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

Foreigners often have a misconception of their tax situation if moving to Germany and working there.

Here are typical issues often misunderstood:

1. Very often foreign employees coming to Germany think that their foreign source income is not subject to German income taxation. This is a misjudgement. Foreign source income is either taxable in Germany or it effects the progressive German income tax rate. In both cases the income has to be declared in the German income tax return.
2. The calculation of foreign source income has to follow German legal requirements. This may require a recalculation of foreign source income. This is especially the case for business and rental income (for example recalculations of depreciations or capital allowances).
3. Foreign income taxes including withholding taxes can be deducted against German income tax if foreign source income is taxed in Germany.
4. It is also not correct to believe that being tax resident in Germany is unfavourable compared to a situation where somebody receives German based salaries as non-resident. This is due to the fact that non-residents cannot claim various allowances and personal expenses. A careful tax planning is advisable.
5. Germany has the reputation of being a high tax jurisdiction. This may be the case for individuals with high income. The tax burden on lower or average income is endurable. And German tax law is less strict concerning the deduction of income related expenses than most neighbouring countries. Additionally it provides a wide range of personal allowances and a liberal acceptance of private expenses. Foreign individuals are often surprised by the relatively low tax burden on average income. The real problem is social security liability if applicable. The social security contributions are one of the highest in Europe. Individuals coming to Germany should always seek advice on whether or not they can avoid German social security contributions.
6. Foreigners often think that personal payments to foreign organisations or insurance companies cannot be deducted. That again is a wrong impression. Payments to foreign pension schemes, private health insurance, private accident insurance, personal liability insurance etc. may very well be deductible in Germany.
7. A special problem arises from employment income related to stock options. Respective benefits will be taxed in Germany under certain conditions. Taxed will be the difference between the value at the time of purchasing the stocks and the value at the time when the options have been granted. For the allocation of taxation rights the time between granting the options and the vesting time (vesting period) is applicable. This means that if somebody worked for an employer in the vesting period in different countries he may have to pay taxes in these countries. Example: The vesting period was 2 years. For one year employee worked in the USA and for the other year he worked in Germany. Than half of the benefit will be taxed in the USA and the other half in Germany.

We have developed a checklist “Foreign citizens working in Germany – Required documents and information” to file a German income tax return. The checklist can be ordered free of charge at our German office (www.iapa-online.com/hamburg-germany).

On January 1, 2009 Germany introduced the possibility for German tax payers to install electronic bookkeeping outside of Germany. This enables German companies and subsidiaries of foreign entities to outsource IT infrastructure and accounting and payroll processes to other countries. The limitation to EU/EEA-countries has been abolished by the end of 2010.

Note: This regime only applies to electronic books and records. Paper documents such as annual financial accounts, opening balance sheets but also in- and outgoing invoices have to be kept in Germany. This restricts the possibilities to transfer the entire bookkeeping abroad.

The following requirements apply:

• The taxpayer has to inform German tax authorities where electronic bookkeeping is conducted. If a service provider is assigned to do the bookkeeping his name and address has to be reported to the tax authorities.
• The taxpayer has to fulfil special obligations in regard to participation in tax audits and documenting business transactions.
• Tax authorities must have full access to all electronic books and records.
• Taxation shall not be negatively affected by the transfer of electronic books and records abroad.

German tax authorities may grant permission to transfer electronic bookkeeping abroad. The application has to be made in writing. The following information is required:

• Detailed enumeration and description of electronic books and records to be transferred abroad
• Description of the bookkeeping process
• Description of facts which allows the tax authorities to verify above mentioned requirements

Foreign Service provider who is conducting the bookkeeping for a German company has to follow German accounting standards. Provisions of German commercial and tax law have to be considered. And he has to follow the special regulations of the Principles of proper IT-based Accountancy Systems (Grundsätze ordnungsmäßiger DV-gestützter Buchführungssysteme).

German tax authorities have the right to audit data produced by means of data processing systems (EDP systems). There are three forms of data access:

• Audit of stored data by using the taxpayer’s EDP system (access form: Z 1)
• Computer evaluation by instructing staff of the tax payer using EDP system (access from: Z 2)
• Demanding a data medium such as a CD with tax relevant data, documents and records (access form: Z 3)

In practice only access form Z 3 is used by tax inspectors when auditing smaller companies. The special rules of the Principles of Data Access and Auditability of Digital Records (GDPdU) have to be followed by the foreign service provider.

If the company and/or its service provider is not complying with the requirements under this regime fines in a range between € 2,500 and € 250,000 may be imposed. And the tax authorities have the right assessing taxes based on estimates.

As a US citizen or green card holder you are required by the US government to continue to file a US tax return, even if you are living, working and paying taxes abroad. This has been the law since about 1914, but it is only in the past few years that the IRS has started cracking down on Americans living abroad who have not been filing their tax returns.

The US government thinks that there is about $ 700 billion dollars of tax revenue that it is missing out on due to individuals and businesses failing to properly report their US taxes and hiding money in foreign bank accounts. The IRS is actively looking for individuals with over $ 50,000 held outside the US and is finding and prosecuting these individuals. In an effort to encourage US citizens living abroad to “catch up” on their taxes and to properly report their foreign bank accounts the IRS recently announced its Second Voluntary Disclosure Initiative. This is good news for anyone who has not been filing their taxes, reporting their bank accounts or both.

The first Voluntary Disclosure Program ended in 2009 and since then people who did not disclose their overseas bank accounts and other liquid assets were in a state of limbo as there was no official policy for how they would be dealt with (i.e. fines, criminal prosecution or both). The new initiative clearly defines the penalties and the requirements for properly disclosing your foreign accounts and catching up on your tax filings. The 2011 Offshore Voluntary Disclosure Initiative is the best opportunity since 2009 for people to catch up on their taxes and once again become compliant with the IRS. The penalties are higher than in 2009, but the IRS policy is not to reward people for not reporting and the IRS has stated that penalties will only increase in the future. This means that now is the time to catch up on your US taxes and report all of your foreign bank accounts.

In order to take advantage of the Voluntary Disclosure Initiative you will need to completely catch up by August 31st 2011 so you should contact your tax advisor immediately to get started. The terms will require you to file for up to 8 years and to disclose your foreign bank, brokerage and savings accounts and the balances for up to 8 years. You will also need to pay any late taxes, penalties and fines by August 31st 2011.

Finally, some key dates you should be aware of:

Whether you have been filing your taxes each year or iyou have recently moved abroad, you should be aware of the important tax dates for 2011 (the 2010 US tax year). They are:

• April 18th - US Federal Tax deadline, also the date any taxes need to be paid by in order to avoid penalties
• Deadline for State Taxes varies state by state (some have also extended to April 18th, some keeping to April 15th deadline)
• June 15th - Tax deadline for US Expats – expats receive an automatic 2 month extension (please note: if you owe money, interest accrues as of April 18th)
• June 30th - Deadline for the Foreign Bank Account Report form reporting foreign accounts - there is no extension for this
• August 31st- Deadline for 2011 Offshore Voluntary Disclosure Initiative
• Oct 15th - final tax deadline if you have filed for an extension before June 15th

The US tax code can be very confusing and is quite complex so we strongly recommend speaking to a US expat tax expert before getting started. This will greatly improve your chances of avoiding double taxation and getting hit with a large US tax bill.

All information was correct at the time this article was written (February 2011).

Author: David McKeegan, Director and Founder of Greenback Expat Tax Services, a US Income Tax provider that specializes in tax preparation for Americans who live abroad

Tax law is a field of scientific research. And there are co-operations of universities from different countries. On 4 March 2011 the second Joint Seminar of the following universities will take place in Hamburg :

• University of Hamburg (Course of studies: Master of International Taxation)
• Universita die Roma Sapienza (Course of studies: Master in Pianificazione Tributaria Internazionale)
• Guardia di Finanza – Corso Superiore die Polizia Tributaria

The seminar will cover the following topics:

• Transparancy and Exchange of Information with “Tax havens”
  • The legal Framework for Exchange of Information
  • Domestic Measures against the improper use of tax havens
• The Domestic Legislation against Tax Havens
  • Constitutional , EU and International Framework of Mutual Assistance in Tax Matters
  • The Single Instruments (New Rules and Critical Issues)

Co-ordinators are the professors Gerrit Frotscher and Pietro Selicato.

Speakers from the IAPA are involved and will cover the following topic:

Domestic Measures against the improper use of tax havens

The system of taxation in Poland is similar to other EU countries.
There are three main taxes: value added tax, corporate income tax, personal income tax.

Value added tax

The basic rate is 22% (an increase to 23% is planned in 2011). The regulations are based on EU directives, so main principles are similar to those existing in other EU countries. Generally the tax shall be transparent for entrepreneurs, but there are some limitations in deduction of VAT paid – personal cars (partial deduction up to 60%, no more than 6,000 PLN is allowed), fuel used to power them, hotels, and restaurants.

Corporate income tax

The basic rate of the tax is 19%. It is the only income tax related to the economic activity. It is payable to the state budget. It is shared with local authorities based on other regulations. Poland implemented regulations that eliminate double taxation in case of dividend payments from one company to the other one – when certain conditions have been fulfilled the revenues from dividends are free from income tax.

Personal income tax

The basic rates are 18/32%. Personal income tax is applicable also for individuals running economic activity as sole entrepreneurs or partners of partnerships. They have got an additional possibility to pay flat 19% rate tax, similarly to bigger companies.

The income tax rate on interests and capital gains is 19%.

Other taxes and charges

There is a number of other taxes that may be applicable depending on the activity of the entrepreneur – the most important are excise duty, real estate tax, transportation means tax, civil law transaction tax as well as social security contribution, charges on using the environment, recycling of electronic and electric products, contribution for the fund of supporting disabled people and others.

It is always worth  considering  consultancy with a tax advisor to review the taxes and charges that may be applicable and how to pay them in the best way.

Author: Tomasz Wikliński, THOMAS sp. z o.o., www.thomas.pl

The Dutch office market

The office market in the Netherlands is decentralized, which results in each city having a more or less specific office market. Amsterdam (approx. 6.6 million sq.m. office stock) focuses on finance and international trade, The Hague (approx. 4.0 million sq.m.) is the national administration centre where the government and public departments are the main users of the local office buildings. Rotterdam (approx. 3.1 million sq.m.) has one of the largest ports in the world, as a result of which the office market has a traditional focus on insurance and trade. Utrecht (approx. 2.5 million sq.m.) is the heart of the country with a focus on transport and domestic commercial services. In Eindhoven (approx. 1.4 million sq.m.) and Arnhem (approx. 1.1 million sq.m.) occupiers of office space have strong ties with electronics, chemicals and energy supply.

In general the office leasing market reflects the trends in the national economy. After 2000 when GDP fell, the demand for office space fell back as well and supply increased rapidly. Like the Dutch economy, take-up levels increased in the period 2004-2007. In 2008 and 2009 take-up decreased due to the changing economic climate. Occupiers are increasingly cautious in decision making and activity is driven by cost reduction and is focused primarily on good quality, well-located space. In the course of 2009 the supply rose by approx. 11% compared to 2008. There is a strong polarisation between (economically) dated and modern office space in the total supply.

Owners are aware of the fact that the market has changed and it has become a lot more difficult to attract new tenants. In all markets incentives went up; in areas confronted with high-vacancy rates the growth of incentives is even more generous.

The Netherlands has seen its key office markets slow down over the course of 2009. However, signs of modest improvement in occupier interest are becoming evident, suggesting that the prime market segment has found its floor and no further rental falls are expected. Prime rents in the top CBD locations across the country have stabilized, whilst secondary and non-core locations continued to decline.

Town planning

The Netherlands has applied strict regulations with respect to the development of offices, retail, industrial and residential schemes since 1950. The municipal system of zoning plans determines in detail what can and cannot be built. In general, developers are only granted building permits if their plans fit in with the zoning plans or if an exemption has been granted. The zoning plans also apply to all redevelopment projects. It is therefore not easy to change the use of the building without the cooperation of the local authorities. Municipal as well regional approval is mandatory with respect to zoning plan changes. Procedures for obtaining permits are scheduled according to strict timetables. It can take several years to obtain approval for complex building plans in which public authorities play a dominant role.

Lease or buy

The general practice in the Netherlands is to lease office space: approx. 65% of all office buildings are owned by investors. Owner-occupier situations are more common in the industrial real estate market, but due to an increasing number of sale-and-lease-back transactions this proportion is changing.

Leasing has advantages, such as a positive impact on the company’s cash flow, flexibility, the possibility of off-balance presentation and negotiation of incentives with landlords. Lease contracts can be subject to VAT; which may result in VAT savings in specific situations. Depreciation is an important consideration with respect to the ownership of real estate.

Since the beginning of 2007, the depreciation on real estate is limited, both for BVs and for IB entrepreneurs. Depreciation is exclusively permitted where and in as far as the book value of the building exceeds the so-called base value. The level of the base value depends on the intended use of the building.

Leasing Practises and Taxes

Offices and Industrial

In all instances:
The tenant has security of tenure as the lease automatically renews at expiry, bearing in mind the notice period. The exception to this is if the landlord wishes to occupy, tear down or redevelop the building. These conditions are rather strict and in reality the landlord’s options of terminating the lease are limited.

• The tenant pays for internal repairs and utilities.
• The tenant is responsible for insurance of contents.
• The landlord pays for the external and structural elements of the building.
• The landlord is responsible for building insurance and non-recoverable service charge items.
• The landlord provides property management services that are not recoverable through service charges.

More about taxes

The landlord and the tenant are each partly responsible for the property tax levied by the local authority. Each property is assessed for taxation purposes, known as “onroerende zaak belasting” (OZB). The local government gives a value for the property and that value applies for one year. Each year the authorities collect the tax. The rate depends on the local authorities and this is a percentage of the value according to the Immovable Property Act.

Purchase Practises and Taxes
The purchaser is responsible for the so-called ‘kosten-koper’, which means that the buyer is liable for the payment of all additional costs. Those costs include transfer tax (6%), notary costs (0.2-0.5%), legal costs (negotiable) and some minor administration costs, such as land registration (Kadaster).

General building costs

Market Outlook
Although the Dutch economy is now on the road to recovery the market conditions are still challenging. Supply will continue to creep up, albeit at a slow rate. Demand is subdued with lease extensions dominating the market in the short term. Prime rents are expected to remain largely stable, however, some pressure may be felt in the secondary markets and overall incentives remain high.

Investment in Immovable Property

It is possible to make private immovable property profitable by leasing it to private or corporate tenants. The market can be broken down into 3 fiscal situations:

• Personal investment
• Income from other work
• Income from business operations

Personal investment
In most instances the income from immovable property is subject to a fixed tax rate via Box 3. In the case of leasing beyond the scope of normal active asset management, the income is not taxed via Box 3, but via Box 1, as income from other work. The balance of the value applicable to the immovable property, as at 1 January and 31 December of each year, minus the financing debts on 1 January and 31 December is taxed at 1.2% via Box 3. Immovable property subject to tax based on the principles applicable to Box 3 is, in principle, valued at current market value at the reference date. Box 3 is a fixed tax rate for income from immovable property. The actual income, whether rent or lease is irrelevant.

Income from other work
In the case of private entities, income from ordinary investment and speculation does not translate into taxable income from other work. Where the activities however go beyond ordinary active asset management, such as in the case of the preparation and sale of immovable property where the sales profit is increased by carrying out major maintenance in-house, the work will not be considered normal
investment or speculation. The income will be viewed as taxable income where the work has a favourable influence on the financial outcome. The actual lease revenue is taxed in Box 1 at a maximum progressive rate of 52%. The (business) costs are deductible. If of the immovable property is sold, the profits (sales value minus the fiscal book value) will also be taxed progressively.

Income from business operations
This is processed in a similar way to that outlined in situation 2.

Depreciation
The annual depreciation is deductible from the annual profits in situations 1 and 2. As of 1 January 2007, the fiscal book value may not however fall below the so-called base value. The base value is equivalent to the WOZ value. If the immovable property is not leased, but used by the company itself, then the base value is equivalent to 50% of the WOZ value (WOZ for ‘Wet waardering onroerende zaken’ or Real Estate Valuation Regulations).

Private house
A private house is viewed as the complete unit of the house with the garage and other buildings on the property. Houseboats and caravans are also viewed as private houses. The only condition being that they are permanently bound to a single address. A private house is only considered as such where the house is owned by the occupant (tax payer) and where it serves as permanent domicile and not as temporary domicile.

The Own Home Scheme (Eigenwoningregeling)
Once it has been determined that a house can be viewed as an ‘own home’, the house automatically qualifies fiscally for the Own Home Scheme based on Box 1 (Work and Home: Maximum tax rate 52%).

The own home scheme works as follows: The fixed sum assumed by the legislator for the enjoyment derived from the own home is fiscally expressed in the own home fixed sum. The own home fixed sum is determined on the basis of a fixed percentage of the value of the house in question. The basis for determining the value of the own home is the value of the property, as determined on the basis of the WOZ value. The WOZ value is determined by municipal decree. Certain costs can be deducted from the above-mentioned own home fixed sum. This does not however mean that the interest paid on a mortgage bond is automatically tax deductible.

Author: Harry den Hond, Schagen Lensen & van Krieken Accountants, www.slk.nl

Under Dutch law, a foreign individual or company may operate in the Netherlands through an incorporated or unincorporated subsidiary or branch. Dutch corporate law provides a flexible and liberal framework for the organization of subsidiaries or branches. There are no special restrictions for a foreign entrepreneur to do business in the Netherlands.

The business operations can be set up in the Netherlands with or without a legal personality. If a legal entity has legal personality, the entrepreneur cannot be held liable for more than the sum it contributed to the company’s capital.

Dutch law distinguishes 2 types of companies both of which possess legal personality: the private limited liability company (besloten vennootschap met beperkte aansprakelijkheid - BV) and the public limited liability company (naamloze vennootschap - NV). These forms of legal entities are most commonly used for doing business in the Netherlands.

Other common forms of business entities are sole proprietorship (eenmanszaak), general partnership (vennootschap onder firma - VOF), (civil) partnership (maatschap) and limited partnership (commanditaire vennootschap - CV). None of the latter forms possesses legal personality and, as a consequence thereof, the owner or owners will be fully liable for the obligations of the entity.

All entrepreneurs engaged in commercial business and all legal entities have to register their business with the Trade Register (Handelsregister) at the local Chamber of Commerce (Kamer van Koophandel).

This section covers the abovementioned legal entities for doing business in the Netherlands from a legal perspective. After dealing with the distinction between a subsidiary and a branch, the above mentioned entities will be described in greater detail. This will be followed by a summary of the status of intellectual property rights in the Netherlands. Finally, this manual will explain the advantages and disadvantages of doing business through a subsidiary or a branch.

Branch, subsidiary

Branch
A branch is not a separate legal entity. A branch is a permanent establishment of a company from which business operations are carried out. As a result, the company that establishes a branch in the Netherlands is liable for claims incurred by actions carried out by the branch.

Subsidiary
A subsidiary is a separate legal entity that may be established by one or more shareholders. The subsidiary is a legal entity that is controlled by the (parent) company. Control of a subsidiary is mostly achieved through the ownership of more than 50% of the shares in the subsidiary by the (parent) company. However, under certain circumstances it is also possible to obtain control by special voting rights or diversity of the other shareholders. These shares or rights give the (parent) company the votes to determine the composition of the board of the subsidiary and thereby to exercise control. Since a subsidiary has limited liability, a shareholder (the parent company) is, in principle, only liable to the extent of its capital contribution.

Private limited liability company (BV)

The laws regulating the BV are largely based upon rules governing the NV. The shares of a BV are not freely transferable (subject to blocking clauses incorporated in the articles of association) which makes this type of company generally preferred as the vehicle for a privately held company.

Incorporation
A BV is incorporated by one or more incorporators pursuant to the execution of a notarial deed of incorporation before a civil-law notary. The notarial deed of incorporation must be executed in the Dutch language and must at least include the company’s articles of association and the amount of issued share capital. Prior to incorporation, statement of no objection (‘verklaring van geen bezwaar’) must be obtained from the Dutch Ministry of Justice. This statement is required for incorporation and ensures that all statutory requirements for incorporation have been met. Certain information regarding the incorporator(s) must be submitted before approval is granted.

While the BV is in the process of incorporation, business may be conducted on its behalf provided that it adds to its name the letters, ‘i.o.’ (for ‘in oprichting’), which means in the process of being incorporated. The persons acting on behalf of the BV i.o. are severally liable for damages incurred by third parties until the BV (after its incorporation) has expressly or implicitly ratified the actions performed on its behalf during the process of incorporation. A similar liability arises for the persons responsible if the BV is not incorporated or if the BV fails to fulfil its obligations under the ratified actions and the responsible persons knew that the BV would be unable to do so. In the event of bankruptcy within 1 year of incorporation, the burden of proof lies with the persons responsible.

Members of the board of directors are also severally liable to third parties for legal acts performed after incorporation, but preceding the registration of the BV with the Trade Register.

Share capital
A BV must have an authorized capital, divided into a number of shares with a par value expressed in Euros. Shares without a par value are not permitted. At least 20% of the authorized capital must be issued and at least 25% of the par value of the issued shares must be paidup. The issued and paid-up capital of a BV must amount to at least € 18,000.

Payment for shares can be in cash. If payment for shares is in cash, the civil-law notary must be provided with a statement from a bank to the effect that, upon incorporation, the money will be available to the BV at the bank in question, or that the bank has received the required amount of cash in an account in the name of the BV i.o. This statement may not be issued more than 5 months prior to the date of incorporation.

Payment for shares can also be in kind. Payments in kind are contributions of property and/or other non-cash items. These payments are restricted to items that can be objectively appraised. If these payments take place upon incorporation of the BV, the incorporators must describe the contributed assets and an auditor must issue a statement to the effect that the value of the contribution is at least equal to the par value of the shares. The statement of the auditor is to be provided to the civil-law notary involved prior to incorporation and may not be issued more than 5 months prior to the date of incorporation.

Shares
A BV may only issue registered shares. Besides ordinary shares, a BV may also issue priority shares, to which certain (usually voting) rights are allocated in the articles of association, and preference shares, which entitle the shareholder to fixed dividends that have preference over any dividends on ordinary shares. Within a given type of share, the articles of association may also create different classes of shares (e.g. A, B and C shares) to which certain specific rights are allocated (e.g. upon liquidation).

Dutch law does not allow for the existence of non-voting shares. All shareholders must at least have one vote. However, by using a trust office, the voting power can be separated from the beneficial interest.

The articles of association of a BV must stipulate limitations on the transferability of the shares. Dutch law provides for 2 possible restrictions, which require the transferor either to:

• offer his shares to the other shareholders, the right of first refusal, or;
• obtain approval for the transfer of shares from the corporate body, as specified in the articles of association.

Shares in a BV are transferred by a deed of transfer executed before a civil-law notary.

The board of directors of a BV must keep an up-to-date shareholders’ register, which lists the names and addresses of all shareholders, the number of shares, the amount paid-up on each share and the particulars of any transfer, pledge or usufruct of the shares.

Management
The management of a BV consists of the board of directors and the general meeting of shareholders. A BV can, in addition, under certain circumstances have a supervisory board.

General meeting of shareholders
At least one shareholders’ meeting should be held each year. Shareholders resolutions are usually adopted by a majority of votes, unless the articles of association provide otherwise. As a rule, the shareholders may not give specific instructions to the board of directors with respect to the management of the company, but only general directions.

Supervisory board
The supervisory board’s sole concern is the interest of the BV. Its primary responsibility is to supervise and advise the board of directors. Pursuant to the Large Companies Regime (Structuurregeling), the supervisory board is only a mandatory body for a Large BV; however this is optional for other BVs.

Board of directors

The board of directors is responsible for managing the BV. The members of the board of directors are appointed and removed by the shareholders (unless the BV is a Large BV). The articles of association generally state that each director is solely authorized to represent the company. However, the articles of association may provide that the directors are only jointly authorized. Such a provision in the articles of association can be invoked against third parties.

The articles of association may provide that certain acts of the board of directors require the prior approval of another corporate body such as the shareholders’ meeting or the supervisory board. Such a provision is only internally applicable and cannot be invoked against a third party, except where the party in question is aware of the provision and did not act in good faith.

A member of the board of directors of the company can be held liable by the BV, as well as by third parties. The entire board of directors can be held liable to the BV for mismanagement. An individual member of the board of directors can be held liable with respect to specific assigned duties. The shareholders can discharge the members of the board of directors from their liability to the company by adopting an express resolution barring statutory restrictions.

Besides the aforementioned liability prior to incorporation and registration, liability towards third parties can occur in several situations. For example, in case of the bankruptcy of the BV, the members of the board of directors are severally liable for the deficit if the bankruptcy was caused by negligence or improper management in the preceding 3 years. An individual member of the board of directors can exonerate himself by proving that he is not responsible for the negligence or improper management.

Simplification and flexibilization of Dutch private company law
Dutch private company law is currently subject to extensive discussion. A Bill to simplify Dutch private company law was submitted on 31 May 2007 and is currently pending in the Dutch Parliament. The Bill will abolish many of the formalities that are currently required to set up a BV; e.g. the requirement of a minimum capital of €18,000. The new legislation will make it easier for entrepreneurs to set up a BV in the future.

Public limited liability company (NV)

In general, everything mentioned above that applies to the BV also applies to the NV. This section will outline the most significant differences between the NV and the BV.

Share capital and shares
The minimum issued and paid-up share capital is € 45,000. Besides registered shares, a NV may also issue bearer shares. Bearer shares must be fully paid up and are freely transferable. Registered shares have to be transferred by executing a deed of transfer before a civil-law notary, and in contrast to a BV, it is not a statutory requirement that the articles of association of an NV provide for limitations with respect to the transferability of the registered shares. An NV is authorized to issue share certificates (certificaten).

Other common forms of business entities

Partnership (maatschap)
Entrepreneurs in the liberal professions (such as doctors, lawyers and graphic designers) often set up partnerships (maatschap).

A partnership is an arrangement by means of which at least two partners, who may be individuals or legal entities, agree to conduct a joint business. Each partner brings money, goods and/or manpower into the business. Each partner is personally, either jointly or severally, liable for all the obligations of the partnership. A partnership does not possess legal personality.

A public partnership (openbare maatschap) participates in judicial matters under a common name. The possessions of a public partnership are legally separated from the possessions of the partners.

General/commercial partnership (VOF)
A general partnership can be defined as a public partnership that conducts a business instead of a profession. A public partnership and the partners must be registered in the Commercial Register at the Chamber of Commerce.

A limited partnership (CV)
A limited partnership is a special form of the general partnership (VOF) which has both active and limited (or sleeping/silent) partners.

An active partner is active as an entrepreneur and is liable, as in the case of the general partnership.

The silent partner, however, tends to finance the business and stays in the background. The silent partner is liable only up to the amount of his capital contribution. He is not allowed to act as an active partner and his name cannot be used in the name of the partnership. If the silent partner enters the business (to provide extra finance for growth) he becomes liable as an active partner.

Sole proprietorship (eenmanszaak)
In the case of a sole proprietorship (eenmanszaak), 1 (natural) person is fully responsible and liable for the business. A sole proprietorship does not posses legal capacity and there is no distinction between the business assets and private assets of the natural (person).

Legislative proposal
There is currently a bill pending in the Dutch Parliament which provides for replacement of the partnerships described above by a new legal form of partnership. Depending on whether it is public or not, it will be possible for such a partnership to obtain legal personality and, consequently, to hold property, to contract in its own name, to sue and be sued. Obtaining legal personality, however, does not result in a reduction of the liability of the owners or partners in the partnership. This new form of partnership will be introduced in the Dutch Civil Code in the near future.

Trust company

A trust company is entitled to perform corporate trust services for payment, such as the administration and management of a company that conducts business in the Netherlands. A trust company can take care of (required) administrative services, such as the preparation of annual reports. In certain instances the trust company is the (sole) director of the company for which it provides the services.

Intellectual property

The Benelux Convention on Intellectual Property regulates the provisions regarding the registration, use and protection of trade marks, designs and models in the Netherlands, Belgium and Luxembourg.

Trademarks can be names, drawings, stamps, letters, numbers, shapes of goods or packages and all other signs used to distinguish the goods of one company from those of others. A registered trademark is protected for a period of 10 years from the registration date and the protection can be extended by a further 10 years. Renewal must be requested and all due fees paid. The rightful owner is entitled to claim damages for infringement of its rights (such as the use of the trademark by another party).

A design or model is the new appearance of a utility product. A registered model or design is protected for 5 years from the registration date onwards and the protection can be extended by 4 periods of 5 years each, up to a maximum of 25 years. Renewal will be effective upon timely settlement of all fees due. The rightful owner is entitled to claim damages for any infringement of its rights (such as the use of the model or design by another party).

Copyright Act 1912 (Auteurswet 1912) contains provisions regarding the protection of copyrights. Copyright does not require registration in the Netherlands and applies (amongst other things) to literature, dramatic, musical and artistic work, sound recordings, films and computer programs. A copyright expires 70 years after the author’s death.

Council Regulation (EC) No 40/94 on the Community trademark introduces a system for the award of Community trade marks by the Office for Harmonisation in the Internal Market (OHIM). The Community trademark system of the European Union enables the uniform identification of products and services of enterprises throughout the European Union. Requiring no more than a single application to OHIM, the Community trade mark has a unitary character in the sense that it produces the same effects throughout the Community. The Community trade mark contains provisions concerning the registration and use of Community trademarks by (legal) persons and the protection of the rightful owners of such Community trademarks. A registered trademark is protected for 10 years from the registration date onwards and the protection can be extended repeatedly by subsequent ten-year periods. Renewal must be requested and all fees due settled in good time. The rightful owner is entitled to claim damages for infringement of its rights (such as the use of the trademark by another party).

Branch or Subsidiary

Many foreign companies make use of a subsidiary rather than a branch. The main legal reason to set up a subsidiary, instead of a branch, is limitation of liability. As a shareholder of a subsidiary, the foreign company’s liability is, in principle, limited to the extent of its capital contribution; whereas, if the foreign company makes use of a branch, it is fully responsible for all the obligations and liabilities of the branch.

One major advantage of setting up a branch is that it does not, in principle, require the same legal formalities required for setting up a subsidiary. However, the simplification and flexibilization of the Dutch limited company law (as mentioned above) may well diminish this advantage.

Another important aspect to consider with respect to the choice of setting up a branch or a subsidiary in the Netherlands is the matter of local tax regulations. The choice of setting up a branch or a subsidiary will be determined based on the circumstances and relevant factors with respect to the business as such, and the Dutch tax regulations and tax treaties.

Author: Harry den Hond, Schagen Lensen & van Krieken Accountants, www.slk.nl

Official name: Republic of Poland
Population: 38,463,689
Area: 322,575 km²
Official language: Polish
Currency: Polish Zloty (PLN)
Capital city: Warsaw
GDP Per Capita – purchasing power parity : 18,072 USD

Poland is located in Central Europe at the Baltic Sea. It borders on Germany (in the West), Czech Republic, Slovakia (in the South), Ukraine, Belarus (in the East), Lithuania (in the North-East) and Russia (Kaliningrad district – in the North). By area it is the 68th country in the world and 9th in Europe. Poland is divided in 16 voivodships. The main river is Vistula that flows from the mountains in the South to the Baltic Sea.

Poland is a homeland for many persons known worldwide : Nicolaus Copernicus – an astronomer that “stopped the Earth and made Sun moving”, John Paul II – the Pope, Lech Walesa – that played an important role in changing the political system of the countries in Eastern Europe, Frederic Chopin – a composer, many scientists, travelers, soldiers fighting for independency of Poland and other countries.

The history of Poland reaches the year 966 when Mieszko I, the first ruler, accepted Christianity. Poland became a kingdom in 1025 and entered into a Commonwealth with Lithuania.  During the majority of its history Poland was independent, multiethnic and multireligious.  

In 1795 Poland was divided between three invaders: Kingdom of Prussia, Russia and Austria. It regained the independency in 1918 after the First World War. During the Second World War it was occupied by The Third Reich and Soviet Union. After the war Poland became a socialist republic, politically and economically dependent on the Soviet Union. In 1989 the political system was changed and it became a parliamentary democracy. After very difficult reforms in the early nineties it returned to a market economy. Poland is a member of the European Union since 2004.
Poland is a fast developing country. The GDP in 2009 reached the level of 1,7% and it was the only positive number in the EU (average – minus 4,1%). The economy is mixed in terms of ownership. 25% of GDP is generated by state-owned-companies, what is a level similar to France and Norway. It is an attractive place for investments – good geographical location, internal stability, participation in the EU. It is however not ideal – unclear law, significant bureaucracy, high administration charges, not enough developed infrastructure and high unemployment are the most important problems for the entire society.

Author: Tomasz Wikliński, THOMAS sp. z o.o., www.thomas.pl

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