How Central and Eastern Europe is taxed: Forvis Mazars publishes its 2026 regional tax guide

• 2026 marks the broadest simultaneous VAT rate increase in years: Romania, Estonia and Kazakhstan all raised standard rates, while reduced rates across the region are being consolidated or abolished.
• The tax wedge at average wage ranges from 13% (Kosovo) to 48% (Germany).
• Pillar II compliance becomes a real operational burden in 2026: first top-up tax returns for fiscal year 2024 are due by 30 June 2026.

Now spanning 25 jurisdictions - 22 European states plus Kazakhstan, Kyrgyzstan and Uzbekistan - the guide compares tax systems from an investor’s perspective and tracks the structural forces reshaping the regional tax environment.

The 2026 edition is defined by three converging themes: personal income tax and VAT rates have risen in several countries, reversing the relative stability of prior years; Pillar II compliance is transitioning from a legislative exercise to an operational reality as first filing deadlines arrive; and mandatory e-invoicing has become a mainstream compliance requirement across the region’s largest economies.

Employment taxes

In 2026, personal income taxes continued to diverge across the region. Lithuania and Slovakia both shifted toward more progressive systems, with top rates rising into the 30-35% range, while Romania increased its dividend withholding tax from 10% to 16%. Greece moved in the opposite direction, cutting most rates by around 2 percentage points.

Employer social contributions show a similarly wide spread. While the regional average is around 17% of gross salary, the actual burden ranges from below 5% in Lithuania, Kosovo and Romania to over 30% in Estonia, Slovakia and the Czech Republic. The overall tax burden on labour varies widely across the region. At the average wage level, the rate ranges from about 13% in Kosovo to nearly 50% in Germany, with a typical level of around 37%, slightly above the OECD average.

Two main patterns stand out. First, in countries with progressive tax systems, such as Austria and Albania, the burden increases noticeably at higher income levels. By contrast, in flat-tax countries like Hungary, Bulgaria, Romania and Ukraine, it changes very little.

Dr Dániel H. Nagy LL.M., Partner and Head of Tax and Legal Services at Forvis Mazars in Hungary, summed up the key trends: "The 2026 edition of our tax guide reflects a region in motion: VAT is rising, PIT systems are diverging and Pillar II has become an operational reality. For multinationals across CEE, nominal rates tell only part of the story - effective burdens and tax predictability matter just as much. The region remains competitive, but the pace of change is accelerating."

Wage levels: nominal rises mask real divergence

Gross minimum wages rose across the board. The most striking increase is Montenegro’s, up by roughly one third to €670; Slovakia, the Czech Republic and Albania also recorded double-digit local-currency gains. Germany and Austria lead the region at around €2,400, while the private-sector average across CEE stands at nearly €1,700. Adjusted for purchasing power parity, rankings shift considerably: Estonia’s nominally high wage is eroded by price levels, Greece falls behind several lower-headline countries, while Montenegro, Poland, Croatia and Romania all perform materially better in real terms than their figures suggest.

VAT: the broadest simultaneous upward shift in years

VAT rules are broadly harmonised across EU member states, but applicable rates show significant differences - and 2026 records an unusually broad simultaneous upward movement. Headline rates are rising while the scope of reduced rates keeps shrinking.

Romania increased its standard rate from 19% to 21% from August 2025, simultaneously consolidating its existing 5% and 9% reduced rates into a single 11% rate. Estonia raised its standard rate from 22% to 24% from July 2025, applicable for the full 2026 year. The most significant increase in absolute terms is Kazakhstan’s, where the standard rate rose from 12% to 16% effective January 2026. Against this backdrop, Hungary stands out at the opposite end of the spectrum: its 27% standard VAT rate remains the highest in the EU, well above the regional average of approximately 20%.

Reduced rate structures are also narrowing. Lithuania eliminated its general 9% reduced rate, transferring district heating and hot water to the standard 21% band, while introducing a new 12% rate for accommodation and cultural services. Slovakia abolished the 19% reduced rate on high-sugar and high-salt food products; these goods now bear the standard 23% rate. VAT registration thresholds were raised in Romania (to €80,000), Moldova (to approx. €75,800) and Poland (to approx. €56,500).

"In the CEE region, VAT is increasingly being used as a fiscal balancing instrument, with governments expanding tax bases and reducing the number of reduced VAT rates. The increase in Romania’s standard VAT rate from 19% to 21%, together with the consolidation of reduced rates into a single 11% rate, reflects a broader regional trend toward simplification and higher levels of indirect taxation. For companies, this translates into greater pressure on pricing strategies, cash flow management and VAT compliance processes, in an environment already sensitive to inflation.”, stated Bianca Vlad, Tax Partner, Forvis Mazars in Romania.

Corporate income tax: headline rates stable, complexity growing

Corporate tax rates across the region remain broadly stable, typically clustering around 20%. Hungary stands out with a 9% rate - the lowest in the EU - although additional sector-specific taxes can significantly increase the effective burden. While headline rates change little, underlying systems are evolving. Lithuania slightly increased its rate (from 16% to 17%), whereas Germany is planning a gradual reduction from 15% to 10% by the early 2030s. Latvia introduced a new approach, taxing distributed profits at 15% alongside a dividend tax.

Incentives are becoming more important in shaping the real tax burden. The Czech Republic strengthened its R&D support, while Romania introduced a new refundable tax credit, highlighting a broader regional shift toward targeted investment incentives.

“Romania’s introduction of a 10% refundable R&D tax credit, alongside the existing 50% superdeduction for R&D activities, reflects a broader regional shift toward investment‑driven tax policy. As countries compete to attract innovation and high‑value added activities, businesses are looking beyond nominal corporate tax rates and focusing more closely on how effectively local incentive frameworks reduce the real cost of investment.”, noted Lucian Dumitru, Tax Partner, Forvis Mazars in Romania.

Pillar II: from legislation to first-filing reality

The implementation of Pillar Two represents the most significant development in the field of international taxation in 2026. EU Directive 2022/2523 has been implemented in 14 of the 25 jurisdictions covered by the guide. Taxpayers within scope must generally submit their top-up tax return for fiscal year 2024 by 30 June 2026 (the Czech Republic secured an extension to October). Romania and Slovakia have also transposed the DAC9 information exchange directive. The gap between jurisdictions with operational frameworks and those still deferring is becoming commercially material.

“2026 marks the point at which Pillar II moves from a legislative exercise to a real compliance and reporting challenge for multinational groups. With first GIR forms and top‑up tax returns now due across much of the CEE region, companies are focusing not only on their effective tax rates, but increasingly on the operational readiness of their data, reporting and governance frameworks. As more jurisdictions implement both the Pillar Two requirements and those of DAC9, the effective tax rate of entities belonging to medium and large groups operating in the region will be at least 15%.”, commented Liviu Gheorghiu, Tax Partner, Forvis Mazars in Romania.

Transfer pricing and digital compliance: converging trends

Transfer pricing rules now cover almost all countries in the region, with several tightening their frameworks in 2026. Latvia introduced mandatory reporting for larger cross-border transactions, Moldova aligned its rules with OECD standards and Poland expanded transparency with public country-by-country reporting for large multinational groups. At the same time, more countries are simplifying compliance by accepting a standard markup for low-value intragroup services.

Digital tax compliance is also accelerating. E-invoicing is becoming standard practice: Croatia introduced real-time invoicing for all VAT-registered businesses in 2026, Poland rolled out mandatory e-invoicing in phases during 2026 and Romania extended SAF-T reporting to all taxpayers. Slovakia and Slovenia are set to follow with new requirements in the coming years.

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About the publication

The Forvis Mazars CEE Tax Guide 2026 summarises the tax systems of 25 countries based on legislation in force as of 1 January 2026, with detailed comparative tables on corporate income tax, VAT, payroll tax burdens, transfer pricing regulations and the status of Pillar II implementation. This is the fourteenth annual edition of the guide.

The publication is available here.

Press contacts

Emilia Popa, Head of Marketing, Communication, and Business Development, Forvis Mazars in CEE & in Romania
emilia.popa@forvismazars.com  / +4 0741 111 042

Mădălina Lazăr, PR & Corporate Communication Manager, Forvis Mazars in Romania
madalina.lazar@forvismazars.com  / +4 0763 385 622