services
within 5 years but special limitations property at the rate of 4%. The taxable provided by medical doctors and
are applicable in case of M&A transac- base is the market value of a real dentists, and certain other activities
tions. Capital gains are included in the estate at the moment when the tax which are tax exempt with regard to
annual corporate profits tax return. liability is incurred and the taxable their public interest or their special
Croatia uses thin capitalization (4:1), person is the buyer. The acquisition character. Tax is deductible on food
but thin capitalization does not apply if of newly built real estate that is taxed donation to non-profit humanitarian
shareholders are financial institutions, according to the VAT Law is not con- legal entities up to 2 percent of total
CIT payers in Croatia or PIT payers in sidered the transfer of real estate. revenues of previous year. From 2018,
Croatia. There is a range of tax allow- Other taxes include contribution to the taxpayers are entitled to deduct 50 %
ances for new investments and R&D Croatian Commercial Chamber (fixed of the input VAT related to the acqui-
(up to 150% of qualified costs), the monthly fee), forestry tax (annual sition and rental of personal cars and
education of employees, etc. percentage) and tourist tax (for certain other means of personal transport
activities). including the acquisition of any goods
or services related to those goods (but
only to purchase value of HRK 400.000
TRANSFER PRICING IN CROATIA per single means of transport).
Arm’s length principle since 2004
Deliver to Tax Administration upon request. Other indirect tax types in Croatia are
Documentation
Yes
Together with tax return for 2017, taxpayers have excise duty and insurance tax.
liability to deliver Report on business transactions with
related parties ( PD-IPO form) (deadline is 30 April)
APA is available as from January 1, 2017.
APA Yes
The application fee will be charged.
Country-by-Country
VAT OPTIONS IN CROATIA Applicable / limits
from FY 2017
liability Distance selling EUR 36,000/year
Master file-local file The tax authorities have not yet issued any Call-off stock
(OECD BEPS 13) No guidance on the implementation of the Master File,
applicable but is expected and recognised in practice VAT group registration No
Penalty Cash accounting EUR 400,000/year
Not specifically stated, general rules apply Import VAT deferment Only in specific cases
lack of
No (up to HRK 200,000 for a company and HRK 20,000 Local reverse charge construction work, the supply of used ma-
documentation
for the responsible individual terial, the transfer of allowances to emit
greenhouse gase, the supply of immovable
Additional tax charged and 100%
tax shortage Yes property in certain conditions
of that tax is not deductible
Option for taxation
50% direct or indirect control (25% is commonly used by
Related parties No
(25%) < tax authority and advisors) or joint control functions letting of real estate
Interest on IC loans is determined by the Minister supply of used real estate
Safe harbours of Finance, for 2017 4,97% and for 2018 interest
VAT registration threshold* EUR 39,000/year
rate is 4,55%
Level of attention paid by Tax Authority
7/10 * Lorem ipsum Ut acculpa aut et molorep udanimus, serit, sinverum et aut iderias
perspicium adipis et quam eaquatum idita.TA X G U I D E 2 018 15
Mazars Cinotti Consulting d.o.o.
Strojarska cesta 20, II. Floor,
10 000 – Zagreb, Croatia
Phone: (+385) 1 4864 420
MAZARS Fax: (+385) 1 4864 429
IN CROATIA www.mazars.hr
PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM
Personal income tax rates are 24% (monthly represent employer contribution.
tax base up to HRK 17,500) and 36% (above For the person under 30 on undetermined
HRK 17,500), while 12% rate is withheld from period, there is no contributions on salary
certain types of income, e.g. dividends, capital (17,2) for the period of 5 years. Passive
gains, lease of the real estate etc.. Active incomes are generally subject only to taxes.
incomes fall under the scope of the SSC sys- The examples below show the cost of the em-
tem: individual pension social contributions ployer and the employee in case of minimum
equal 20% (employee contribution) and health and average wage level in the private sector.
and unemployment contributions of 17.2% Basic personal allowance amounts to HRK
3,800 and surtax is determined by municipali-
ty/city and amounts from 0% to 18%.
Average wage in
WAGE-RELATED TAXES IN CROATIA Minimum wage
private sector
Exchange rate HRK/EUR 7,5 in EUR in HRK in EUR in HRK
459 3 440 1 117 8 381
TOTAL WAGE COST 538 117,20% 1 310 117,20%
Employer's contribution 79 17,20% 192 17,20%
GROSS SALARY 459 100,00% 1 117 100,00%
Employees' contributions 92 20,00% 223 20,00%
Contact:
Tax and surtax* - 0,00% 89 7,97%
Kristijan CINOTTI
NET SALARY 367 80,00% 805 72,03%
Partner – Advisory services
*Tax base differs from the gross salary, deductions apply. Phone: (00385) 1 4864 420
Mobile: (00385) 99 4877 112
E-mail: kristijan.cinotti@mazars.hr16 TA X G U I D E 2 018
CZECH REPUBLIC
The Czech Republic has a wide inter- VAT AND OTHER
CORPORATE TAXES national treaty network with more than INDIRECT TAXES
AND OTHER DIRECT TAXES 80 double tax treaties concluded. If the
payments are realized to third countries For 2018, the standard VAT rate is
The Czech Republic has a flat corporate without a double tax treaty (or a valid 21%, while the reduced rates are 15%
income tax rate of 19% applied on a international agreement on exchange of (applicable, for example, on foodstuff,
general tax base. Basically, the tax base information on tax matters), the with- non-alcoholic beverage, heat, cold, public
is represented by an accounting profit holding tax amounts to 35%. transport, accommodation and selected
or loss modified by certain increasing medical/sanitary goods and food-ser-
and decreasing items. The tax base may Road motor vehicles used in connection ving services) and 10 % (applicable, for
be deducted by tax losses to be carried with business, as well as trucks with example, on baby formula and children’s
forward within five subsequent taxable a maximum gross weight exceeding food, certain pharmaceuticals, certain
periods. The Czech Republic applies thin 3.5 tonnes regardless of their use, are printed books, children’s picture books,
capitalization rules to loans provided by subject to a road tax if registered in the newspapers, magazines, music sheets
related parties (generally 4:1). Czech Republic. A real estate tax is to be and food for gluten-intolerant persons).
applied in relation to land and buildings, VAT-exempt services include financial
The Czech Republic provides tax exemp- with tax rates generally depending on and insurance services, the transfer of
tion for holding structures: dividends and the type of the property, while the final buildings/flats/non-residential premises
capital gains are tax exempted, provided amount of tax may also be influenced by (after 5 years following the building ap-
certain conditions are fulfilled. More- local ratios (as applied by local author- proval), rent of real estate, post services,
over, under certain specific conditions, ities). A real estate transfer tax is to be radio and TV services, education services
an exemption may also be granted to applied at a rate of 4%. Inheritance tax and medical and social care services.
royalties or interest from credit and loans. and gift tax are incorporated into the
A withholding tax of 15% applies to divi- income tax, with the application of stan- VAT payers are obliged to submit VAT
dends, royalties, interest and generally to dard income tax rates (15% for individ- returns, EC Sales Lists and Control
income received in the Czech Republic, if uals, 19% for legal persons). Gratuitous Statements (evidence which reports
the conditions for tax exemptions are not income from inheritance is fully exempt. detail on the selected transactions). All
fulfilled and a relevant double tax treaty Gratuitous income from giving is exempt reports may be submitted on monthly or
states otherwise. in a limited extent (e.g. gifts within family). quarterly basis (depends on the subject
who submits the report). The following
options/limits based on the EU Directive
TRANSFER PRICING IN CZECH REPUBLIC are presented within VAT legislation:
Arm’s length principle since 1993
Documentation since 2006 (scope of Documentation
VAT OPTIONS IN CZECH REPUBLIC Applicable / limits
liability is only recommended) Distance selling approx. EUR 45,000/year
Country-by-Country Call-off stock
from FY 2016
liability
VAT group registration*
the recommended scope of the TP
documentation in the Czech Republic Cash accounting
Master file-local file corresponds to the general principles Import VAT deferment
(OECD BEPS 13) included in the OECD Guidelines
applicable and the Code of Conduct on Transfer supply of construction works, waste, gold and intermediary service related to supply of gold,
Pricing Documentation for Associated supply of emission permits, selected cereals and industrial crops, mobile phones, integrated
Local circuits, portable devices for the automated processing of data (e.g. notebooks and tablets),
Enterprises in the EU. videogame consoles, real estate (when VAT payer voluntarily applies VAT on the sale which should
reverse be generally VAT exempt), supply of gas, electricity to trader, provision of telecommunication
APA since 2006 charge services to trader, outplacement of construction and assembly workers, supply of immovable
property in forced insolvency sale, supply of goods originally provided as guarantee, supply
Penalty of goods after assignment of reservation of ownership
lack of Option for taxation
No
documentation
letting of real estate**
20% on tax underpayment
tax shortage supply of used real estate***
+ late payment interest
direct or indirect control VAT registration threshold**** approx. EUR 39,200/year
Related parties 25% <
or personally related
* related parties, only for Czech legal entities
Low value added services: ** only when let to VAT payer for perfoming of his economic activity
Safe harbours *** 5 years time test
3-7% mark-up
**** only for Czech based legal entities
Level of attention paid by Tax Authority
Other indirect taxes include excise duties (on mineral oils, spirits, beer, wine and tobacco) and an energy
9/10 taxes (on gas, electricity or solid fuels). A ‘contribution’ from electricity produced via solar facilities
applies to such electricity producers.TA X G U I D E 2 018 17
MAZARS S.R.O.
INTERNATIONAL BUSINESS CENTER
186 00 Prague 8, Pobřežní 620/3,
Czech Republic
MAZARS Phone: (+420) 224 835 730
IN THE CZECH Fax: (+420) 224 835 799
REPUBLIC www.mazars.cz
PERSONAL INCOME TAX / SOCIAL SECURITY SYSTEM
Personal income tax is applied at a part of the gross income from an em- For the employer, these amount to 25%
flat rate of 15% on active (employment, ployment/tax base from self-employment and 9% respectively. The social security
self-employment) and passive income exceeding 48 times the amount of the ave- contributions are not paid on the income
(e.g. capital gains, dividends, interests). rage wage (for 2018 it is CZK 1,438,992). exceeding the maximum assessment
The employees’ tax base is increased by Income from employment and self-em- base (for 2018 it is CZK 1,438,992). The
health insurance/social security contri- ployment is subject to social security and maximum assessment base for the
butions paid by the employer, thus the health insurance contributions. In case of health insurance contributions has been
effective tax rate amounts to approxi- employment, the employee’s contribution cancelled as of 2013. The example below
mately 20%. A “solidarity” increase of amounts to 6.5% (social security) and shows the employer’s and the employee’s
tax at the rate of 7% is applied for the 4.5% (health insurance). costs in case of minimum wage and
average wage in the private sector.
WAGE- RELATED TAXES IN CZECH Average wage in
Minimum wage
REPUBLIC private sector
Exchange rate CZK/EUR 25,265 in EUR in CZK in EUR in CZK
483 12 200 1 187 29 979
TOTAL WAGE COST ("SUPER GROSS" 647 134,00% 1 590 134,00%
SALARY)
Social security contribution -
121 25,00% 297 25,00%
employer
Health insurance - employer 43 9,00% 107 9,00%
GROSS SALARY 483 100,00% 1 187 100,00%
Calculated personal income tax without
Contact:
standard tax deduction* 97 15,00% 239 15,00% Pavel Klein
Personal income tax after Leading Partner of Tax Department
15 157
standard tax deduction** Corporate tax / VAT
Employees' contributions 53 11,00% 131 11,00% Mobile: (+420) 721 461 394
NET SALARY 415 85,88% 900 75,81% E-mail : pavel.klein@mazars.cz
* 15% tax rate is applied on "super gross" salary, the effective tax rate is approximately 20%
** Each individual is entitled to deduct a lump sum of CZK 2,070 (app. EUR 82) per month
from his tax liability (called "standard tax deduction")18 TA X G U I D E 2 018
ESTONIA VAT AND OTHER
INDIRECT TAXES
CORPORATE TAXES The general rate is 20%, while the
AND OTHER DIRECT TAXES reduced rate is 9% (e.g. books and
workbooks used as learning materials,
In Estonia there is no traditional tax rate of 20%. A calculation example in particular medicinal products,
corporate income tax, which means case the net payment is 1,000 EUR: the particular periodic publications, certain
that retained profits enjoy deferred tax base is 1000 / 80% = 1,250 EUR, and accommodation services). Exportation
taxation, which is considered as the most the corporate income tax is 1,250 EUR x is zero-rated. VAT is not imposed on
attractive tax incentive for companies to 20% = 250 EUR. There are no rules certain goods and services of social
invest in Estonia. Corporate profits are regarding how losses can be carried nature. Other VAT-exempt goods and
subject to income tax upon distribution forward because only distributed profits services include insurance services,
i.e. dividend payments, liquidation are subject to income tax. leasing or letting of immovable
proceeds, etc. properties, the sale of immovable
In addition, certain payments, such as There is no withholding tax on dividends, properties or parts thereof before
fringe benefits, gifts, donations, costs interest and royalty paid by an Estonian their first use, securities and financial
of entertaining guests, expenses and company to either an Estonian or foreign services. The options/limits based on
payments that are not business-related company, provided that certain criteria the EU Directive are presented within
are also identified as profit distributions are met. Also, there is no corporate the VAT legislation:
for income tax purposes. Expenses income tax applied in case of pass-
related to business are not taxable if they through dividends corresponding to At the end of 2014 Estonia introduced
have been incurred for the purposes of certain rules. Income tax is withheld from an additional reporting form that
deriving income from a taxable business rent from a commercial or residential companies need to submit together
or are necessary or appropriate for lease (20%), payments to a non-resident with their VAT returns for reporting all
maintaining or developing such business for services provided in Estonia (10%), transactions exceeding 1,000 EUR with
and it is clearly justified that the expenses and payments to a legal person located a single partner in a calendar month.
are business-related. Also, no income in a low-tax-rate territory for services Also, in 2014 new rules were introduced
tax is charged on business gifts, gifts provided to an Estonian resident (20%). regarding vehicle-related VAT-
and donations to specified non-profit Estonia has a wide international treaty deductions, which in general (with one
associations and costs of entertaining network with 63 double tax treaties. specific exception) restrict more than
guests not exceeding limits set by law. Other direct taxes include a gambling 50% of total input-VAT deduction related
The corporate tax rate is fixed as 20/80 tax and a land tax applicable in specific with vehicle costs (purchase of car, fuel,
on the net amount of the payment, which cases. Also, there is a social tax, which repair, etc.).
means that net distribution/payment is is described under the social security
grossed up first and then subject to a system below. Other indirect tax types in Estonia
include excise duty and customs duty.
TRANSFER PRICING IN ESTONIA VAT OPTIONS IN ESTONIA Applicable / limits
Arm’s length principle since 1999 Distance selling EUR 35,000/year
Documentation Call-off stock -
since 2007
liability VAT group registration*
APA No N/A Cash accounting turnover < 200,000 EUR
Penalty
Import VAT deferment
Up to EUR 3,200. A criminal penalty may also be
lack of documentation Local reverse charge specific real estate, metal waste, gold
imposed up to EUR 16 million.
Option for taxation
tax shortage Daily interest of 0.06% on the tax underpayment
letting of real estate
share capital or voting rights; other special rules supply of used real estate
Related parties 25% <
relating mutual business interest or control
VAT registration threshold** EUR 16,000/year
Safe harbours No
Level of attention paid by Tax Authority * There must be an element of common control over the members of the group.
8/10 ** If the trade is below the registration threshold, voluntary VAT registration might
be possible.TA X G U I D E 2 018 19
MAZARS OFFICIAL
CORRESPONDENT
IN ESTONIA
Baltic Business Advisory OÜ
Rotermanni 8, Tallinn, 10111
MAZARS Estonia
IN ESTONIA Phone: +372 534 634 22
www.bba.ee
PERSONAL INCOME TAX /
SOCIAL SECURITY SYSTEM
In Estonia there is a flat rate of PIT, exemption decreases according to the contributions equal altogether
which is 20%, and it is generally following formula: 6000 – 6000 ÷ 10 800 1.6%-3.6% depending of the type
applicable to active (e.g. employment, × (income amount – 14 400), 3) if annual of mandatory pension subscription;
assignment fee) and passive income income is above 25 200 EUR, basic the employer’s contribution is
(e.g. capital gains, dividend and exemption is 0. altogether 33.8% (social tax 33%
interest). Resident individuals can use and unemployment insurance 0.8%).
a monthly tax-free amount, which is In addition, there a specific list of tax Passive incomes are in general not
maximum 500 EUR per month starting deductions, which can be applied via subject to SSC. Benefits in kind are
from 2018. The monthly tax-free the annual tax returns e.g. deduction taxed only on the level of the employer
minimum is applicable only with lower of housing loan interests (in certain at two rates: corporate income tax
income and the application of it goes limits), voluntary pension payments, (20/80 on net amount) plus social tax
according to the following formula: 1) donations and training expenses, an 33%, which is altogether approximately
annual income up to 14 400 EUR gives additional tax allowance in case more 60%. The examples below show the
6000 EUR as annual basic exemption, than one child, etc. cost of the employer and employee in
2) in case annual income increases Active incomes fall under the scope case of minimum wage level and the
from 14 400 EUR to 25 200 EUR, basic of the SSC system: individual social average wage in the private sector.
Average wage in private
WAGE TAXATION IN ESTONIA Minimum wage
sector
in EUR in EUR
TOTAL WAGE COST 629 133,80% 1 604 133,78%
Employer unemployment insurance 4 0,80% 10 0,80%
Contact:
Social tax 155 33,00% 396 33,00%
Karin NEEMSALU
GROSS SALARY 470 100,00% 1 199 100,00%
Tax partner
Personal income tax 54 20,00% 193 20,00% Mobile: +372 534 634 22
Employees' unemployment insurance 8 1,60% 19 1,60% E-mail: karin.neemsalu@bba.ee
Employees' pension insurance* 14 3,00% 36 3,00%
Minimum monthly tax deduction (for tax residents) 180 - 180 -
NET SALARY 395 83,98% 951 79,32%
*The rate could be 2% or 3% depending of the age and the subscription typeYou can also read
