Draft law No. 1210 approved by the Parliament is currently the main topic of discussion in the business community. The business is looking for answers to what to expect in the near future. The rules of the game are changing. Let us consider how local tax rates will change if the draft law is passed.
Draft law No. 1210 changes the deadline for local governments to formally promulgate a decision to set local taxes and fees (including rates) to take effect from the beginning of the next budget period. The decision should be made public not prior to July 15, the year preceding the budget period, but before July 25 (subitem 12.3.4 of the TCU). Only the decisions that will be made public after July 25 of the respective year will be applied no earlier than the beginning of the budget period following the planned period, i.e. one year later.
In addition, the Draft Law No.1210 amends subitem 12.3.3 of the TCU is the norm according to which the decision of local self-government bodies on the establishment of local taxes and/or fees, as well as tax benefits for their payment, which do not specify the validity period (such decisions are actually approved by each local self-government body), will remain in force without limit of time. That is, they are effective until a new decision is made.
Consequently, the discussion that local tax rates have to be reaffirmed annually by the local authorities so that not minimum rates (0%) but specific ones determined in such decisions are applied to individual taxes, will go into oblivion.
The legislators have insured local governments if they approve tax rates for a fixed term (by the end of a certain year), and the new decision will not be enforced in time (not promulgated by July 25). Then, all local taxes and/or fees will be subject to decisions (and, accordingly, rates) on local taxation that have been effective until December 31 of the year preceding the budget period (subitem 12.3.5 of the TCU). Previously, last year's rates had to be applied in this case only for the land tax, and for other taxes it was necessary to take the minimum rates set by the TCU, i.e. the 0% rate.
It will only be possible to avoid the payment of local taxes if the local government so requests and prescribes the exemption in its decision.
