Tax aspect of liquidation of companies

Tax aspect of liquidation of companies have their own specific characteristics in relation to the general corporate tax regime.

The most common tax questions which arise regarding the tax aspect of liquidation of companies are:

  • assessment of tax on corporate profit of companies in liquidation and
  • tax treatment of payments of the liquidation surplus.

Assessment of tax on profit of companies in liquidation

Generally according to the provisions of Article 34 of the Corporate Profit Tax Law, taxpayer’s profit in the process of liquidation shall be taxed in accordance with that law. Continue reading Tax aspect of liquidation of companies

Status changes according to the Law on Business companies – concept and types

Concept of a Status change:
A company in a status change – the transferring company reorganizes itself to the effect that it transfers assets and obligations to another company – the recipient company, while its members acquire shares, i.e. stocks in that company.

The essence of the status change is manifested in the following two important elements:

  • transfer of assets and obligations – without the transfer of assets and obligations from one company to another status change does not exist. This is achieved by universal or singular succession.
  • proportional conversion of stocks and shares – All members of the transferring company acquire shares, i.e. stocks in the recipient company pro rata to their shares, i.e. stocks in the transferring company, unless:
    – each member of the transferring company agrees that the status change establishes a different ratio for such conversion of shares, i.e. stocks, or
    – a member of the transferring company who dissented from the decision on status change exercises his right to payment instead of the acquisition of shares, i.e. stocks in the recipient company, whereas the buy-back price of his stocks is determined by the decision on status change Continue reading Status changes according to the Law on Business companies – concept and types

Fair value of real estates declared in business books as property tax base for micro legal entities

According to the provisions of Article 7, paragraph 1. of the Law on Property Taxes, the basis of property tax for the immovable property of a taxpayer who keeps business books and whose value is reported in the business books according to the fair value method following international accounting standards (IAS), i.e. international financial reporting standards (IFRS) and adopted accounting policies is the fair value stated on the last day of the taxpayer’s business year in the current year.

According to the opinion of the Ministry of Finance, no. 011-00-00698/2021-04 from July 1, 2021. for the fair value of the real estate shown in the taxpayer’s business books on the last day of the taxpayer’s business year in the year preceding the year for which the property tax is determined and paid to form the basis of the property tax, all prescribed conditions must be met:

  • that the specific obligee has the status of an obligee who keeps business books under the Law
  • that the taxpayer reports the value of the real estate in the business books using the fair value method under international accounting standards (IAS), i.e. international financial reporting standards (IFRS) and adopted accounting policies, as well as
  • that the value of the real estate in the business books of the taxpayer was stated following IAS, i.e. IFRS and adopted accounting policies on the last day of the business year of the taxpayer in the current year (i.e. the year preceding the year for which the tax liability is determined.

Continue reading Fair value of real estates declared in business books as property tax base for micro legal entities