Briefly About Taxes

Income tax

Rate: 5% (0% for the first year of operation*) or 15%

If, as of 31 December, all three (3) of the following criteria are met, the rate is 5%:

  • Sales revenue does not exceed €300,000 per year
  • The average number of employees does not exceed 10
  • The controlling shareholder(s) (member(s)) do not jointly hold more than 50% of the shares (interests) in other companies and do not have an IE**

*For the first tax year, companies may apply a 0% tax rate if they meet certain conditions.

Read more.

**As of 1 January 2019, if a shareholder (member) owns more than 50% of the shares in another company and the first and second criteria are met, the rate is 5% for both companies.

Dividends

One of the ways to distribute profits is to pay dividends. Dividends are taxed at 15% (the PIT rate).

VAT

Rate: 21 %

  • You shall register as a VAT payer if your income exceeds €45,000 over any 12 calendar months
  • If the sum of your purchases of goods from the EU (VAT payers) in the previous or the current calendar year exceeds €14,000 or is expected to exceed this limit, you shall register as a VAT payer. The head of the company is responsible for adhering to this limit
  • If a shareholder (member) has 50% or more of the shares (interests) in any other companies and income and/or purchases from the EU over the last 12 months, then the market value of all of their shares in other companies must be summed up. Income must also be summed up for any shareholders (members) who operate as a natural person

Salary in 2022

  • For salary employees, the MMS is €730 taxes excluded
  • For hourly employees, the MMS is €4.47 taxes excluded
  • The MMS can only be paid to an unqualified employee.

If an employee works part-time and is paid less than the MMS, the employer must still pay “Sodra” contributions based on the MMS (due to “Sodra’s” “floor”*).

*“Sodra’s” “floor” does not apply if the employee is employed by two (2) or more companies, is under the age of 24 or receives a pension.

Non-monetary gifts to employees are tax-exempt if their total value does not exceed €200 in a calendar year. Once the €200 limit is exceeded, any additional non-monetary gifts are subject to PIT and “Sodra” contributions. All monetary gifts are subject to “Sodra” taxes.

Representation:

  • 50% of the cost of representation is tax-deductible
  • The tax-deductible amount may not exceed 2% of taxable income during the accounting year

Daily allowances/ business trips:

  • Are not taxable if the employee’s wage is €1204.50 or more before taxes (MMS x 1,3). If their wage is less than EUR 1204.50 before taxes, daily allowances exceeding 50% of the wage specified in their employment contract are subject to “Sodra” contributions and PIT (and are paid as wages)
  • Directors’ (and Manager’s of Small Partnerships) daily allowances for business trips abroad may be increased by up to 100%;
  • The rate of daily allowance may be reduced to no less than 50% of their monthly wage. Such a rate reduction must be detailed in the employment contract
  • It is mandatory to calculate and pay daily allowances
  • Expenses for the costs incurred during business trips may also be invoiced on behalf of the employee

Abbreviations used in the text:

  • MMS – Minimum Monthly Salary
  • PIT – Personal Income Tax
  • VAT – Value Added Tax

Find all information here.

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