4th January 2019
The CEE region is proving very attractive to contingent workers looking for opportunities abroad. The region is booming economically, and as a result talent shortages are a key concern for businesses. However, tax compliance in the area is complicated and ever changing. Therefore, potential workers need to be kept informed about the situation within the region. With that in mind, here is a summary of the key tax changes coming into effect in Poland, Hungary, and Croatia in the New Year.
Changes to personal income tax
The ‘cafeteria-style‘ income tax system, popular among both employers and employees, will fundamentally change. Numerous benefits, such as voluntary fund contributions, local public transportation season tickets, the Erzsébet voucher, school starting allowance, meals provided by canteens at workplaces, holiday services and contributions to school costs, will no longer be considered tax free. The overall tax burden will increase from 34.22% to 34.5%.
Group corporate taxation will now be implemented in Hungary. Domestic corporate income taxpayers with at least 75% direct or indirect ownership interest will be able to offset losses at group level. They’ll also be exempt from transfer pricing rules within the group.
Submission of financial statements
Changes have been made to government regulations for the submission of financial statements. From October 2018, financial statements must be completed electronically with e-signatures. Every board member of Polish companies will now need a digital tool to enable their e-signature on financial statements.
For all cryptocurrency assets, there will be a cryptocurrency tax rate of 19%. This applies to the exchange of digital assets for a ‘payment instrument, commodity, and service or property right.’ When someone makes income with a cryptocurrency sale, it will be treated like regular income. In addition to this, Polish residents will have to keep accurate reports of every purchase they make with cryptocurrencies on their tax return in a separate log.
Personal income tax
From January 2019, the tax bases for income tax will be 24% until earnings of 30,000 HRK, 36% until earnings above 30,000 HRK. These new bases will significantly increase contributions for qualified professionals such as doctors, IT specialists and pharmacists, and are expected to worsen staff retention, leading to wide skills shortages.
From January 2019, health contributions will increase from to 16.5% from 15%. Contributions for unemployment and safety at work have been cancelled.
Croatia’s general VAT tax rate will reduce from 25% to 24% on 1 January 2020. Furthermore, the VAT rate for live animals, meat, fish, fruits, nuts, vegetables and eggs will be reduced from 25% to 13%. The reduction of VAT rates is set to increase annual disposable household income in Croatia by an estimated average of 872 HRK.
Help is on hand
For contractors looking to work overseas, as the fastest growing region in Europe, the CEE is certainly a favourable location. However, as this raft of new legislation shows, tax systems are becoming far more comprehensive and complicated across the board. Therefore, it is vital contractors make sure the solutions that they are using are compliant with local legislation. To make this as straightforward as possible, we advise employing the services of a global expert.
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