Blickpunkt Osteuropa

Blickpunkt Osteuropa

The National Employment Agency changes the procedure for foreigners seconded to Serbia

The National Employment Agency introduces changes to the procedure for extending work permits to foreigners seconded to Serbia and Intra- company transferees.
The procedure for obtaining work permits for foreigners seconded to Serbia is governed by the Law on Employment of Foreign Nationals (the Law), whereas the National Employment Agency is in charge of issuing work permits.

The Law sets down the validity period of the work permit, which may not be longer than one year, in other words may not be longer than the Term of Contract concluded between the employer for whom the services are performed in the Republic of Serbia and the foreign employer (foreign entity).

An exception to this is noted when there is a bilateral Social Security Agreement concluded by and between the county of incorporation of a foreign employer (foreign entity) and the Republic of Serbia, in which situation a work permit is issued to a seconded foreigner under the Terms and Conditions of, and for the period specified in, the Agreement, and may be extended for a further 12 month i.e. for a maximum of two years.

Although this provision became effective as at the Law’s effective date, in practice a work permit extension was possible even beyond one (two) year(s).

New practice

The National Employment Agency has changed the practice of interpreting the Law, making it impossible to extend work permits for seconded foreigners and Intra-company transferees beyond one (two) year(s).

In other words, in order to extend a work permit beyond the period specified above, the seconded foreigner must conclude an employment contract with an employer in Serbia.

Romania: Who can benefit from the European Commission’s proposals for restructuring the VAT system

In brief

The European Commission has published its proposals for restructuring the VAT system, including the introduction of the Certified Taxable Person (CTP) concept. The concept and authorisation criteria are similar to those for AEO and offer significant benefits to reliable taxable persons.

In detail

The European Commission has published its proposals for amending European Union Council Directive 2006/112/CE on the common system of value added tax (VAT Directive) and other VAT normative acts.
The Commission’s proposals are aimed at, among other things, introducing the notion of CTP, which is similar to the existing customs concept of Authorised Economic Operator (AEO). CTP represents a category of reliable taxable persons with certain benefits starting in the transition period to the new VAT system, as of 1 January 2019, such as:

• less restrictive rules for the application of simplification measures applicable to call-off stocks;
• simplified intra-Community chain transactions (triangular operations);
• simplified process for justifying the exemption for intra-Community supplies of goods.

The takeaway

Companies which obtain AEO authorisation by the time of applying the European Commission’s proposed provisions will be able to obtain the CTP status more easily and enjoy new VAT benefits as of 1 January 2019.

Worldwide Tax Summaries – Corporate Taxes 2017/18

PwC’s Worldwide Tax Summaries – Corporate Taxes 2017/18 is now available as an eBook or PDF for download. This free reference guide provides quick and easy access to details about corporate tax systems in 157 countries, updated with the latest information as of June 1, 2017. Available on most devices, each country update is written by local PwC tax specialists and continuously enhanced with additional content, including the latest changes in legislation, residency, gross income, deductions, tax credits and incentives, tax administration and other taxes and tax rates.

Download the PDF or eBook versions of the latest guide at There, you will also find tax information that is updated in real-time for all 157 countries through our enhanced online and quick chart tools.

We hope that Worldwide Tax Summaries continues to be a useful reference in helping you handle your organisations’ taxes around the world. If you would like more detailed information or advice on any aspect of tax, please do not hesitate to contact your regular PwC contact.


Romania: Amendments to the customs legislation regulating free zones

In brief

Order No. 2661/11 September 2017 (“Order”) of the President of the tax administration agency ANAF, amending and supplementing the technical regulations on the uniform enforcement of the customs legislation in free zones, approved by ANAF president Order no. 2759/2016, has been published.

In detail

The main amendments in the new Order cover the following aspects:

• The responsibilities of titleholders of decisions approving the stock records for storage of non-Union goods in free zones are now listed, namely:

– to make sure that the goods placed under the free zone customs procedure are not unlawfully removed from customs supervision;
– to fulfil their duties arising from the storage of the goods;
– to notify in writing the customs office of any missing goods;
– to inform the customs office on any changes of the obligations stipulated in the request for approval of the stock records.

• The cases when a decision approving the stock records can be cancelled are now listed, namely:

– when the decision was made based on incomplete or inaccurate information;
– when the titleholder of the decision knew or should have known that the information was incomplete or inaccurate;
– when the decision would have been different if the information had been complete and accurate.

• Also, the Order prescribes measures regarding the approvals and decisions issued by the customs offices pursuant to the provisions in force before 4 October 2016 (i.e. those in Order No. 7394/2007), as follows:

– construction permits in a free zone will remain valid;
– decisions approving stock records, issued prior to 4 October 2016, will be reassessed, with the reassessment decisions to be made by the relevant customs offices by 1 May 2019.

[Source: Official Gazette No 750 of 19 September 2017]

The takeaway

Decisions approving the stock records for storage of non-Union goods in free zones can be cancelled in specific cases.
Also, decisions approving the stock records, issued prior to 4 October 2016, will be reassessed by the customs authorities.

Bulgaria: Implementation of the country-by- country reporting requirements in Bulgaria

In brief

On 4 August 2017 the amendments to the Tax and Social Security Procedures Code (TSSPC) introducing the country-by-country (CbC) reporting requirements in Bulgaria were published in the State Gazette.

It is expected the new rules to enable the tax administration to undertake measures against the harmful tax practices, tax avoidance and aggressive tax planning.

New rules

In line with Action 13 of the OECD Base Erosion and Profit Shifting initiative, the amended TSSPC introduces new rules related to the mandatory CbC reporting by multinational enterprise groups (MNE Group) with consolidated group revenue exceeding EUR 750 million.
Once submitted, the CbC reports will be subject to automatic exchange between the tax administrations of the jurisdictions in which the MNE Group operates.
Specific rules are envisaged to MNE Groups with total consolidated group revenue exceeding BGN 100 million, whose ultimate parent company is a Bulgarian tax resident.

Who should report in Bulgaria?

The following entities will have the obligation to submit CbC reports to the National Revenue Agency (NRA):
• an ultimate parent company of a MNE Group, that is a tax resident in Bulgaria, if the consolidated group revenue exceeds BGN 100 million in the year preceding the reporting fiscal year;
• a Bulgarian subsidiary or a permanent establishment of a MNE Group, with consolidated group revenue exceeding BGN 1,466,872,500 in the year preceding the reporting fiscal year when:
– the Bulgarian tax administration does not have an available mechanism to receive the CbC reports, filed by the ultimate parent entity of the MNE Group or another designated reporting group entity; or
– the MNE Group has appointed the Bulgarian subsidiary/permanent establishment to submit a CbC report on behalf of the group (i.e. to act as a surrogate parent company) or on behalf of all EU group members, subject to the requirements envisaged in the law.

What should be reported?

The CbC reports shall be prepared in a table format containing information on revenue, profit (loss) before tax, income tax paid and accrued, share capital, accumulated earnings, tangible assets (other than cash and cash equivalents) and number of employees for each tax jurisdiction, as well as on the business activities of all group members.

The CbC reports will be filed only electronically in a format to be approved by the executive director of the NRA by 31 October 2017.


Filing obligation

The CbC reports should be submitted to the executive director of the NRA within 12 months of the end of the reporting fiscal year of the ultimate parent entity of the MNE Group.

The first year, for which CbC report should be filed by Bulgarian ultimate parent companies or surrogate parent entities is FY 2016.
In the other cases, the first reporting year is FY 2017.

The CbC reports, subject to automatic exchange of information, will be communicated by the NRA with other tax administrations within 15 months of the end of the reporting fiscal year of the MNE Group.

For the FY 2016 reports, the deadline is extended with 3 months (i.e. 18 months in total).

Notification obligation

A Bulgarian tax resident, part of a MNE Group shall notify the executive director of the NRA of the group entity that will submit the CbC report. The notification deadline is the last day of the reporting fiscal year of the MNE Group.

For FY 2016 the notification deadline is 31 December 2017.


Failure to submit CbC reports will entail an administrative penalty between BGN 100 thousand and BGN 200 thousand for first violation, and between BGN 200 thousand and BGN 300 thousand for subsequent violations.

Reporting of false or misleading information will entail penalty in the amount of BGN 50 thousand to BGN 150 thousand for the first violation and BGN 100 thousand to BGN 250 thousand for subsequent violations.

Failure to fulfill the notification requirements will entail a penalty between BGN 50 thousand and BGN 150 thousand for the first violation, and between BGN 100 thousand and BGN 200 thousand for subsequent violations.

In case a Bulgarian entity of an MNE Group, that is liable to file a CbC report in Bulgaria, fails to notify the tax authorities that the ultimate parent company has refused to provide all the information required for the filing, is subject to penalty in the amount of BGN 10 thousand for first violation and BGN 15 thousand for subsequent violations.

Latvia: EU court on VAT treatment of new vehicle supplies

On 14 June 2017 the Court of Justice of the European Union (CJEU) announced its ruling C-26/16 on the conditions for applying a VAT exemption to intra-Community supplies of new vehicles. This article explores the relevant court findings.

The background of the case

Santogal M-Comércio e Reparação de Automóveis Lda is a Portuguese company that sells automobiles. The company sold a new vehicle to an Angolan national, which he had previously brought into Portugal under a customs declaration for vehicles. The buyer had stated that he was planning to use the vehicle for private purposes in Spain, which he had named as his permanent residence to which he was planning to deliver the vehicle, then take it through a roadworthiness test and complete its registration. The buyer had provided his foreign citizen registration number in Spain and a copy of his Angolan passport. The address he stated at the time of purchase did not match the one appearing in his foreign citizen registration document. The vehicle was carried to Spain in a fully closed vehicle transporter. After the delivery to Spain, the Portuguese tax authority received the vehicle’s Spanish registration certificate, which stated yet another address of the buyer and mentioned temporary registration for tourism purposes. The Portuguese tax authority had found that the buyer’s permanent residence was in Portugal and he was registered as the CEO of a Portuguese company and had a Portuguese taxpayer number.
Under article 138(2)(a) of the VAT directive, a member state will exempt VAT on supplies of new vehicles that are shipped or transported by the seller, the buyer, or a third party on behalf of the seller or the buyer, to a destination outside the member state but within the EU if supplies are made to taxable persons, non-taxable entities whose intra-Community acquisitions of goods are exempt from VAT under article 3(1) of the directive, or to any other non-taxable person.

Since the company was in dispute with the Portuguese tax authority over the conditions for applying a VAT exemption, the case was referred to the CJEU.
Court findings

Having considered the facts and circumstances of the case and the relevant Portuguese legislation, the CJEU came to the following conclusions:

1. Article 138(2)(a) of the VAT directive is contradicted by the requirement that the buyer of a new vehicle should be registered or permanently resident in the member state of destination. The fact that the buyer is not living in the member state of destination does not necessarily mean that the final and permanent use of the vehicle does not take place in that member state. All the objective facts and circumstances should be assessed, including the buyer’s place of residence.

2. If a member state is to grant a VAT exemption to the supply of a new vehicle, article 138(2)(a) of the VAT directive implies that three cumulative conditions must be satisfied:

a) the seller must give the buyer the right to deal with the vehicle as owner;
b) the supplier must prove that the goods have been shipped or transported to another member state;
c) after the shipment or transportation the goods must be physically removed from the member state of shipment.

3. These conditions do not require that a new vehicle should be registered in the member state of destination, and the member state cannot, therefore, restrict the application of an exemption on the grounds that the registration made in the member state of destination is temporary, and the grant of registration in the member state of destination does not help determine the member state of end use of the vehicle, which is the place of taxation.

4. The court stated that evidence of the vehicle’s physical movement to the place of its end use, which the seller can file with the tax authority, depends on the buyer, and the seller cannot be required to provide evidence that the intra-Community acquisition of goods has been charged to VAT in order to receive an exemption.

5. Article 138(2)(a) of the VAT directive is contradicted by the fact that the seller must later pay VAT on the new vehicle which the buyer transported to another member state and temporarily registered in that last mentioned country unless it is proved that the temporary registration arrangement has ended and that VAT has been, or will be, paid in the member state of destination. The seller cannot be required to provide evidence that the buyer has paid VAT in the member state of destination.

6. The court also stated, however, that the trader must take all steps that may be reasonably demanded from him to make sure the transaction will not involve him in tax fraud. The seller cannot rely solely on the buyer’s intention to transport the goods to another member state for their end use, but the seller should ensure that the buyer’s intention is supported by objective circumstances. The seller must also demonstrate special care, given that an individual is not permitted to recover VAT when acquiring a new vehicle, and so the individual is more interested in evading VAT than a trader. In assessing the supplier’s good faith, we should form an opinion on whether the seller could know that the temporary registration of vehicles is restricted to persons without a permanent residence in the country, and whether the seller should not have had doubts about the buyer’s permanent residence after he had filed documents with different addresses. The seller should make a general assessment of all the facts and circumstances in order to treat the transaction as an intra-Community supply and to prevent any involvement in tax fraud; he should accumulate all evidence he can reasonably obtain to make sure all the conditions are satisfied, in particular the requirement for permanent use in the member state of destination. Considering the vehicle’s temporary registration, it would also be reasonable to check the country of its end use with the buyer.

In view of this court ruling, we would recommend that any company making supplies of goods in the EU, in particular supplies of new vehicles to EU individuals that do not carry on a trade or business, should make an in-depth assessment of its supply procedures to stay compliant with the conditions for a VAT exemption (section 43 of the Latvian VAT Act) and make sure the company steers clear of fraudulent transactions.

Business Breakfast unter dem Titel „Kommt Russland aus der Krise“ am Dienstag, 4. Juli 2017, PwC Berlin

Der Osteuropaverein der deutschen Wirtschaft e.V. und die PricewaterhouseCoopers GmbH laden zum traditionellen gemeinsamen Business Breakfast ein, bei dem dieses Mal der Handelspartner und Investitionsstandort Russland im Mittelpunkt steht.

Anmeldung und weitere Details über Ina Enache:

Agenda Business Breakfast Russland

Latvia: Non-residents to file Latvian income tax

The deadline for taxpayers who are required to file an income tax return is 1 June. We have already informed our subscribers about cases where Latvian tax residents are required to file an income tax return and cases where they can choose to do so voluntarily. This article explores a non-Latvian resident’s filing obligation.

Taxable income and withholding tax

Unlike Latvian tax residents, whose worldwide income is taxable in Latvia, non-Latvian residents are liable to pay Latvian personal income tax (PIT) on their Latvian-source income only. This means that a tax return should be filed by a non-resident who has gained any income on which PIT was not withheld at source.

In practice, more often than not, the source or payer of income will have already withheld PIT from the income, and so the non-resident need not file in Latvia. For example, a Latvian employer paying salary to a non-resident for work done in Latvia will withhold PIT under general procedure. Latvian credit institutions paying interest or dividends to non-residents are also required to withhold. The non-resident need not file in either case.

If, however, the source or payer of income has not withheld PIT from the non-resident’s Latvian-source income (or income attributable to Latvia), the non-resident is required to file in order to pay the PIT charged on that income. Below we list cases where the filing obligation arises:

  • A non-resident is hired labour, and the Latvian company on whose behalf the person was employed in Latvia has not withheld PIT from their income. Such a situation can arise, for example, if the foreign employer who hires out labour has failed to attribute relevant costs to Latvia, i.e. the non-resident’s foreign salary costs were not transferred to the Latvian company. This failure does not, however, affect the existence of labour hire, and the income attracts Latvian PIT;
  • A non-resident has received a bonus from the foreign employer in the current tax year for work done in Latvia in previous tax periods, but the foreign employer did not have the technical capability to withhold Latvian PIT;
  • A non-resident has gained income from leasing out real estate in Latvia, but the tenant or lessee has not withheld PIT at source, e.g. the tenant is an individual who does not carry on a trade, or the lessee is a non-Latvian resident entity. (This example ignores the fact that a non-resident gaining income from leasing out real estate may be required to register as a trader in Latvia, and the fact that this income may attract different rates of PIT.)

In all the cases listed above the non-resident is required to file (this is not an exhaustive list of cases where filing is mandatory).

In general, where no exceptions apply, non-residents are required to file by the same deadline as residents, i.e. the 2016 income tax return is due by 1 June 2017.

Latvia: Tighter requirements for external accountants from 1 July 2017

In an attempt to optimise costs, CEOs in small and medium firms tend to put their accounting function out to an external service provider under a written contract defining their rights, obligations, and liability. This article explores some recent amendments to the Accounting Act and some new proposals dealing with bookkeeping procedures.

An external accountant’s liability

The current law holds the CEO responsible for keeping the company’s books. The CEO can agree with an external accountant on the required scope of services and define their level of liability in a contract. External accountants have so far had the option of insuring their civil liability on a voluntary basis, meaning an increase in their service fees.

The Accounting Act as amended from 1 July 2017 lays down the liability of external accountants and requires that they insure their civil liability for any loss resulting from their professional acts or omissions for a minimum of €3,000. The amendments are likely to have the effect of reducing the number of available external accountants due to extra cost as well as improving the quality of their services.

The Financial Statements and Consolidated Financial Statements Act requires that a company’s financial statements be signed by its internal or external accountant or a responsible person appointed internally.

When it comes to filing financial statements through the Electronic Declaration System, there is a special field for giving the first name, surname and full title of the responsible person, the entity’s name and the person’s title, designed to help tax inspectors analyse details of accounting service providers.

Proposed amendments

A new set of proposals for amending the Accounting Act have been drafted to lay down administrative liability in the field of accounting. The proposals replace the current title of Chapter IV, “Apportionment of competence in accounting” with “Administrative liability in accounting and competence in imposing penalties” as well as laying down liability for the following offences:

  • Non-compliance with procedures for recording cash transactions;
  • Non-compliance with bookkeeping rules;
  • Non-submission or incomplete filing of financial statements;
  • Non-compliance with procedures for preparing, registering and using supporting documents;
  • Non-compliance with procedures for preparing, registering and using delivery or carriage documents.

The State Revenue Service can issue a warning or levy a fine of 70–400 units depending on the type of offence.

This means that the statutory requirements for bookkeeping and accounting are tightening up, and the company can agree with the external accountant on their terms of business in order to avoid risks and define their respective obligations.

Rules on issuance of visas for entry to Ukraine and Transit through ist territory were simplified

Recently the Cabinet of Ministers of Ukraine (the “CMU”) approved new rules on issuance of visas for entry to Ukraine and transit through its territory.*

The new rules were officially published on 17 March 2017 and will become effective in 30 days after the publication date.

Key novelties are the following:

  • It will be possible to submit visa application online and conduct interviews with applicants via video conference.
  • The list of countries whose citizens are eligible to obtain visas at checkpoints at the state border of Ukraine is expanded.
  • The term for visa issuance and fees for its issuance were reduced.
  • A type D visa will be issued as a multiple entry visa and its term of validity will be 90 days (instead single-entry visa with 45 days term of validity).
  • It is no longer necessary to provide standard invitations issued by the State Migration Service of Ukraine in order to obtain a short- term type C visa.

It is expected that these changes will simplify and improve the procedure of issuance of Ukrainian visas.

*Approved by the CMU Resolution No. 118, dated March 1, 2013