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13 January 2020

cee overview - tax

An overview of tax innovations for Austria, Romania and neighbouring countries

Significant tax innovations came into force in 2019 in the Austrian legal market.

These led to exciting new projects and matters for us. Austria introduced CFC rules for the first time ["Throwback: Implementation of CFC rules in Austria"], as well as new legislation such as the Austrian digital tax on online advertising services ["Austria: New Digital Services Tax"] and the implementation of DAC6 regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements ["Austria's implementation of the DAC 6-directive: The EU Reporting Act"] – all of which are discussed in this roadmap.

Due to the expected economic downturn and what we currently see on the Austrian M&A market, we believe that distressed M&A transactions will become more important and develop into one of the practice group's focus areas in the near future. As the tax authorities continue to increase the number of personnel in the area of criminal tax law and transfer pricing, an increase in criminal tax law and tax law proceedings as well as tax audits is also to be expected in the upcoming year.

This aspect can also be observed in neighbouring countries. The Romanian tax authorities in particular have launched a wave of tax audits on major multinational companies active in all sectors in 2019. These audits aimed to fight profit shifting [see "Tax authorities' Iceberg aims to sink multinationals' Titanic" newsletter and "Are you ready for the tax and employment authorities' dawn raids?" at]. In this context, we continued assisting companies in such audits, as well as advising on a considerable number of tax disputes.

The Romanian tax environment has always been dynamic and somewhat unpredictable. We expect the following years to confirm the status quo and to continue to provide tax thrills to the local business community mainly because of the following factors: (i) the recent change of government and the prospect of parliamentary elections in 2020 will likely yield significant changes in the country's fiscal policy, the magnitude of which we cannot yet anticipate; (ii) the newly announced tax law amendments which are now under debate will bring about new opportunities for businesses (e.g. profit tax consolidation, potential reduction of the existing VAT rates, changes of the tax appeal process) as well as new challenges (e.g. the implementation of the SAF-T, the potential incrimination of certain administrative offences related to the withholding of income tax and social contributions); (iii) the VAT "quick fixes", which will "go live" on 1 January 2020 throughout the EU and which are designed to improve the functioning of the current EU VAT system, will create new compliance and operational requirements for Romanian companies that are now less than ready to react and adapt; (iv) the announced overhaul of the EU's VAT system, which is due to take place in the following years, will bring about a completely new way of dealing with VAT in the EU and will likely have a major impact on all VAT registered entities, including Romanian ones. 

Overall, last year was again very successful for our tax teams. We have expanded and participated in some of the most prominent transactions in Austria and across the CEE region. Over the last few years the firm's transfer pricing practice has grown significantly and is expected to continue to do so.

Looking ahead, we expect 2020 will continue to bring workflows for the tax team mostly in the practice areas where we have already established our reputation, providing companies with a full set of tools that will help them not only react to challenges from the tax authorities, but also prevent or reduce tax exposure.

This article was written by Roman Perner, Marco Thorbauer and Maja Petrovic.



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