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Croatia: Treasury rate

The Croatian National Bank has decided to lower its treasury rate from 9% to 7% as of 1 July 2011. The decrease of the treasury rate will affect all taxpayers engaged in related party financing. The Croatian tax regulations provide that the treasury rate is the equivalent of a market interest rate in related party loan transactions and in this respect there has not been any change.

This means that Croatian companies issuing loans to their related parties, both foreign and local, at the interest rate under 7%, will be required to increase their tax base for the difference in income arising from the contractual rate and the rate of 7%. Thus the additional tax burden for lending entities will be lowered.

Conversely, related party interest expenses will be deductible only up to the 7% rate and enterprises borrowing from related parties at the agreed interest rate above 7% will have to treat the difference as a non tax deductible expense. Consequently, companies that are currently borrowing from their related parties at a rate above 7% will incur an additional tax burden.

Income and expenses from related party lending up to 1 July 2011 will remain subject to the 9% rule.

Filming tax rebate. The Croatian Audiovisual Centre has proposed the introduction of a 20% filming tax rebate as of December 2011. The Croatian Tax Rebate for Film and Television will focus on attracting feature films, documentaries and television dramas, with a 3 million euro cap per qualifying production. Foreign producers will need to work with a Croatian co-producer and satisfy a cultural test to be eligible for support.

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Bulgaria: Amendments to the Commerce Act

Commercial register. In the Commercial Register Act the deadline for mandatory re-registration of commercial companies and sole proprietors in the Commercial Register has been extended to 31 December 2011.
The amendments aim to ensure sufficient guarantees for transparency with regard to exercising the rights arising from the registered shares in a joint-stock company. Particular attention is therefore attributed to the shareholders’ register of a company, which should contain complete and accurate information regarding the holders of registered shares at any time.
Pursuant to the amendments, legal representatives of the company are obliged to ensure the reporting of all required circumstances, as well as any changes in the shareholders’ register not later than seven days after receiving the relevant documents in accordance with the law and the articles of association.
Bankruptcy. The adopted amendments related to the bankruptcy procedure aim primarily at a more effective protection of the interests of the creditors.
The range of persons, who are entitled to appeal court rulings for opening and termination of the bankruptcy procedure has been extended. With this amendment the right to appeal was granted to creditors who have receivables against the debtor secured by a pledge or mortgage registered in a public registry.
However, court rulings may be appealed only by creditors, for whom it can be undoubtedly established that they have become creditors prior to the date of the court ruling  by means of registration of the securities in a public register.
The application for opening of a bankruptcy procedure filed by a company, which has become insolvent or overindebted, should be announced in the Commercial Register in order to guarantee a larger publicity.
The amendment provides also for the ceasing of all individual court and arbitration proceedings against a debtor as soon as a bankruptcy procedure is opened against him. Court or arbitration proceedings against a debtor are not ceased if the proceedings refer to receivables from the debtor which have been secured with property of third parties

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Belgium: Exemptions for foreign source income

income

Belgium

The Belgian tax authorities published an administrative circular that clarifies the situations in which Belgium will grant an exemption for foreign-source income (generally all items of income except for income from dividends, interest and royalties) based on tax treaty provisions. The new circular makes a distinction between income taxable in the source state, income taxed in the source state and income effectively taxed in the source state.
Where income is “taxable” in the source state, Belgium must exempt the income from tax without taking into account the actual tax treatment of the income in the treaty partner country. The obligation to grant an exemption applies even if the source state does not use its power to tax.
Belgium must grant an exemption when the income is taxable in the source state and has been subject to the normal tax treatment. This does not mean, however, that the income must have been effectively taxed in the source state. Income is considered to be taxed even when there is no actual taxation because of a deduction for losses or expenses, the income has been specifically classified as non-taxable or exempt in the source state, or the tax is legally due but the source country tax authorities refrain from collecting it.
The circular also lists the circumstances under which foreign-source income should not be considered to have been taxed in the source state and, therefore, Belgium must not grant exemption of the foreign-source income.
Income is effectively taxed in the source state when it has been subject to tax without being classified as non-taxable or tax exempt. Belgium will also have to exempt the foreign-source income when it is taxed in the source country but there is no tax because losses or expenses have been deducted.
The circular specifies that profits of a permanent establishment (PE) must be taken into account as a whole. Thus, if only part of the income has effectively been taxed, all of the profits of the PE must be considered as having been effectively taxed.
The fact that foreign-source income is taxable, taxed or effectively taxed in the source state does not mean that the exemption must be applied automatically. The Belgian tax authorities are instructed to first determine whether the tax authorities of the source state have correctly applied the treaty provisions. If this is the case, the taxpayer has to prove that the foreign-source income has been “taxed” or “effectively taxed”.

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Austria: Miscellaneous

NoVA. Last December the European Court of Justice ruled that the inclusion of the standard fuel consumption tax (NoVA) in the base for VAT calculation in the case of the supply of motor vehicles is in contrast with EU legislation. The Court motivated its decision stating that the main reason behind the tax is not supply but first registration of the vehicle.

Pursuant to the Court’s ruling, the suppliers of vehicles may claim refunding of the excessive VAT previously incurred if the procedural requirements are satisfied. In cases where an invoice has been issued regarding the supply of motor vehicles showing the VAT amount separately, in order to obtain refunding it is necessary to correct the invoice and send it to the client.

In this respect it is however important to bear in mind that a passage of the Law on NoVA states that the amount of NoVA has to be increased by 20% if it is not part of the VAT calculation base. Thus, the reduced VAT amount is compensated by a NoVA increase without any benefit to the taxpayer.

In a decree issued at the beginning of February, the Tax Administration explains that the NoVA amount increased by 20% is applied in all cases of individual importation in Austria of motor vehicles from an EU member country. This rule applies both to new cars and second-hand cars.

Finally the Ministry of Finance states that the current method, i.e. the consideration of VAT with reference to NoVA for the intra-communitarian supply and/or purchase of vehicles can be maintained until 30 June 2011. In order to avoid double taxation, until the end of June it is possible to refrain from the application of the increased NoVA amount.

Financial statements. If financial statements are not filed with the commercial register by the end of the statutory deadline of 9 months after the balance sheet date, a minimum fine of 700 euro will be imposed automatically without prior notice. It is possible to file an objection against the fine within a period of 14 days.

If the disclosure of a financial statement is not made within two months from the end of the 9 months’ deadline, additional fines will be imposed every two months. The amount of the fines may reach 2,100 euro for medium corporations and up to 4,200 euro for big corporations. By 28 February it is therefore necessary to provide for the disclosure of all financial statements for balance sheets with a closing date until 31 May 2010.

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