In addition, Highgate Law & Tax is also celebrating its win in the “Capital Markets” category, proving itself to be a comprehensive law firm with an extensive portfolio of expertise and the ability to successfully navigate diverse legal challenges.

The awards gala evening, which was organized by the media and educational group EPRAVO Group and the weekly TREND, was held at the Double Tree by Hilton hotel in Bratislava. For Highgate Law & Tax it was not only an opportunity to celebrate its success, but also to thank its clients and partners for their trust and support, without which this milestone would not have been possible.

This double triumph confirms Highgate Law & Tax’s excellent reputation for legal and tax services and reinforces its position as a leading player in the legal services market in Slovakia.

Článok Highgate Law & Tax and its double triumph in the prestigious Law Firm of the Year competition je zobrazený ako prvý na Highgate.

Článok Hello world! je zobrazený ako prvý na Highgate.

1/ The Ministry of Finance of the Slovak Republic submitted for inter-ministerial comment procedure, which started on 3. 8. 2023 A draft law on a top-up tax to ensure a minimum level of taxation for multinational enterprise groups and large domestic groups. What do you think of this news, which follows on from the EU’s activities?

Peter Varga: This proposal for a global minimum tax represents a continuing effort to eliminate the tax practices of multinational corporations, through which they shift profits to jurisdictions where they are subject to no or very low taxation. It is the minimum tax that is intended to discourage multinationals in this endeavour and thus level the overall playing field. There are well-known cases of large technology giants who, thanks to the openness of countries such as the Netherlands or Ireland, are able to tax their profits from countries such as Slovakia at minimum rates. This puts them at a possibly unfair competitive advantage economically. Any competitor of such companies that does not have the infrastructure to shift profits to more favourable jurisdictions is thus at an economic disadvantage. This is because it has to tax its profits even if it wants to reinvest them, thus reducing its investment potential and putting it at a disadvantage against companies that effectively (abusively) exploit different tax regimes in different countries.

And so from the point of view of the idea and the vision, it seems like a sensible step. I am concerned, however, whether it will be too much of an administrative burden for the companies and groups concerned to comply with the requirements of this legislation. For example, the relatively recently adopted EU DAC Directive 6, which pursues a similar objective, often poses a perhaps disproportionately high administrative and interpretative challenge for those concerned. A number of affected entities are addressing this challenge by ignoring this legislation. Certainly, Slovakia itself, which is most responsible for the concrete implementation in practice, will have a say in this potential for simple implementation and unambiguous interpretation. It is therefore to be hoped that the actual implementation in the individual Member States will be easier and that those concerned will be able to set up their procedural procedures with relative agility.

2/ In practice, various items not included in the calculation of the tax base or various tax reliefs are also a problem. Does this mean that realistically these items would already be taxed, or how can this be understood? Please clarify.

Peter Varga: Exactly. At EU level, there is currently no harmonisation of tax bases for income taxation as we know it for VAT. As Member States have not conferred this competence on the EU in primary law, the issue of direct taxation is therefore a matter for Member States to legislate on. There are, of course, exceptions where EU law takes precedence over national law on direct taxes, but these exceptions relate primarily to fundamental economic freedoms, in particular the freedom of establishment. Thus, in the absence of greater harmonisation in the area of income tax to date, this Directive must also address the issue of harmonisation of effective tax rate calculations. Thus, it cannot be calculated simply by taking the tax liability of the entity concerned and comparing it with the revenue or taxable income under local rules. For this purpose, a relatively complex procedure for calculating a harmonised base and a harmonised effective tax rate needs to be applied.

For example, for the calculation of the effective tax rate, the Directive differentiates between dividends from the so-called portfolio investments and other dividends. On the basis of this differentiation, the effective tax rate calculated on the basis of Slovak regulations is modified. Slovak tax regulations do not distinguish between dividends in this context. And there are many such examples. As a result, the effective tax rate determined under the Directive does not necessarily even approach the effective tax rate calculated under Slovak regulations. Since the harmonisation modifications are relatively complex and the Directive is to be followed by local Slovak legislation, it would certainly be beneficial to the Slovak addressees of these changes if the law implementing the Directive was adopted as soon as possible and was in the required interpretable form.

3/ Only large entities belonging to multinational groups or large national groups are likely to be realistically affected by the top-up tax. Try to be more specific about what companies are involved, who will be realistically affected, and what level of tax rate will the entities be taxed at compared to current market conditions?

Peter Varga: It doesn’t necessarily have to be only multinational entities. The legislation also affects companies from the so-called. a “large-scale domestic group”, where all the companies are located in one EU Member State. The ultimate real impact on the taxation of the group is difficult to predict from this position as it depends on a number of individual circumstances such as the set-up of the structure, the income and cost structure or the tax incentives in place and so on.

4/ This is a very specific tax affecting very few entities. Since the consolidated turnover of EUR 750 million was set for all EU Member States, the turnover set in this way is obviously very high for Slovakia. How do you see it realistically? Will any company operating domestically ever achieve such a turnaround?

Peter Varga: We have several dozen companies in Slovakia that individually have revenues exceeding EUR 750 million. If we add to this the Slovak companies whose group revenues reach this level, we certainly get an interesting number of companies that are to some extent affected by this regulation. The extent to which this is the case depends mainly on the position of these companies in the groups or the level of taxation and jurisdiction of the individual companies in a particular group. Some complexity is added by the fact that Slovak companies can also tax their profits at an effective rate lower than 15% under Slovak law (without taking into account the aforementioned harmonisation modifications), which also has an impact on the obligations under this legislation. So the extent of the impact of this legislation on Slovak businesses is probably not fully graspable at this point.

5/ What do you foresee the impact of this legislative innovation on the market – specifically on business, the state budget, etc.? What benefits or risks do you see there? Is it not just a formal tax, the terms of which do not really translate into practice?

Peter Varga: I believe that the main motive of this regulation is not necessarily to increase tax revenues for individual Member States, but to achieve a greater degree of fairness in taxation. It is the large foreign conglomerates that have the means and flexibility to arrange their tax affairs in a way that can reduce the effective taxation of corporate profits in the so called “onshore” jurisdictions to single digits, in some cases even approaching zero. However, only practice will tell what the real impact will be.

If you are interested in this topic, please do not hesitate to contact us.

Článok Peter Varga on the so-called. dorovnávacej dani je zobrazený ako prvý na Highgate.

The awards gala was organised by the EPRAVO Group and the weekly TREND, and its eleventh edition took place on Wednesday 26. April. The event took place at the Double Tree by Hilton Hotel in Bratislava, where the winners of the individual categories received their awards for their year-long work.

We would like to thank our clients and partners for their cooperation, thanks to which we have achieved this success.

If you are interested in a consultation, please do not hesitate to contact us.

Článok Highgate Law & Tax named Tax Law Firm of the Year 2023 je zobrazený ako prvý na Highgate.

SMART watch for business

With SMART watches, it seems easy to argue for their use for the purposes of texting, time keeping, navigation and other functions that are practical for business. However, unlike a mobile phone, a watch feels more “private” and therefore, in the worst case scenario, the tax office may want you to prove that you only used it for business purposes. And at worst, it might want to show that you did not use it for private purposes (although it is relatively settled that no one can fairly be asked to prove the non-existence of a particular legal fact).

Luxury watches for business

With luxury watches, oddly enough, it can be easier. Here, though, it looks at first glance like a “representation”, which is not recognised as a tax expense by default. However, there are other types of “representation” that are recognised as a tax expense. Why can a superior office space (i.e., location, classification, or reception desk appearance) be recognized as a tax expense and a luxury watch not? After all, we don’t necessarily need both “representations” for business? However, the problem arises in how we can construct the argument that we are only using them for business purposes. Thus, while unique office spaces in themselves indicate their use only for business purposes, luxury watches do not automatically enjoy such an attribute.

Watches for business

Something extra must therefore be done to make them tax deductible. To give them the hallmark of corporate use. For example, get a safe for your office.

Photos from weddings of family and friends must exude a different watch. Don’t buy “ROLEXes.” With ROLEXs as standard, you can harden up in winter, go to the beach in summer, and the more expressive ones with their sleeves rolled up can imagine a Friday outing to a more student-oriented area in them. However, brands such as A. LANGE & SÖHNE or NOMOS Glashutte look much more authentic when worn exclusively for work purposes. And perhaps even as much as those office spaces.

Tax check watch on the company

However, a dispute with the tax office can take less pleasant forms. That is to say, the financial administration’s penalties are based on the amount of the ECB’s base interest rate, and these have already reached a threshold beyond which the penalties are higher than we have been used to for many years. In addition, there is the risk of taxation of the employee’s/statutor’s non-cash income, or the legal risks (including liability for private assets) associated with the deposit return institution. Either way, in the context of lower political (and therefore legal) predictability, this is another reason confirming how important it is to pay at least basic attention to prevention in the context of asset and business protection. For example, through the legal structuring of business and asset ownership.

I also dealt with a similar topic in my lecture “Paying for holidays with a company card” – what about the law and taxes?which is available on our website.

If you have any questions, feel free to contact me. For more of this information, subscribe to our newsletter.

If you are interested in this topic, please do not hesitate to contact us.

Článok Can I put a luxury watch “in expenses”? je zobrazený ako prvý na Highgate.

The practice of businessmen in buying cars for company and (only) private use resembles the practice of the population in (not) observing anti-pandemic measures. A company buys a car also (only) for private use, claims a full VAT deduction on the purchase as well as on the fuel, and includes the cost of the car (through depreciation) and the fuel in full in its tax expenditure. And even if the car is also used (only) for private purposes, the company does not tax or deduct anything on behalf of the employee/managing director/associate (“Managing Director“).

But the rules of the game are completely different. Unlike anti-pandemic measures, the worst case scenario for non-compliance can be dramatic, even with criminal consequences (as I write below). Let us therefore look at how the law and the tax authorities treat the use of a car in a company and for private purposes, i.e. the standard Slovak use case.

What are the basic rules of the game?

If the car is to be used partly for private purposes, the rules for keeping records are (simplified) as follows:

* Even if the car is used for business purposes only, e.g. 20%, the company can claim 100% of its cost (through depreciation) as a tax expense;;

** There is a flat rate of up to 80% of the cost of petrol, but in the context of using the car also for private purposes, it does not have a significant simplifying effect on administration (as I explain below)

It would only make sense to have one rule. In reality, however, the right hand (income tax) does not know what the left hand (VAT) is doing. Moreover, even in the case of income tax it is not consistent. Exemption from the obligation to keep detailed records of car use misses the practical effect, because this ratio still needs to be proven for both fuel and VAT purposes. Moreover, the phenomenon of non-cash income of the Managing Director (as I explain below) enters into it.

Figure 1: Simple structure (explained below):

What are the more complicated rules of the game? (you can skip)

While the above basic rules seem to be unfavourable for entrepreneurs (from a financial and administrative point of view), at least they seem to be easier to understand. Unfortunately, they are not – nor are they easier to understand.

That is, apart from the basic complication in the form of the obligation to keep accurate records of the use of the car for business (or private) purposes for fuel and VAT purposes in general, other administrative and tax inconveniences arise, for example:

The first The interpretation complication is the change of opinion of the Financial Administration in 2022. According to the new opinion, the Financial Administration already considers the use of property by the Managing Director as non-cash income even if the company uses the 80% flat rate. The previously presented opinion of the Financial Administration did not see non-cash income in such a context. Although the 80% flat rate should not be applied to the purchase of a company car used by the Managing Director for private purposes, the practice of some tax and accounting offices was/is different – incorrect. However, following a change of mind by the tax authorities, the use of the 80% flat rate does not even make sense anymore.

The other The puzzle is the actual fuel for income tax purposes. Even if a company decides to apply a flat rate of 80% because the car is also used for private purposes and wants to simplify the administration, it still has to be able to prove the proportion of use of the car for business (or private) purposes because of the statutory wording “up to 80% of the amount”. There is no more space in this blog about the various ways of examining car use and consumption and accepting it for tax purposes in the various ways of including the cost of petrol in tax expenses.

Third A complication is where a company claims 100% of the cost of a car as a tax expense, even though the car is also used by the Managing Director for private purposes. The company is entitled to do so if it taxes and “discharges” the Managing Director in the manner prescribed by law (1% of the cost of the car, which is progressively reduced). However, such administrative simplification cannot be applied to fuel, where the company must again keep records of individual journeys and tax and ‘account’ for the actual consumption of fuel by the Managing Director (alternatively, reimburse the Managing Director for the consumption of fuel).

By the fourth problem is the obligation to monitor the ratio of car use for business and private purposes and the obligation to adjust the amount of VAT deducted (upwards as well as downwards) regularly for 5 years, always to the last tax period of the respective calendar year. The alternative is to charge output VAT at the rate corresponding to the private use. Again, it is necessary to be able to demonstrate such a ratio.

Fifth complication arises when applying the exemption of EUR 500 under Art. 7 lit. (o) of the Income Tax Act. For example, a company that provides a car to the Managing Director for private purposes only cannot apply section 5(1)(a)(i) to such a non-cash benefit. 7 lit. (o) of the Income-tax Act as the expenditure (cost) relating to the operation of the car provided for private purposes is not a tax expenditure. It could be a tax expenditure if the private use was agreed with the Managing Director as an employee benefit. In such a case, the company could decide whether to claim the employee benefit as a tax expense under section 19(1)(b) of the Act. 1 of the Income Tax Act and tax and “withhold” the value of the benefit to the Managing Director or exclude the private use from tax expenditure and exempt the value of the non-cash benefit provided to the Managing Director from tax in accordance with section 5(1) of the Income Tax Act. 7 lit. (o) of the Income Tax Act. Simple.

Figure 2: Complex structure (explained below):

What do the tax authorities say?

As well as the logbook, the tax authorities may want to see other evidence of the journey, such as minutes of the meeting you travelled to, including the signature of the business partner. Problem.

However, this problem is not necessarily in the executive branch (i.e. the tax authorities). The problem is in the legislature. The legislator must, when making laws, act within the limits of the requirement for the so-called material rule of law (Article 1(1) of the Slovak Constitution). The principle of the substantive rule of law sets the bar for the rule of law even higher than the obligation to comply with valid and effective legal norms. It requires that the legal norms (i.e. the Income Tax Act and the VAT Act) be of a relevant quality in terms of content and value. The legislator must be able to write laws so that they are clear, transparent, and (in the context of this blog) can be complied with. But I’m afraid that even the corporation with the greatest sensitivity and commitment to compliance probably can’t objectively follow the rules of the game for company cars used for private purposes.

And so we get into an environment where the tax authorities are just doing their job. The burden of proof is primarily on the side of the taxpayer and the logbook may not be credible. But neither can the taxpayer reasonably be expected to bring signed minutes of meetings. Thus, the legislature has not only created complicated and nonsensical rules, it has created a breeding ground for procedurally intractable situations to arise within the bounds of fairness.

Do such rules have to be followed?

Yes, but sometimes maybe not. Indeed, it is questionable how these rules would stand up to constitutional law scrutiny. The Constitutional Court of the Slovak Republic (e.g.: PL Constitutional Court 9/2014) has repeatedly indicated the extent of the legislator’s freedom (and possible incompetence) in creating tax legislation. Ak pravidlá predstavujú pre a manifestly disproportionate burden on businesses that is extremely disproportionate to the public interest served, such rules are unconstitutional.

The European Court of Human Rights (SWENSKA MANAGEMENTGRUPPEN AB v/SWEDEN) refers to taxes as an unbearable burden which, if it exists, is contrary to the European Convention on Human Rights. The Czech Constitutional Court makes a similar point. It refers to the unconstitutional rule in the field of taxation as a rule that does not stand the test of legitimacy and rationality. Legitimacy of a tax is not exhausted by the manner of its adoption and by the reason consisting in the fulfilment of the state budget (Pl. ÚS 29/08).

From a procedural point of view, the road to success would resemble Ulysses’ road, which, moreover, thanks to the derogatory effects of the Constitutional Court’s rulings in administrative (tax) proceedings, may be only partially successful at the end of the day. Be that as it may, it can be a concomitant argument supporting the legitimacy of the taxpayer’s actions acting within the bounds of what can fairly be expected of him.

I confess that with company cars I have no procedural experience with this reasoning yet. And of course, this is just my humble digression into this complex area of law, which, given the scope of this blog, cannot even aspire to be exhaustive. At the very least, however, it provides a glimpse of the issue from a different argumentative perspective. In any event, I look forward to testing it in our practice of representing clients in tax audits.

What are the penalties and why am I writing about this?

Making laws is thus clearly an art. And if not mastered, it creates the discomfort of unpredictability in a more warped rule of law.

In the grammatical interpretation of the law and without the application of the so-called. material correctives , one car in the company used also for private purposes, and for which full VAT deduction and 100% of tax expenses were applied, and if the Managing Director is not taxed and does not “justify” non-cash income, can cause the following:

With tax reform unlikely anytime soon and the outcome of the September elections unpredictable, the legal set-up of business and asset ownership needs to be diversified in addition to investments.

On a thick bag, a thick patch. For simpler as well as more complex examples of setting up legal-tax structures, see the figures above in the text. The goal is to minimize the impact of the biggest risks of an unpredictable state (not only in the area of company car use rules).

So if you have any questions on this topic or on legal structuring, feel free to get back to me. For more interesting information like this, please subscribe to our newsletter.

If you are interested in this topic, please do not hesitate to contact us.

Článok Peter Varga’s view on the topic: car (for private purposes) in company expenses, VAT deduction, tax audits and worst case scenario je zobrazený ako prvý na Highgate.

We are thus relatively intimately familiar with the related realities of this segment. Whether it is the topic of tax optimization, “employing sole traders”, investor entry, setting up a holding company, automated accounting, ESOPs, the legal, practical and tax pitfalls of scaling a business abroad, or operating with cryptos, these are all topics that we encounter in practice.

For this reason, we perceived that this conference can help many entrepreneurs to navigate through the complex tangle of more complex Slovak and foreign tax and legal issues. It was also intended to help to better understand the perspective of an investor or potential buyer in a company exit.

Sale of the company or entry of an investor :

• What are the basic situations and types of investor entry into companies?
• What are the key motivations and areas of interest for the investor and the company owner?
• What should an IT firm focus on to maximize the benefits of the investment for the firm and the business owner?
• Structured transactions and relevant tax implications from an income tax perspective (e.g. tax burden through a Slovak vs. a foreign holding company);
• Transaction Experience;

Relevant financial ratios when a company is sold or an investor enters :

• What is of interest to the investor or the buyer in accounting?
• Risks associated with incorrect accounting;
• Capitalization of the company;
• Transaction Experience;

Foreign IT contractors and work “from Bali” :

• Withholding taxes on payments to foreign contractors;
• Working from “Bali” – tax and levy implications;
• Setting up contract documentation;

ESOP – Best practice :

• What forms of shares and options can Slovak companies offer to their employees?
• Legal and practical context;
• Tax and levy context;
• Cross-border structure and practical experience;

Functioning in the crypt :

• Receiving retribution and paying contractors in the crypt;
• Types of crypto projects (token issuance, management, consulting, community token,…) and regulatory and tax aspects;
• Accounting and tax pitfalls in Slovakia and best practice when leaving Slovakia;
• Experience;

Scaling the IT business abroad :

• Do I need to have a company abroad in different business situations?
• Establishment of a permanent establishment, VAT regimes, withholding taxes;
• A company in an offshore jurisdiction from a legal, tax and practical perspective;
• Holding abroad – advantages and disadvantages;
• Investor requirements for foreign structure;
• Protection of the owner’s private property in the context of the political situation in Slovakia;
• Transfer pricing;

Software contracts :

• Framework or one-off contracts;
• Waterfall vs. agile SW development;
• Licensing Terms;
• Warranties and liability for defects in the SW;
• Problematic provisions – experience from practice;

Structuring business to the US :

• How best to enter the US market;
• Where can I get some help/information/grants?
• What is the tax and administrative burden?
• How to choose the right lawyer and accountant?
• How to get into the investors/funds horizon?
• In which state are the best conditions to enter the US market?

Tax optimization for digital and IT companies :

• Holding structure – owner protection;
• Patent Box and Supercomputing – how some IT companies do not have to pay income tax in Slovakia;
• Other tax and levy types and practical experience;
• When is tax optimisation already a criminal offence;

Schwarz system :

• Tax-tax implications and calculations;
• Impact on employees’ social insurance benefits (maternity, pension, sick leave,…);
• What impact does the change to a sole trader’s trade have on a sole trader’s pension?
• Analysis of court decisions that have dealt with the topic;
• Practice of tax administrations and labour inspectorates;
• Criminal liability;
• Setting up contracts with contractors;

Relevant financial ratios when a company is sold or an investor enters :

• What is of interest to the investor or the buyer in accounting?
• Risks associated with incorrect accounting;
• Capitalization of the company;
• Transaction Experience;

Many topics and many questions from conference participants. Companies were particularly interested in topics around ESOPs, tax optimizations or company sales. However, many attendees stayed until the end to hear the current practice in connection with the so-called In the meantime, there was a lot of interest in the practice of the shvarc system (i.e. the employment of freelancers).

We received a lot of positive feedback on the content and organisation of the conference. We are therefore very pleased that after the conference on setting up investment funds, this conference was also a success.

If you are interested in this topic, please do not hesitate to contact us.

Článok Conference on legal and tax optimization for technology companies je zobrazený ako prvý na Highgate.

What pearls people put in their expenses (you can multiple examples)

It is not rare in Slovakia when sole traders or owners of eseroces try to optimize taxes through personal items. It often happens that they include luxury watches, expensive handbags, clothes, microwaves or other household appliances, dentist treatments, cinema or theatre tickets, glasses or even a holiday – which they try to label as a business trip – in the costs associated with their business activities. It is important to note, however, that in defending these costs, the burden is primarily on the taxpayer and the tax authorities or the courts may not recognise these costs. In certain circumstances, this may also have criminal ramifications.

Which of the costs mentioned above were still okay? And which were no longer? And why?

This is always individual. Every entrepreneur may have some reason why they need a more expensive watch, clothes, handbag and so on to run their business. However, that reason must be legitimate enough. For assets of a personal consumption nature, their proximate causality to the generation of income is important. It must be remembered that the taxpayer bears the primary burden of proof in procedural terms. Given the unpredictability of the decision-makers, I recommend, at least for larger transactions, to have this assessed by experts in the field. When good faith is maintained, it is just such an assessment that protects against criminal liability. However, if a business avoids proving itself to the tax authorities, it can still take advantage of the 80%-20% expense claim for personal property,”

So what is the tax office focusing on when checking these items?

It is the aforementioned legitimacy and whether the acquisition of these items is necessary for the exercise of the profession, respectively. business activity. For example, the internal rules of the Slovak Bar Association require attorneys to take care of the dignity of their appearance. For women, this means wearing a skirt or trouser suit, blouse, dress and dress shoes appropriate to the season. And, in turn, male attorneys must wear a men’s suit. And supposedly airline pilots must have a second pair of goggles purchased.

Under what circumstances are these costs recognised?

In the case of personal items – especially if they are expensive and luxury items – the taxpayer must demonstrate the necessity of such a standard in order, for example, to gain the confidence of certain clients if he works in an industry where a certain standard is expected and the absence of such a standard will diminish that confidence. At the same time, he must be able to explain satisfactorily that such equipment is not used privately (e.g. by storing the watch in a safe after work and showing that the taxpayer has his own social watch for non-business purposes, etc.). If these conditions are met, the cost of acquiring such items should be treated as a tax expenditure.

When are these items over the line?

If the taxpayer were using items of a luxury nature, which, by default, the number already strays outside the bounds of what is reasonable to assume to be rational in the ordinary course of events.

Is there a specific case where the SAO or a court has not recognized something? What was the reason?

For example, the courts have dealt with a case concerning the procurement of spectacles by a crane operator who had an eye defect. In that case, the court did not consider such a cost to be a tax expense because the crane operator would have had to acquire the glasses anyway.

What is the difference if a sole trader and a one-person Ltd. put such beads in their costs?

It makes no difference whether you are a sole trader or a sole proprietorship – it must always be clearly demonstrable that the personal items are necessary for the conduct of the business. However, there is another problem with eserocoses – in the Slovak environment it is common practice for eserocos owners to confuse the company’s cash register with the statutory officer’s wallet.

How, for example, can the owner of even a one-person proprietorship dispose of the money in his business account?

Whether and how the money from a business account or cash can be used depends on whether you are a sole trader, an eseroca or a large company. Self-employed persons have a free hand in the use of money from their business account. They don’t have to worry about when and how they withdraw money from the business so that they can use it for private purposes as well. However, this is no longer the case if the business is an LLC – even a sole proprietorship. Smaller businesses in particular forget that an LLC is a business entity that is strictly separate from its owner corporately, accountingly and tax-wise, and the potential penalties for tax or legal offenses can be manifold as well. So it’s not just a question of whether a business can put a microwave in expenses because you heat up your lunch in it during home office hours. If an LLC owner wants to legally use the profits for private purposes, he or she must pay dividends (there are other options, but dividends are the basic, legal alternative), which are subject to withholding tax. In addition to paying dividends, there are other ways to cash out of a small company. The applicability of these is on a case-by-case basis.

What is the risk if he does not state that it was private consumption, etc.

In extra-legal terminology, it is a tunnelling of the company’s assets, for which not only the statutory body but also the recipient(s) of the benefits themselves are liable. And it may have criminal consequences in connection with other, non-tax offences (for example, defamation of a creditor). The topic of private use of corporate assets is thus very complex and the potential penalties for both tax and legal offences can be manifold.

Do large companies also make mistakes in taxing, for example, non-cash income? What are the most common things?

In larger companies, accounting and economic transparency is more present. Although the level of taxpayer aggressiveness discussed is lower by default, even larger companies cannot avoid technical errors. These include, for example, situations where corporate assets are used with full VAT deduction for employees’ private purposes, giving away shares in the company to employees without taxing and “justifying” this income, various non-cash benefits, and so on.

If you are interested in this topic, please do not hesitate to contact us.

Článok Peter Varga in an interview for Forbes: Watches, holidays or luxury handbag: will these items stand up on tax returns? je zobrazený ako prvý na Highgate.

This is a relatively topical issue, as only recently the state has deleted several companies from the commercial register, only to “resurrect” them and re-enter them in the commercial register for a change. Despite the fact that procedurally these are not difficult institutes, legal and tax legislation are not coordinated at all, so in practice a number of legislatively incomprehensible situations arise, such as a tax inspection of an entity that has ceased business and the like.

If you are interested in this topic, please do not hesitate to contact us.

Článok Ex offo deletion – legal and tax implications je zobrazený ako prvý na Highgate.

According to Petr Varga, the reform is not just an invention of this government. A number of proposals have existed for a longer period of time. He also sees the reform as an effort to introduce a greater degree of fairness into Taxation / drainage. There is now a huge disproportion between employees and the so called. office tradesmen. These sole traders benefit from generous lump-sum expenses and pay an effective tax and levy rate of perhaps around 15% (up to 10% for levy holidays). Whereas ordinary employees are much worse off. And yet tradespeople do not lose out on important social insurance benefits (old-age pension, maternity, pregnancy benefits) and save hundreds of euros a month at the expense of public finances.

Positive features of the reform:

• simplification of the system
• group taxation (i.e. netting of losses, elimination of transfer pricing)
• lower tax rate
• striving for greater fairness

Negative features of the reform:

• property tax (illusion)
• exuberant social transfers
• charging university fees for working students

Anyway Peter Varga is very sceptical about whether the state as we have known it for a long time (except perhaps the 2nd Dzurinda government) is capable of implementing such a tax and levy reform. It would be extremely technically complex, not only from a §§ point of view, but also from an information point of view. After all, the Social Insurance Institution has been unable to introduce even an annual settlement of insurance premiums for several years.

Full interview: An expert has dissected Matovič’s reform to the bone. The part with tradesmen has succeeded, surprised the expert (INTERVIEW)

If you are interested in this topic, please do not hesitate to contact us.

Článok What are the positives and negatives of Matovic’s tax revolution? je zobrazený ako prvý na Highgate.