In brief
The tax proposal sent to the Parliament on 5 July 2023 calls for a 5-point increase in the corporate income tax rate to 25% for companies other than those in the financial sector and to 30% for companies in the financial sector. The partial corporate tax exemption and the value added tax exemption currently available on sale of immovable property (which have been held for 2 years) are repealed. In addition, the tax-free spin off provision under Article 19 of Corporate Tax Law would no longer apply for immovables. The proposal also includes payment of a one-time additional motor vehicle tax in 2023.
In detail
The tax proposal sent to the Parliament on 5 July 2023 includes the following major changes:
Corporate income tax rate
- For companies other than those in the financial sector the corporate tax rate is increased from 20 percent to 25 percent with effect from 1 January 2023. For entities that do not have a 31 December reporting date, the 25 percent rate kicks in at their accounting period starting in 2023.
- For financial sector companies (such as banks, financial leasing companies, electronic payment and money institutions, asset management companies, capital market institutions, insurance companies, private pension companies) the corporate tax rate increases from 25 percent to 30 percent.
- On the other hand, companies engaged in export activities will benefit from a reduction of 5 percent in their corporate tax rate, instead of the current 1 percent.
Sale of immovable property by corporate taxpayers
- The proposal eliminates the 50% exemption currently available for capital gains from sale of immovable property that have been held for at least 2 years. A grandfathering regime will apply to immovables which have been acquired before the law change comes into effect, however the exemption rate is reduced to 25% (instead of the current 50%) under the proposal.
- The VAT exemption related to sale of immovable property held for at least 2 years is also abolished. Immovable property acquired before the effective date of the law will be grandfathered.
Partial spin-offs
- Under current law, immovable property held by a company may be transferred to an existing or a newly established company under tax-free spin-off provisions (i.e. without paying taxes) after two years holding period. The proposal repeals this provision with effect from 1 January 2024.
Additional motor vehicle tax
- The proposal includes payment of a one-time additional motor vehicle tax which will be equal to the motor vehicle tax accrued for the year 2023.
Investment funds
- The proposal abolishes the corporate income tax exemption for income derived from “other investment funds” excluding the exemption for income from venture capital investment fund participation shares and venture capital investment partnership shares.
This bulletin has been prepared based on the proposal submitted to the Parliament on 5 July 2023. Please note that the proposal may be amended before becoming law.
