Here is a useful summary of the key tax changes that are coming into effect in Croatia, Hungary and Poland in the New Year:
Croatia
Changes here consist of:
Personal income tax
As of December 2018, the non-taxable portion of personal income for Christmas and vacation allowances has been set at HRK 2,500 (US$383) per year. Performance-related bonuses and other forms of awards, such as supplements to an individual’s regular monthly salary, amount to HRK 5,000 (US$767) per year.
From January 2019, rates of personal income tax will be as follows:
- 24% on salaries of up to 30,000 HRK (US$4,595);
- 36% on salaries of over 30,000 HRK.
The new rates will significantly boost the income of professional staff such as doctors, IT specialists and pharmacists, with the aim making it easier for the country to retain qualified personnel.
Salary contributions
While employer contributions to health funds will rise to 16.5% from 15% as of January 2019, this increase will be offset by the fact that they will no longer be required to contribute to unemployment and safety at work insurance. As employers will be paying lower levels of contributions for each employee, they can opt to boost their salaries as a result.
VAT
The VAT rate on nappies, live animals, meat, fish, fruits, nuts, vegetables and eggs has been cut to 13% from 25%.
Taxpayers who purchase goods worth more than HRK 300,000 during the tax period must be included in the Register immediately rather than by the end of the calendar year to cover the following year as is currently the case. A book of incoming and outgoing invoices, together with a VAT form, will also be required.
Croatia's general VAT tax rate will be cut to 24% from 25% as of 1 January 2020 in a bid to boost annual disposable household income by an estimated average of HRK 872 (US$134).
Hungary
Changes to personal income tax
The cafeteria-style personal income tax system, which is popular among employers and employees alike in Hungary, will change fundamentally in 2019. Cash benefits in-kind (BiK) with an annual cap of HUF 100,000 (US$350) will be abolished, with the only remaining option here being the Széchenyi Leisure Card. As a result of the move, each individual’s overall tax burden will increase from 34.22% to 34.5%.
Voluntary fund contributions, local public transport season tickets, the Erzsébet voucher, school start allowances, workplace canteen meals, holiday services and contributions to school costs will no longer be regarded as BiK but will be taxed along with other specific benefits.
Other items subject to income tax include housing subsidies provided by employers, housing allowances for mobility purposes, contributions towards repaying student loans and premiums paid by employers for risk insurance policies, which are currently capped at 30% of the minimum wage.
Some tax-free benefits will remain though. These include individual or season tickets for sporting or cultural events and allowances for funding nursery and kindergarten places.
Other tax changes
Group corporate taxation will be introduced into Hungary from 2019. Domestic corporate income taxpayers with at least 75% in common direct or indirect ownership interests will be able to offset their losses at group level in the year they were generated. They will also be exempt from transfer pricing rules within the group.
Other changes include the fact that:
- Controlled foreign corporation and the interest limitation rules of the European Union’s (EU) Anti Tax Avoidance Directive, have now been incorporated into the corporate tax law;
- Some 50% of the VAT applied to the rental fee of company cars will be tax-deductible without needing to produce a vehicle log;
- Individual VAT exemption limits will increase to HUF 12m (US$41,926);
- The reduced VAT rate of 5% for residential properties has been extended until 2023 in certain cases.
Poland
Submission of financial statements
Government regulations on how to submit financial statements in Poland changed as of 1 October 2018. From now on, they must be presented in an electronic format and each member of Polish boardroom must use their own individual e-signature, or Polish identification number (PESEL) to validate the statement before sending it to the National Court Register.
Withholding income tax
From 1 January 2019, a completely new mechanism will be introduced to handle withholding tax for payments in excess of PLN 2 million (US$526,000) per taxpayer per year. The charging of withholding tax on payments above PLN 2m will follow the basic rates as specified in the Corporate Income Tax Act.
Collection will be obligatory and as the system is based on a ‘withholding tax refund on-demand’ model, the tax office will be within its rights to put in a subsequent request for reimbursement if required.
Excess payments of withholding tax will be refunded within six-months, although this timeframe may be extended. Taxpayers may also be eligible for preferential withholding tax rates in certain situations.
By TMF Group experts. TMF Group is a professional services firm that helps clients operate internationally by ensuring they are properly set up to do business in any country and compliant with local and international regulations.
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Here is a useful summary of the key tax changes that are coming into effect in Croatia, Hungary and Poland in the New Year:
Croatia
Changes here consist of:
Personal income tax
As of December 2018, the non-taxable portion of personal income for Christmas and vacation allowances has been set at HRK 2,500 (US$383) per year. Performance-related bonuses and other forms of awards, such as supplements to an individual’s regular monthly salary, amount to HRK 5,000 (US$767) per year.
From January 2019, rates of personal income tax will be as follows:
- 24% on salaries of up to 30,000 HRK (US$4,595);
- 36% on salaries of over 30,000 HRK.
The new rates will significantly boost the income of professional staff such as doctors, IT specialists and pharmacists, with the aim making it easier for the country to retain qualified personnel.
Salary contributions
While employer contributions to health funds will rise to 16.5% from 15% as of January 2019, this increase will be offset by the fact that they will no longer be required to contribute to unemployment and safety at work insurance. As employers will be paying lower levels of contributions for each employee, they can opt to boost their salaries as a result.
VAT
The VAT rate on nappies, live animals, meat, fish, fruits, nuts, vegetables and eggs has been cut to 13% from 25%.
Taxpayers who purchase goods worth more than HRK 300,000 during the tax period must be included in the Register immediately rather than by the end of the calendar year to cover the following year as is currently the case. A book of incoming and outgoing invoices, together with a VAT form, will also be required.
Croatia's general VAT tax rate will be cut to 24% from 25% as of 1 January 2020 in a bid to boost annual disposable household income by an estimated average of HRK 872 (US$134).
Hungary
Changes to personal income tax
The cafeteria-style personal income tax system, which is popular among employers and employees alike in Hungary, will change fundamentally in 2019. Cash benefits in-kind (BiK) with an annual cap of HUF 100,000 (US$350) will be abolished, with the only remaining option here being the Széchenyi Leisure Card. As a result of the move, each individual’s overall tax burden will increase from 34.22% to 34.5%.
Voluntary fund contributions, local public transport season tickets, the Erzsébet voucher, school start allowances, workplace canteen meals, holiday services and contributions to school costs will no longer be regarded as BiK but will be taxed along with other specific benefits.
Other items subject to income tax include housing subsidies provided by employers, housing allowances for mobility purposes, contributions towards repaying student loans and premiums paid by employers for risk insurance policies, which are currently capped at 30% of the minimum wage.
Some tax-free benefits will remain though. These include individual or season tickets for sporting or cultural events and allowances for funding nursery and kindergarten places.
Other tax changes
Group corporate taxation will be introduced into Hungary from 2019. Domestic corporate income taxpayers with at least 75% in common direct or indirect ownership interests will be able to offset their losses at group level in the year they were generated. They will also be exempt from transfer pricing rules within the group.
Other changes include the fact that:
- Controlled foreign corporation and the interest limitation rules of the European Union’s (EU) Anti Tax Avoidance Directive, have now been incorporated into the corporate tax law;
- Some 50% of the VAT applied to the rental fee of company cars will be tax-deductible without needing to produce a vehicle log;
- Individual VAT exemption limits will increase to HUF 12m (US$41,926);
- The reduced VAT rate of 5% for residential properties has been extended until 2023 in certain cases.
Poland
Submission of financial statements
Government regulations on how to submit financial statements in Poland changed as of 1 October 2018. From now on, they must be presented in an electronic format and each member of Polish boardroom must use their own individual e-signature, or Polish identification number (PESEL) to validate the statement before sending it to the National Court Register.
Withholding income tax
From 1 January 2019, a completely new mechanism will be introduced to handle withholding tax for payments in excess of PLN 2 million (US$526,000) per taxpayer per year. The charging of withholding tax on payments above PLN 2m will follow the basic rates as specified in the Corporate Income Tax Act.
Collection will be obligatory and as the system is based on a ‘withholding tax refund on-demand’ model, the tax office will be within its rights to put in a subsequent request for reimbursement if required.
Excess payments of withholding tax will be refunded within six-months, although this timeframe may be extended. Taxpayers may also be eligible for preferential withholding tax rates in certain situations.
By TMF Group experts. TMF Group is a professional services firm that helps clients operate internationally by ensuring they are properly set up to do business in any country and compliant with local and international regulations.
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Poland introduces new act to digitise HR and payroll processes
