Page 5 - CEE Tax Guide 2024

Tax review 2024 taxpayers. Although Hungary has the lowest general rate Finally, it is also interesting to see how governments try
of 9%, it should also be noted that in certain sectors the
to consolidate state budgets during the energy crisis
An overview of taxation system within CEE overall profit tax rate may be as high as 50%. caused by the war in the Ukraine; for example, Hungary and
There is only one country where the profit tax rate has
the Czech Republic introduced co-called windfall taxes
been reduced (in Austria, from 24% to 23%). On the other on specific sectors.
hand, the rate has gone up to 21 and 22% in the Czech Transfer pricing (TP)
Republic and Slovenia, respectively. The European Union
consciously strives to limit the tax race and to prevent The OECD’s BEPS (“Base Erosion and Profit Shifting”)
Introduction is less than EUR 260 and is around EUR 400-500 in some the use of the most harmful tax avoidance techniques. initiative drew attention to the fact that tax authorities
of the former Yugoslav countries as well as in Albania An important tool in this effort was the Anti-Tax Avoidance need to concentrate more on possible cross-border
We are proud to announce that, thanks to the cooperation and Bulgaria, the minimum wage is around EUR 700- Directive (ATAD and ATAD II), officially known as Directives transactions within corporate groups. Transfer pricing
of the Mazars offices, this is now our twelfth publication. 1000 in a significant part of the region (Czech Republic, (EU) 2016/1164 and 2017/952. The greatest challenge for regulations had previously appeared in the tax systems
This brochure aims to provide current information Slovakia, Hungary, Poland, Romania, Greece, Croatia, and many EU Member States has been the adoption of these of practically all countries. Starting from 2023, Hungarian
on taxation in the 22 European states concerned, the Baltic States). This is still incomparable with the values EU rules. For example, as a consequence of the ATAD, the taxpayers are also obliged to submit a transfer pricing
supplemented by 3 Central Asian countries, effective of Slovenia (EUR 1,250) or those of Germany and Austria previous rules on thin capitalization were increasingly related report as part of their annual corporate income tax
as of January 2024. (over EUR 2,000). Last year, the average wage level in the replaced or supplemented by the method tied to EBITDA- return. In addition, taxpayers operating in the CEE region
We firmly believe that this publication will help investors private sector, which shows similar differences in the based interest limitation calculation. The standardization also had to participate actively in the implementation
understand the complexities of the various CEE tax region, increased by an average of 10%. This, of course, of offshore (controlled foreign corporation, CFC) rules can of the CBC reporting system (OECD’s “country-by-country
regimes by highlighting the latest developments and shows significant fluctuation between countries, and also be traced back to the ATAD. Exit taxation regulations reporting”), which promotes transparency by providing
trends characteristic of the tax regimes of the given given the varying level of inflation, its impact is also very have also appeared in many countries. local tax authorities with the information necessary
countries. different. For instance, in Croatia, Slovenia, Bulgaria, and Without exception, CEE countries applying traditional for evaluating tax risks. As of 2024, even Moldova has
Employment Taxes Poland the increase in average wages (14%, 16%, 17%, and corporate taxation allow the carrying forward of losses introduced a mandatory TP documentation obligation.
25% respectively) exceeded the inflation rate (8%, 7%, acquired in previous years and putting them against the Pillar II (GloBE Minimum Tax)
The tax rates on income and employment show significant 9%, and 11% respectively). At the same time, in Hungary positive tax base of later years. This amount can only
differences in the countries in question. Half of the the rise of salaries (11%) could not keep up with record- be used for the purpose during a predetermined period, Right now, the hot topic of international taxation is the
countries apply a flat-rate personal income tax (such high inflation (17%). In the Czech Republic and Slovakia, usually 5 to 7 years, but in some places the limit is set introduction of global minimum taxation, based on the so-
as Bulgaria, Hungary, Romania, and Ukraine; ranging inflation-adjusted wages also decreased. at 3 to 4 years. called Pillar II framework of the G20/OECD. In December
between 10 and 20%), while others prefer progressive Value-added tax The states of the region readily apply a withholding 2022 the EU Council adopted EU Directive 2022/2523,
tax rates (e.g. Austria, Germany, and Slovenia, as well tax on interest, dividend, and royalty revenues on the basis of which EU countries must implement the
as Croatia and Slovakia) where the upper tax rates are Due to EU regulations, the rules of value-added tax are (at a rate of 15%, or even 19-20%). Naturally, these EU Directive into their domestic legislation. Based on the
often as high as 50%. harmonized for the most part, and many non-EU Member can only be applied in the light of the provisions of the responses received, this has already happened in eleven
States are also trying to align themselves with the corresponding tax agreements. However, Latvia and countries: Albania, Austria, Bulgaria, Croatia, the Czech
On average, the costs of social taxes and contributions Community system. However, applicable tax rates show Hungary still do not generally apply withholding taxes Republic, Germany, Hungary, North Macedonia, Romania,
burdening employers in the region is 16% of gross salaries, significant differences. In 2024, general tax rates averaged on capital income. Slovakia, and Slovenia.
though significant differences (of over 30 percentage around 20% in the region. The normal VAT rate of 25% and In most countries in the CEE region, taxpayers are allowed A set of complicated and interlocked rules were put
points) are apparent between the lowest employer 27%, effective in Croatia and Hungary, respectively, still to prepare an IFRS-based individual financial statement in place to ensure minimum effective taxation for
burdens (Lithuania, Kosovo, and Romania: no more than count as especially high. Examining the reduced tax rates and use it for tax purposes as well. Many CEE countries corporate groups with an annual revenue of at least EUR
5%) and the highest employer contributions (e.g. Austria provides an even more diverse image. Many countries offer tax incentives to encourage companies to invest 750 million. Based on these rules, a so-called “qualifying
and Slovakia: around 29 and 36%, respectively) in this case have introduced two reduced rates, which is the maximum in research and development (R&D). domestic top-up tax” should be collected if the effective
as well. However, this shows only that some jurisdictions permitted by Directive 2006/112/EC (VAT Directive). It is good to keep in mind that corporate group taxation tax rate in a given jurisdiction is below 15%. It is clear that
prefer to levy payroll taxes on employees rather than VAT group taxation is available in Hungary, Austria, is available in Hungary, Austria, Germany, Poland, Romania, there are increasingly few opportunities for multinational
on employers, which makes systems hard to compare Germany, the Czech Republic, Estonia, Latvia, North Serbia, Bosnia and Herzegovina, and Montenegro. companies to engage in profit-shifting.
based on tax rates alone. Macedonia, Poland, Romania, and Slovakia. An increasing
A much more suitable method to compare systems number of jurisdictions in the region are implementing
is to examine the so-called tax wedge. This is the ratio new systems to improve compliance and reduce fraud,
between the total amount of taxes and contributions paid such as electronic invoicing, online VAT registration and Countries included in the publication
in connection with employment and the corresponding filing, and real-time reporting.
total labor costs for the employer. The tax wedge shows Starting in 2024, Hungary introduced the so called
the percentage of labor costs that, in any form, go to the e-VAT system with the aim of making VAT administration
state budget. In 2024, this indicator varies between easier. Under the new regime, the Tax Authority provides
14 and 49%, with an average of 38%. Compared to last taxpayers with draft VAT statements based on online
year’s figure of 36%, this has moved a bit further away invoice reporting data.
from the OECD average of 35%. In the case of EU Member Poland and Romania have implemented the Standard
States in the CEE region, the average of 42% can Audit File for Tax (SAF-T), which is a standardized XML
definitely be considered to be high. Of course, due file format for exchanging accounting data between
to progressive tax rates, the value may be somewhat lower businesses and tax authorities.
in the case of lower income rates and higher in the case
of higher rates. Corporate income tax

All of the above should obviously be evaluated in light Various countries emphasize different factors when taxing
of the wage level in the given country, which is the corporate profit. Countries in the region typically keep the
factor where the countries of the region display the headline CIT rates around 15-22%. The reality is, however,
most significant spread. While the minimum wage in the often more complex, as a number of countries, like Poland
Central European countries of Kosovo and Moldova and Slovakia, also have beneficial tax rates for smaller
4 Mazars Central and Eastern European tax guide 2024 Central and Eastern European tax guide 2024 Mazars 5