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

The council of the European Union agreed on 13 July 2010 on a general aproach on a draft directive aimded to simplifying VAT invoice requirements, in particular concerning electronic invoicing.

EU-member states shall be obliged to abolish less favourable treatment of e-invoices compared to paper invoices. The proposal also includes deadlines for the issuing of invoices in order to speed up the information exchange on intra-community supplies.

The directive will be adopted by the Council once the European Parliament has given its opinion.

More information:  

• VAT Directive 2006/112/EC
• Press release

Author: Peter Scheller, Editor-in-Chief

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

Politically Germany is one of the driving forces of European unification. But all good intentions seem to vanish if money is involved. In this respect Germany’s finance minister is no different from others. He is responsible for drafting tax laws with doubtful EU-comparability.

A good indication that German tax law is not in line with EU law is the sheer number of cases in front of the European Court of Justice. No other European country produces more cases in regard to direct taxes. In the last ten to fifteen years Germany lost a lot of cases. And it looks as though many more are to follow. A German professional magazine publishes every year a list of tax provisions which might not be in line with EU law. This year’s list names 146 different provisions! And this list does not contain potential cases on indirect taxes such as Value Added Tax (VAT) or excise taxes on energy, tobacco or alcohol.

German tax law discriminates in certain cases against foreign enterprises as well as individuals. Anti-discrimination provisions of the EU-treaty are

• General freedom right/Right to choose residence
• Freedom for employees
• Freedom of trade
• Freedom to conduct services
• Right of establishment
• Freedom to transfer capital funds

For business activities e.g. the following German regulations can be subject to court cases:

• Deduction of foreign losses
• German thin capitalisation-regulations
• Capital gains taxation if assets are transferred abroad
• Taxation at source of dividends and profit distributions
• German CFC-regulations
• German restructuring regulations

The following German taxation of individuals may breech EU freedom rights:

• Deduction of foreign losses
• Deduction of personal allowances
• Taxation of foreign investment funds
• Extensive double taxation concerning inheritances and gifts

Enterprises and individuals from other EU-countries have good chances to argue against discriminating tax regulations. For enterprises and individuals resident in non-EU countries such as the USA or Switzerland, it is much more difficult to achieve protection of EU anti-discrimination jurisdiction. But it is not impossible. This is due to the fact that the Freedom to transfer capital funds provides cover to respective world-wide activities. Companies and individuals from non-EU countries who are subject to German taxation and feel discriminated by German tax legislation should always check whether appeals against tax assessments could prove to be successful.

But to be fair it has to be said that in recent years a lot of German tax provisions have been brought in line with EU law by the German government. But in many cases it was only after Germany lost cases in front of the European Court of Justice or German fiscal courts.

Glossary

Author: Peter Scheller, Somann & Scheller, www.somannscheller.de