EU: VAT-news

Czech Republic – Proposal to bring single 19% VAT rate from 2012 defeated

Proposal from Czech Finance Minister, Miroslav Kalousek, to bring in a single 19% higher VAT rate from start 2012 has been defeated. The proposal to rush in a higher rate of VAT than under a previously agreed timetable was challenged by junior member of the coalition. Under the existing timetable, two rates of higher VAT at 20 percent and 14 would be introduced next year with a single 17.5 percent rate coming in 2013. Kalousek had been proposing a single 19% higher rate to come in from start of 2012.

France – New 2011 taxation rules for conference and event organisers in France

On the 28 March 2011 the French Tax Authorities published an official guideline on the new VAT place of supply rules for event related services
This guideline is clarifying the impact of the VAT changes that were introduced by the Directive 2008/8/EC dated 12 February 2008 and came into force on the 1st January 2011, and deals in particular with services supplied in connection with conferences, congresses, trade fairs, etc. The information in this administrative guidance can be very useful for taxable persons who are either attending, or organising events in France. It brings some level of response to the uncertainty created by the new EU VAT taxation rules in this area, and also sheds some light on the implementation of those rules in France by featuring specific examples and solutions for various situations.

The information in this guideline is focusing the following items:

  • VAT place of supply rules for services in respect of admission to an event
  • VAT place of supply rules for event organisation services
  • VAT place of supply rules for rental of exhibition space
  • VAT place of supply rules for a complex package of services supplied within the frame of an event

However this guideline is also dealing with other questions such as VAT taxation rules for services rendered by Professional Congress Organisers („PCO“) or the VAT place of supply rules for training services.

Greece – VAT rate on food and drinks supplied for immediate consumption to increase from 1 September 2011

The VAT rate applicable to non-alcoholic beverages and to the supply of food for immediate consumption in restaurants, as well as on some connected services is to increase from 13% to 23% (16% in the Agean Islands) from the 1st of September 2011.

This change will not affect food and beverages supplied in canteens used by medical, educational or social welfare organisations. Also, this change will not affect food intended for mass consumption that are ready to eat and are sold in packages in the restaurant/take-away.

Hungary – Hungary’s VAT regulatory practices not compliant with EU VAT Directive

The European Court of Justice found that Hungary’s practices are incompatible with EU law and need to be modified. The current situation allows taxable persons to deduct the input VAT of their acquisitions from the amount of VAT payable. If the amount that is deductible is greater than the VAT payable the excess can then be reclaimed, except where the taxpayer has not paid the consideration.

This means that for certain taxpayers the opportunity to reclaim VAT is postponed for several tax periods, this was considered by the ECJ in its decision on 28th July 2011 to be  contrary to the EU VAT Directive.

Ireland – Introduction of a new reduced VAT rate of 9%

The Minister for Finance has announced that a second reduced VAT rate of 9% will be introduced in respect of certain goods and services (mainly related to tourism) for the period 1 July 2011 to 31 December 2013 under the “Jobs Initiative 2011”. The new VAT rate is effective from the 1st of July 2011.

Ireland – Update on the deduction rules for Car related expenses

The information used to prepare this update is contained in the VAT Leaflets published on the Irish Revenue website: http://www.revenue.ie/en/tax/vat/index.html

1. Purchase of cars

The purchase of a car in Ireland is subject to Irish VAT. VAT incurred on this purchase is usually not deductible. However, a VAT registered trader may deduct VAT if the car is used 100 % for business and if it belongs to category B or C, i.e. commercial vehicles.

There is an exception to this rule, Motor dealers and driving schools may recover VAT incurred on the purchase of a wider range of vehicles.
From the first January 2009 a trader can also recover some of the VAT incurred in relation to the purchase of category A vehicles, i.e. saloons, estates, hatchbacks, convertibles, etc. However there are conditions;

  • Vehicles must have been registered on or after the 1st Jan 2009
  • CO2 emissions must be less than 156g / km (Co2 emission bands A, B or C)
  • At least 60% of the vehicle’s use must be for business
  • The car must be used for business purpose for at least 2 years

Where those conditions are fulfilled it is possible to recover up to 20% of the VAT paid.

2. Hire and leasing of cars

VAT is recoverable on the hire and leasing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.

3. Repairs and servicing of cars

VAT is recoverable on repair and servicing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.

4. Petrol and diesel

VAT registered traders are not entitled to recover VAT incurred on the purchase of petrol.

VAT is fully recoverable on diesel by VAT registered traders if the vehicle is used 100% for business.

5. Toll bridges and car parking

VAT registered traders are entitled to deduct VAT incurred on toll bridges and “off-street” car parking. VAT should be fully recoverable by VAT registered traders if the vehicle is used 100% for business. VAT on “on-street” car parking is exempt.

The Irish revenue has created categories of vehicles ; A, B, C, D, M, M1, M2 etc. only commercial vehicles in categories B and C open right to VAT deduction, Category A is for vehicles such as estates, saloons, convertibles, etc., that are not designed as commercial vehicles.

United Kingdom – HMRC will target businesses who have not registered to pay VAT

HMRC has launched a campaign to target businesses that are trading above the VAT registration threshold (73,000 GBP) but are not registered for VAT.

Under the terms of the VAT Initiative, those who have not registered to pay VAT can come forward any time up to 30 September to tell HMRC that they want to take part. If they make a full disclosure, most face a low penalty rate of 10 per cent on VAT that has been paid late. After 30 September, using information pulled together from different sources, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow. HMRC uses new technology and legislation to gather and analyse data, from internal and external sources, to identify people who should come forward.

United Kingdom – Businesses call for VAT cut

Fears that the UK economy has flatlined in the nine months since October have led to the Federation of Small Businesses (FSB) to call for yet another VAT rate change urging the government to drop VAT to 5% in certain sectors. While this approach has been adopted in other jurisdictions such as France, Germany and most recently Ireland there is little evidence of a positive impact and in some cases questions over whether these reductions were being passed on to end consumers at all.

United Kingdom – HMRC continue to move VAT on-line – Consultation Document Released

HMRC has just released a consultation document covering the changes to the operation of VAT and moving of more transactions on-line. HMRC proposes that from 1st of April 2012, for businesses with a turnover below £100,000, it will be compulsory to file VAT returns on-line and make electronic payment of any VAT due. On-line filing is currently optional for these smaller businesses, however, all new businesses that registered for VAT since 1 April 2010 and larger businesses, with a turnover of £100,000 or more are obliged to file and make VAT payments on-line.

Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu


Doing Business in Hungary: Cultural Background

Although this is not a comprehensive guide to doing business in Hungary the below cross cultural knowledge can help you to understand how business gets done in Hungary.

Although Hungarians are transactional and do not require long-standing personal relationships in order to conduct business, being introduced by someone they know and trust can often help. Prior to doing business in Hungary you will need the help of a local representative. This individual can help approach businesses, make appointments, act as an interpreter and be a decent source of cross cultural knowledge.

Once you have built some contacts you need to invest time in strengthening relationships. Socializing is an important part of the relationship building process. Hungarians prefer face-to-face meetings rather than more impersonal vehicles of communication such as letters. Hungarians are emotive speakers who say what they think and expect you to do the same. Hungarians often use stories, anecdotes, and jokes to prove their points.

Appointments are necessary and should be made in advance in writing. It is often difficult to schedule meetings on Friday afternoon or from mid July to mid August. Also avoid scheduling meetings from mid December to mid January. Punctuality for all social situations is taken seriously. If you expect to be delayed, telephone immediately and offer an explanation. It is considered extremely rude to cancel a meeting at the last minute and could ruin your business relationship.

Hungarians like to consider every aspect of a deal and will therefore spend more time negotiating and reviewing things before making a decision.  Details are vital so Hungarians will often require substantial amounts of information before arriving at a conclusion.  In negotiations, Hungarians do not hesitate to interrupt, argue or criticise if they feel it is needed. Arguments and debates are generally considered constructive ways of bringing about new ideas.

Most Hungarians conduct business in either German or English.  Foreigners are not expected to speak the local language as Hungarian is considered one of the most difficult languages to learn.  Avoid confrontational behaviour or high-pressure sales tactics. Bring plenty of business cards and present them to all you meet.

Traditional working hours are 9:00 am to 5.00 pm, Monday to Friday.  However, Hungarians will usually work overtime and often without a lunch break. Deadlines are an important part of Hungarian business culture.  Hungarians are expected to work overtime to meet a deadline and expect their business partners to do the same.

Hungarians prefer to keep their private and professional life separate. Despite initially being quite reserved, once Hungarians develop business relationships these are usually genuine and last forever.

If invited to a Hungarian’s home for a meal, bring a box of good chocolates, flowers or Western liquor. Do not bring wine as the Hungarians are proud of the wines they produce. An empty glass is immediately refilled so if you do not want more to drink, leave your glass ½ full. Hungarians never clink beer glasses, a tradition dating to the 1849 execution of Hungarian patriots when Habsburg officers clinked their glasses at each gunshot. If invited to a party or other large gathering, arrive no more than 30 minutes later than invited.

Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu


Hungarian taxation: Business taxation

Corporate Taxation

Introduction

From 1 May 2004, Hungary is a Member State of the European Union. Important features of the Hungarian tax system have been harmonized with EU tax law, including direct taxes, VAT, excise duties, mutual assistance and administrative cooperation.

Companies are subject to corporate income tax, social security contributions, VAT, property tax and excise taxes. Municipal authorities are authorized to levy local taxes, including local business tax and real estate taxes.

Corporate Income Tax

Corporate profits are subject to corporate income tax. The general rate of corporate income tax is 19%. If certain conditions are fulfilled, a rate of 10% is applicable to the part of the taxable base which does not exceed HUF 50 million, while any excess is taxable at the general rate.

Value Added Tax

The standard rate is 25%. A reduced rate of 5% applies to text books and specified medicines, medical materials and supplies. An additional reduced rate of 18% applies to certain basic foodstuff, hotel services and district heating.

Non-residents are taxable in the same manner as residents if they carry out any taxable transactions in Hungary.

EU resident registered taxpayers who are not established in Hungary are entitled to reclaim VAT according to provisions implementing the relevant EU directives.

Non-EU resident registered taxpayers who are not established in Hungary may be entitled, on the basis of reciprocal arrangements, to reclaim the VAT paid on domestic supplies of goods (including the importation of goods) and paid on services used in Hungary for their business activities. Hungary currently has reciprocity agreements with Liechtenstein and Switzerland.

Local taxes

The municipalities are authorized to levy a local business tax at rate of maximum 2% on corporate taxpayers that have their legal seat or permanent establishment within their jurisdiction. This tax is generally levied on the turnover, decreased by the acquisition costs of goods sold, costs of mediated services and material.

Immovable property situated in Hungary may be subject to municipal real estate taxes, including building tax and land tax. The owner is the taxable person. The building tax is HUF 900/m2, while the land tax is HUF 200/m2. These taxes are deductible for corporate income tax purposes.

Payroll tax

Employers’ social security contributions on top of the gross salary are:

  • pension and health insurance contributions at 27%; and
  • vocational training contribution at 1,5%.

The above contributions are deductible for corporate income tax purposes.

Withholding taxes

Dividends paid to (resident and non-resident) corporate shareholders are not subject to withholding tax. Only dividends paid to (resident and non-resident) individual shareholders are subject to withholding tax.

A 30% withholding tax is levied on interest, royalties and certain service fees (including fees for business consulting and advisory, advertising, marketing, etc.) paid to non-resident companies if Hungary does not have an income tax treaty with the country of residence of the recipient.

Transfer tax

Transfer tax is levied on the transfer of ownership (for consideration) of immovable property and rights. The tax is payable by the transferee. The taxable base is the fair market value (generally the sales price), not reduced by debts. The regular rate of the transfer tax is 4%.

Transfer tax is also due on the acquisition of vehicles. The acquisition of shares and other securities for consideration is not subject to transfer tax.

Property tax

A property tax applies to owners of water vehicles, aircrafts and heavy duty passenger cars.

Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu


Doing business in Hungary: Country profile

Fact File  

  • Official name – Republic of Hungary
  • Population – 10,037,637
  • Official Language – Hungarian
  • Currency – Forint (HUF)
  • Capital city – Budapest
  • GDP Per Capita – purchasing power parity $19,000

Formerly communist Hungary is one of the ten Eastern European countries that acceded to the European Union on 1 May 2004. Hungary is a landlocked state with many neighbours – Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia and Austria. It is mostly flat, with low mountains in the north. Lake Balaton, a popular tourist centre, is the largest lake in central Europe.

The ancestors of ethnic Hungarians were the Magyar tribes, who moved into the Carpathian Basin in 896, conquering the people already in the region. Hungary became a Christian kingdom under St Stephen in the year 1000. Hungary has played an important role as part of the Austrian-Hungarian Empire under the Habsburgs.

The Hungarian language is unlike the other neighbouring languages and is only distantly related to Finnish and Estonian. It is a member of the Finno-Ugric family of languages, unrelated to the Indo-European language family, which contains the major European languages. Hungarians list their surnames first.

The capital city, Budapest, which originally was two separate cities: Buda and Pest, straddles the River Danube. It is rich in history and culture and famed for its curative springs.

The country‘s main manufactured exports include machinery and transport equipment, foodstuffs and chemicals. Hungary is a highly musical country whose traditional folk music inspired its great composers such as Liszt, Bartók and Kodály.

Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu


The first post

This is the first post from IAPA. In the future there will be blog-like information in this section. Everything around our claim „Audit, Tax and Accounting in Europe. And worldwide.“

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