October 27, 2020 - Poland was ranked 17th in Europe and 37th in the world among countries with the most complex accounting and tax regulations. Among the "most business-friendly" ones, half of Europe is ahead of us in this respect, including our closest neighbours - Ukraine and the Czech Republic.
These are the results of the latest report prepared by TMF Group, a global company providing business services for companies operating locally and internationally. The country with the least friendly accounting and tax system for companies in Europe turned out to be Greece. In this respect, entrepreneurs operating in Denmark can rely on the friendliest system in Europe.
In the report entitled Accounting & Tax, TMF Group experts compared the accounting and tax systems across 77 jurisdictions around the world. Such studies are considered by multinational companies while deciding to start a business in a given country.
In Europe, the countries with the most favourable accounting and tax regulations for business are Denmark (at the same time with the second-best score worldwide in this respect with the British Virgin Islands and Curaçao on the podium), Switzerland, Ireland, Norway and the Netherlands. Poland is far behind them. Friendlier countries in terms of the tax and accounting system have also turned out to be the Ukraine, Romania and the Czech Republic, among others, with whom Poland has to struggle for foreign investments. Greece held the lowest position in Europe and the third lowest in the world, and Portugal, Hungary, Croatia and Slovakia were low-ranked.
Factors contributing to the complexity of accounting and taxation are frequent and rapid changes in legislation are unclear and difficult to understand or to interpret. In this respect, in the most business-friendly countries tax authorities are considered as partners for companies. This relationship is characterised by trust in the taxpayers and a high degree of flexibility, such as the possibility to extend financial reporting deadlines.
- Many tax authorities have moved from sanctions to a model based on partnership with businesses, working with them to apply tax legislation correctly and the determination of the appropriate tax bases. From a costs point of view, it is cheaper to help taxpayers comply with the rules than to check reports and identify errors later on. From an entrepreneur's perspective, operating in such a country is less risky, which is one of the magnets attracting foreign investment - Dagmara Witt-Kuczyńska, a leader in accounting and tax practice for the CEE area in the TMF Group, covering Poland, the Czech Republic, Slovakia, Ukraine, Russia and Kazakhstan.
One of noticeable trends in accounting and tax solutions is the introduction of real-time reporting, where companies must ensure that individual transactions are visible to national authorities. Such solutions automate the tax settlement process. On the other hand, the compliance of multinational companies with such standards makes it necessary to implement IT systems integrated with the tax portals of the countries in which they operate.
- Real-time reporting issues have been identified by the OECD in preparing an international standard for the electronic exchange of reliable accounting data from organisations to a national tax authority - the SAF-T. Poland is one of several European countries that have adopted this standard – says Dagmara Witt-Kuczyńska from TMF Group.
As the report points out, the friendliness of jurisdictions in terms of tax and accounting, apart from good communication with the tax authorities, is also influenced by transparency about the establishment of regulations. From the point of view of international investors, the friendliest countries are those that tend to implement international regulations, rather than focusing on local nuances that are often difficult for companies to understand and follow.
Examples of moves towards internationalisation are taxes on digital services and the allocation of profits, ensuring that taxes are paid in the country where the value is created and preventing companies from transferring their profits to other jurisdictions.
- The most recent of these include MDR (Mandatory Disclosure Reporting) - the so-called obligation to report tax schemes. However, Polish regulations have a much broader scope than those contained in the European Commission's directive and contain an extended definition of tax solutions subject to the reporting obligation, so that they cover not only cross-border, but also national tax solutions. This solution is an additional obligation for international investors – says Dagmara Witt-Kuczyńska from the TMF Group.
It is also difficult for multinational companies to keep their accounts in the language of the country concerned. In more than 30% of jurisdictions in the world, this is not necessary. Poland does not belong to this group. Another barrier which is often faced by companies operating internationally is the requirement to make tax payments from a local bank account. Our country belongs to the group of countries which impose such an obligation to international companies.
The principle of trust in taxpayers is actively applied in countries seeking international business. In Ireland, the third most favourable country in Europe in terms of accounting and tax regulation, there are significant simplifications with regard to the obligation to carry out audit procedures. In the US, on the other hand, there are relatively reduced tax reporting requirements, and companies can generally extend their filing deadlines in case of entry into force of a substantial changes in accounting and tax regulations.
In a small group of jurisdictions (6%), entrepreneurs may pay VAT even less frequently than once a quarter - in Europe, this is possible in Switzerland and the United Kingdom. In Ireland, Denmark and the United States, directors are not personally liable for tax compliance.
- Poland's position in the middle of the European ranking in terms of the friendliness of accounting and tax regulations is not accidental. We do not have as complicated regulations in this respect as Greece or Portugal, but we are far from leading countries with a lot of confidence in taxpayers, less bureaucracy, more flexibility in setting and enforcing tax rules and, in addition, providing perfectly prepared online tools to allow entrepreneurs to focus on their core business instead of losing their energy.
and resources for time- and cost-intensive procedures - concludes Dagmara Witt-Kuczyńska from TMF Group.
The Accounting & Tax report is an in-depth analysis of the Global Complexity Index 2020 in terms of accounting and tax regulations applicable to companies in particular countries. In September this year, TMF Group also published a report entitled Rules, Regulations and Penalties, in which TMF Group experts compared the main legal and administrative regulations for doing business in different countries within 77 jurisdictions around the world.
The full Accounting & Tax report (in English) can be downloaded HERE.
The full report on Rules, Regulations and Penalties (in English) can be downloaded HERE.
The Global Business Complexity Index 2020 report (in English) can be downloaded HERE.
About TMF Group in Poland:
With more than 500 experts in offices in Warsaw and Katowice, TMF Poland is one from TMF Group's largest subsidiaries in the Europe, Middle East and Africa (EMEA) region. TMF Poland serves over 800 Polish and international clients in the fields of accounting and tax, HR and payroll and corporate secretarial services.
More: https://www.tmf-group.com/pl-pl/about-us/
About TMF Group:
TMF Group is the leading provider of administrative support services for international business expansion. With some 7,800 experts – in-house, on the ground in over 80 locations – and is the only company worldwide to provide the combination of fiduciary, company secretarial, accounting and tax and HR and payroll services essential to the success of businesses investing, operating and expanding across multiple jurisdictions. We know how to unlock access to some of the world’s most attractive markets – no matter how complex – swiftly, safely and efficiently. That’s why over 60% of the Fortune Global 500 and FTSE 100 and almost half of the top 300 private equity firms use us. www.tmf-group.com
Further information:
Anna Przybysz
Senior Account Manager / Icon Strategies
a.przybysz@iconstrategies.pl / +48 609 373 155
Michał Sobiło
Managing Director / Icon Strategies
m.sobilo@iconstrategies.pl / +48 667 187 178
Giampaolo Arghittu
External Communication Manager, EMEA / TMF Group
giampaolo.arghittu@tmf-group.com / +44 (0) 798 331 4989