Latest news - March 2019

HOME NEWS IN BRIEF

• An amendment to the Criminal Register Act and an amendment to the decree stipulating the essentials of printed forms of an application for a copy or extract from the Criminal Register and an application for an extract from the register of administrative offences (No. 42/2019 and 43/2019 Coll.) were published in the Collection of Laws.
   
• The Chamber of Deputies published the agenda for its next session, which will commence on 5 March and continue until 29 March. The tax package with the Senate’s amending proposals is to be debated on 12 March 2019. Neither the MLI, a double taxation treaty with Korea, an amendment to the Act on Electronic Reporting of Sales, nor an amendment to the Investment Incentives Act are on the session’s agenda.
   
• The government discussed a proposed resolution to issue two declarations on the effective date of the Convention on Mutual Administrative Assistance in Tax Matters for the exchange of information under the Multilateral Competent Authority Agreement on the Exchange of Financial Account Information; and under the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.
   
• The government discussed and approved a proposal to amend some laws regulating financial market. The governmental bill was submitted to the Chamber of Deputies, as Print No. 398.
   
• The General Financial Directorate issued Information on Tax Implications of Possible Changes in the Categorisation of Accounting Entities under Section 1b in connection with Section 1e of Act No. 563/1991 Coll., on Accounting, in the taxation period starting in 2018. Depending on the classification into the respective size category, some accounting entities shall be exempt from certain duties under the Accounting Act, for instance to have their financial statements audited. This may also affect an entity’s deadline for filing a tax return.

WORLD NEWS IN BRIEF

• The European Commission published practical guidance on the customs impact resulting from the United Kingdom’s withdrawal from the European Union. They mainly outline implications for import and export activities, and what can be done to prepare.
   
• At its February session, ECOFIN (the council of finance ministers) dealt with the issue of voting on tax matters at the EU level. It became clear that the European Commission’s initiative proposing abolishment of unanimous vote on tax matters does not have the member states’ support.
   
• The European Court of Justice issued two important decisions concerning the interpretation of the terms “beneficial owner” and “abuse of right”  when applying withholding tax exemption under directives on the common system of taxation of parent companies and subsidiaries, and on taxation of interest and royalty payments made between associated companies. The case involved a subsidiary paying interest and dividend to a parent company, which subsequently paid them to another group company outside the EU. A more detailed analysis of the case law will be presented in the next issue of our Tax and Legal Update.
   
• On 13 and 14 March 2019, a public consultation will be held in Paris on an OECD document proposing changes in approaches to taxation of digital economy within the existing rules of international taxation (double taxation treaties and transfer pricing). The consultation document contains two pillars. The first pillar concerns a revision of the rules allocating the right to tax among states; the second pillar concerns rules of profit allocation based on user participation, marketing intangibles or significant economic presence. At the same time, parallel negotiations are taking place at the EU level and in individual member states. These concern the introduction of digital tax, which would stand outside double taxation treaties, its amount to be derived from income from selected digital activities regardless of their profitability.
   
• The Slovak Ministry of Finance issued a Guidance on Transfer Pricing Documentation. The guidance amends the criteria for the preparation of TP documentation by creating three categories: 1) full TP documentation (master and local file), 2) basic TP documentation (simplified master and local file), and 3) simplified TP documentation (content essentials stipulated in the appendix to the guidance). The guidance is applicable to taxable periods commencing in 2018 but allows for the postponement until 30 June 2019, when the documentation can still be submitted in accordance with a previous guidance.