Fi.Solutions Group

Property tax Poland: New version of amendment published

16.10.2024

The Polish government has published a new version of the amendment to the property tax law. Among other things, it aims to remove doubts about the interpretation of the current provisions and to clarify them so that they can be applied correctly. The law is set to come into force on 1 January 2025.

The Ecovis experts already reported on the new law in Poland when the Ministry of Finance published draft amendments to the laws on farming tax, local taxes and fees, forestry tax and stamp duty, as well as amending regulations on property tax.

Scope of changes

Because the changes proposed by the Ministry of Finance were much more extensive than those previously announced, the draft regulations were met with much criticism from other ministries, industry and business organisations, and other entities that had taken part in consultations on the project.

As a result, the Ministry of Finance changed the draft amendment to the regulations and largely took into account the postulates submitted during the consultations.

We will keep you informed of possible further changes and support you in implementing changes to the regulations.

Hubert Kaczyński, Tax Advisor, ECOVIS Poland, Warsaw, Poland

Practical issues

The proposed changes, including among others the definitions of a “building” and a “non-building structure”, will not cause an increase in tax burden, will eliminate interpretational doubts in the current provisions, and clarify the applicable regulations.

The draft amendments include, among others, the following provisions:

• In the case of photovoltaic power plants, energy storage facilities, industrial furnaces, cable cars or ski lifts, only the construction part of these devices (e.g. foundations) will be subject to taxation.
• Removal of the requirement to recognise the facility and installation as a “technical and utility whole” – the decisive criterion for taxation will now be whether the installations ensure the possibility of using the building or non-building structure in accordance with its intended purpose.
• Clarification that buildings and non-building structures refers only to objects erected as a result of construction works (and not, for example, by means of assembly).

These changes will significantly affect the amount of taxation of non-building structures. It is important to remember that the tax rate applicable to non-building structures or their parts related to conducting business activity is 2%, and that the tax base is that used as the basis for calculating depreciation, not reduced by any depreciation.

The amendment also provides for a longer deadline for submitting property tax returns for 2025. Taxpayers meeting the conditions specified in the regulations will be able to submit property tax returns for 2025 by 31 March 2025 (instead of the usual deadline of 31 January of a given year).

The draft of the law will now be subject matter of Parliament’s work.

According to previous announcements, the law is expected to come into effect on 1 January 2025.

For further information please contact:

Hubert Kaczyński, Tax Advisor, ECOVIS Poland, Warsaw, Poland
Email: hubert.kaczynski@ecovis.pl

Transfer pricing in Vietnam: Proposed changes of the draft amendments to Decree 132

14.10.2024

Decree No. 132/2020/ND-CP (Decree 132) on tax administration for companies with related party transactions, which has been in force since 2020, has led to some restrictions and difficulties for companies. The Vietnamese government therefore presented amendments to Decree 132 in July 2024, which are to be adopted in the 4th quarter and will apply from the 2024 tax period. The Ecovis consultants explain the background and what is changing.

The problems caused by Decree 132

The most significant problem is the case of determining the related-party status based on borrowings in Article 5, Clause 2 d of the decree (including the case where the bank lends an enterprise more than 25% of the owner’s capital contribution and accounts for more than 50% of the total medium and long-term debts of the enterprise’s borrowings). This leads to the enterprise being given related-party status with the bank and related-party transactions which are then subject to a deductible interest expense cap.

However, businesses argue that borrowing from banks to serve production and business activities is a common business practice in Vietnam, as well as a normal business activity of the banks. Businesses and banks are completely independent of each other and there is no control, management, or capital contribution by the bank to the production and commercial activities of the business. The company’s interest expenses are an actual cost serving production and business activities. Therefore, controlling and eliminating interest expenses for businesses in this case is inappropriate.

Are you affected by Decree 132? We will discuss the impact of the changes on your company with you.

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam

In addition, Decree 132 also has several provisions that are not consistent with the Law on Credit Institutions published on 18 January 2024 (No. 32/2024/QH15).

In practice, the amendments and supplements to Decree 132 are necessary to ensure compliance and consistency with legal regulations. They will also be better suited to the current situation in Vietnam and meet the requirements of the country’s socio-economic development, while at the same time improving the quality and efficiency in the management of enterprises with related-party transactions.

The changes to the updated Decree 132

In July 2024, the Ministry of Finance publicly released the draft amendments to Decree 132 (the Draft Decree) to gather feedback from ministries and the business community before the official publication. These are some of the most significant changes:

1. The Draft Decree supplements the cases for determining related parties under points a and b of Article 5, Clause 2 of Decree 132 in order to be consistent with the recent changes in the 2024 Law on Credit Institutions in which the charter capital ownership percentage applicable to credit institutions is 20%.
2. The Draft Decree introduces a new case of related parties under point m of Article 6, Clause 2 of Decree 132, including the credit institutions and their associate companies as defined under the new provisions of the 2024 Law on Credit Institutions (see info box).
3. The Draft Decree adds exclusion cases in which an enterprise guarantees or lends to another enterprise under point d of Article 5, Clause 2 of Decree 132. Accordingly, the lender, the guarantor, and the credit institutions will not be considered as related parties if they are not engaged in “operating, controlling, contributing capital or investing activities” of the borrower or the guaranteed enterprise.
4. Moreover, the Draft Decree clarifies the provision regarding the carrying-forward of non-deductible interest expenses from the previous tax periods where an enterprise only has related-party relationship as a result of the borrowings from a credit institution according to point d of Article 5, Clause 2 of Decree 132. If an enterprise does not take part in any related-party transaction in the 2024 tax period, the non-deductible interest expenses of previous tax periods cannot be carried forward to the next five years.
5. The Draft Decree also extends the responsibility of the State Bank of Vietnam in providing information on the related individuals and related enterprises of credit institutions upon request from the tax authority.
6. In addition, the Draft Decree amends Appendix I – Information on related party relationships and related-party transactions – to align with the amended, supplemented regulations mentioned above.

For further information please contact:

Nghia Tran, Partner, ECOVIS AFA VIETNAM, Da Nang City, Vietnam
Email: Nghia.Tran@ecovis.com.vn

VAT Hungary: New era in Hungarian VAT compliance

11.10.2024

On 1 January 2024, the Hungarian Tax Authority (HTA) introduced a new electronic VAT system, eVAT (eÁFA). It offers taxpayers various electronic services to streamline and automate the preparation of their VAT returns. The Ecovis experts explain the details.

eVAT provides a range of innovations to simplify compliance, reduce administrative burdens, and enhance accuracy in VAT reporting. Moreover, the introduction of machine-to-machine (M2M) functions, enabling direct electronic data integration from taxpayers’ ERP databases, signals the beginning of a new era in Hungarian VAT compliance.

What the new M2M functions mean for companies

The new M2M functions can manage a virtually unlimited number of invoices and allow the automated, direct submission of VAT analytics to the HTA. Once received, the data can be reviewed and the HTA will provide observations in the case of any discrepancy, without imposing penalties. According to the HTA, electronic VAT compliance will not only enhance the taxpayers’ reporting process but will also contribute to the HTA’s automated risk analysis.

Our experts will implement the M2M-based electronic VAT system for you so that you can meet the requirements.

László Kelemen, Partner, ECOVIS Tax Solution Hungary, Budapest, Hungary

However, setting up the M2M link gives rise to complex tax advisory tasks and IT development which require in-depth expertise and comprehensive planning. As a result, VAT professionals have played a vital role in ensuring that taxpayers’ ERP systems are capable of handling and are compatible with the M2M framework data formats and that the schemas and VAT-codes follow the HTA’s definitions.

Although the new M2M mechanism is not mandatory, there is already significant interest among Hungarian taxpayers, as it will significantly simplify the current process. It is also expected to attract interest from other EU Member States as digital VAT compliance gains international prominence.

For further information please contact:

László Kelemen, Partner, ECOVIS Tax Solution Hungary, Budapest, Hungary
Email: laszlo.kelemen@ecovis.hu