Last month’s tax and legal news in a few sentences.
4 December 2019 In brief
DOMESTIC NEWS IN BRIEF
- At a regular meeting of the Economic and Financial Affairs Council (ECOFIN), the Czech Republic’s request to introduce a general VAT reverse charge mechanism was finally approved after five long years. The regime should apply to all transactions exceeding EUR 15 500 (CZK 450 000). Since this measure must be implemented into the VAT Act, it is yet unclear when and how it will enter into effect.
- An amendment to tax legislation for 2020 aiming to boost public budget revenues passed through the third reading in the deputies’ chamber and is headed to the senate. The proposed amendment will bring significant changes to the methods of creating technical provisions by insurance companies in compliance with Solvency II. The amendment also increases selected excite duties and tax rates on gambling and brings changes in the real estate tax area.
- An amendment to the government decree on material support provided to create new jobs and to requalify and train employees within investment incentives has been in effect since 1 December 2019. It introduces two main changes: material support for technological centres will be provided across the CR (except Prague) but for manufacturing only in regions with an unemployment rate of at least 7.5%.
- The long-planned e-sick note project will finally be launched on 1 January 2020, significantly changing the method of issuing temporary incapacity to work notes as well as the method of how employers will learn about their employees’ temporary incapacity to work. This information will be available either on the Czech Social Security Administration’s e-portal, or employers will have to ask for the automatic delivery of such information into their data boxes or via email. Nevertheless, employees will still have to inform their employers about their temporary incapacity to work without any undue delay (e.g. by phone or email). According to the new rules, after fourteen days of an employee’s incapacity to work, employers will have to electronically deliver to the CSSA an appendix to the application for sickness allowance stating the account to which the employee’s wages are transferred and, once the temporary incapacity to work terminates, all information necessary for the payment of the last sickness allowance.
- The rates of foreign per diem meal allowances for 2020 were announced via Decree No. 310/2019 Coll. as follows: EUR 45 for Germany, Austria and France; EUR 40 for Poland; and EUR 35 for Slovakia.
- The minimum wage should increase by CZK 1 250 to CZK 14 600 from January. A draft decree is yet to be approved by the government.
- The maximum annual assessment base for social security insurance for 2020 will increase to CZK 1 672 080.
- In 2020, reduction limits for sickness insurance purposes will increase as follows: the first reduction limit to CZK 1 162, the second to CZK 1 742 and the third to CZK 3 484.
- A government bill on the avoidance of double taxation with Taiwan was passed in the third reading and is headed to the Senate.
- A draft amendment to the Tax Procedure Code passed through the first reading in the Chamber of Deputies in early November.
- The number of trust funds has almost doubled over the last year, with less than one thousand in 2018 and 2 080 of trust funds at the end of November of this year.
- The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) was passed by parliament. Once signed by the president, it will be promulgated in the Collection of International Treaties and deposited with the OECD. For the CR, the MLI is expected to enter into force in April 2020, to be effective from 2021.
- A new double taxation treaty with Korea is likely to be effective from the beginning of 2020, pending only the exchange of ratification documents between the two states.
FOREIGN NEWS IN BRIEF
- The European Commission lodged an appeal against the judgement of the General Court of the European Union regarding the Hungarian advertising tax (Commission v Hungary Case T-20/17). The General Court in its judgement delivered in June rejected a European Commission finding that a Hungarian advertising tax was incompatible with EU state aid rules.
- The European Council acceded to a request for the extension of the period under Article 50.3 TFEU, under which the United Kingdom has signified its intention to leave the EU. The extension will apply until 31 January 2020 but includes flexibility for the UK to exit the EU at an earlier date if the Withdrawal Agreement negotiated between the UK and the EU is ratified by both parties in the intervening period. Until such a time, the UK will remain an EU member state with all corresponding rights and obligations of membership in effect.
- The OECD published other interpretation guidelines regarding the fulfilment and application of country-by-country reporting requirements (CbCR), as implemented within BEPS 13.
- Bosnia and Herzegovina signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) as the 90th jurisdiction of the signatories. Latvia and Mauritius have deposited their instruments of ratification for the MLI; the MLI will enter into force for both Latvia and Mauritius on 1 February 2020. An MLI ratification bill was submitted to the Estonian parliament; the MLI will enter into force for Estonia three months after Estonia lodges its instrument of ratification with the OECD. On 1 November 2019, the MLI entered into force for Norway.
- The upper house of the Austrian parliament approved a draft bill which introduces a tax on digital revenues derived from online advertising and imposes reporting obligations on operators of online platforms. The upper house also approved a bill to introduce anti-hybrid mismatch legislation into local Austrian law. The measures will enter into force on 1 January 2020.
- The German Federal Cabinet approved draft legislation to transpose EU Directive 2018/822 on mandatory disclosure rules (DAC 6) into German national law. French Ordinance No. 2019-1068 (the Ordinance) regarding the transposition of EU Directive 2018/822 on mandatory disclosure rules (DAC 6) into national law was published.
- The European Parliament adopted a resolution urging member states to agree on a position on proposals requiring public country-by-country reporting (CbCR) of taxes paid by multinationals. So far, EU ministers have failed to agree on the proposal first put forward in 2016. The proposal may be revisited again later in 2019 under the Finnish presidency of the European Council.