Mandatory book inventory of tax exemptions and tax reductions of companies

The amendments to the Income Tax Act that entered into force in 2015 provide for declaring all rights to tax exemptions and tax reductions at the moment of obtaining or transferring such rights. These amendments require that also the unused rights be entered in the tax return for January 2015, and therefore undertakings will have to carry out a thorough book inventory of taxation rights.

Said tax exemptions are related to the corporate income tax liability arising upon payment of dividends or other payments from equity. Up to now, the rights reducing a tax liability have been declared together with such payments, but from 1 January 2015 all rights reducing the tax liability shall be declared in the tax return for the month when the rights are obtained or transferred. Among others, the rights transferred or obtained in the course of mergers and acquisitions shall be set out in the tax return for the month when the transaction enters into force.

In order to implement the new system, it will be necessary to inform the tax authority of all the rights unused up to the present. For this purpose, the rights received before 1 January 2015 shall be set out in the tax return for January 2015. The due date for filing the tax return will be 10 February 2015 and it should be kept in mind while filing the tax return that tax exemptions or tax reductions are provided only by those rights that are supported by documentary evidence.

Therefore, companies will have to carry out a thorough book inventory of taxation rights which in more complicated cases may give rise to reopening negotiations between parties to transactions. We advise carrying out the assessment of the rights enabling tax reductions and declare the unused rights as soon as possible. Should it still turn out after 10 February 2015 that an earlier contribution has not been declared, it will be possible to amend the respective tax return within 3 years. However, it is important to enter all the unused rights in the tax return, as it will not be possible to rely on any undeclared rights in the future.