This means that the local tax obligations relating to this definition integrated, from a legal technical point of view, into the interpreting provisions of the act will receive stricter regulation.
According to the proposal, plots of land located within city limits that are in agricultural cultivation are exempt from tax. This means that, as intended by the previous regulation also, with this amendment there will be no tax exemption in respect of plots of land specifically for construction, not even if the given land is not used by the taxable person as plough land, vinery, garden or orchard during the entire calendar year in question or if there is a possibility to connect the plot of land in question to public utility lines. Fulfilment of the conditions of tax exemption will be controlled by the competent agricultural administrative body and the procedure will have to be requested by the taxpayer.
Local business tax (hipa)
From 1 January 2017, the former rule concerning local business tax that from the same date taxpayers subject to local business tax may send their local business tax returns to the Hungarian Tax and Customs Authority also will be specified. The proposal confirms that the taxpayers will have to file the returns electronically.
Based on the proposal, the definition of royalty in the Corporate Tax Act would be modified. As, for local business purposes, royalty is deducted from the amount of net sales revenue, the proposal integrates the definition of royalty of the Corporate Tax Act into the Act on Local Taxes also with effect from 1 July 2016.
From 1 January 2017, the proposal would fully align the definitions of research and development for corporate tax and for local business tax purposes so that the differences between the definitions for the two tax types do not cause an extra administrative burden for the taxpayers and to make sure that the recipients of the revenues from these two tax types (the central budget and the municipalities) receive revenues according to a calculation method based on the same regulation.
Company car tax
From 1 January 2017, the proposal would eliminate the rules relating to the so-called long-term leasing. This means that, in the future, taxpayers may not apply the rule that in the case of long-term leasing the tax is not payable by the owner but by the lessee. It also followed from the previous regulation that in the case of long-term leasing, no company car tax payment obligation was incurred by the lessee private individual, which did not account for expenses on the vehicle. This latter rule would not apply in the future either.
Public health product tax (neta)
According to the proposal, from 1 January 2017, the definition of tax allowance deductible from the amount of the public health product tax payable (health protection program) would be extended. This means that not only the expenses of health protection programs offered free of charge but also the expenses incurred in relation to programs offered against a fee of minimum 500 forints would be deductible in the future from the amount of the public health product tax payable.
The proposal would provide definitions for the terms milk raw material, sweetener and herbal beverage.
According to the proposal, the definition of herbs would also change from 1 January 2017. As a result, herbs shall mean plants or parts of plants with a moisture content of maximum 15 percent. This rule is important, above all, for the beverages made of herbs.
From 1 January 2017, the proposal would implement a tighter rule in respect of flavoured beer and alcoholic refreshments as tax payment obligation would also be extended to alcohol beverages of this kind containing sweeteners.
Duty
From 1 January 2017, the proposal would extend the duty payment obligation relating to acquisition of real property contributed to a company owning real property in Hungary as, in contrast to the former regulation relating to only related party business organizations, the duty payment obligation will, in the future, apply to all persons who are related parties.
Social security services (tb)
According to the proposal, from 1 January 2017, the rules relating to the extension of the Hungarian assignment of foreign individuals would be eliminated. As a result, if circumstances arise which are not yet known at the time of commencement of the Hungarian assignment but arise a year later due to which the term of the assignment is likely to exceed two years, there would be an option of reporting the extension of the assignment to the tax authority within eight days. This is important because, unlike previously, in this case, the employer will have insurance obligation after the two year period from the commencement of the assignment expires. Thus, with this change, the period of exemption for insurance obligation based on assignment is maximized at 2 years.
Based on the transitional rule, in the case of extensions until 31 December 2016, exemption from the insurance obligation will apply until 30 June 2017 at the latest.
The amount of the healthcare service commission would increase to 7,110 forints as of 1 January 2017.
Social contribution tax (szocho)
According to the proposal, the taxable person may apply tax allowance in respect of its social contribution tax payment obligation for a period of 12 months if it applies a tax base allowance for the purposes of the Corporate Tax Act with regard to the direct cost of research and development performed within the sphere of its activities and has a negative tax base as a result. The amount of the social contribution tax allowance is calculated applying a 19% tax rate on 50% of the negative tax base but it shall not be exceed the total amount of monthly social contribution tax payment obligation relating to employees. Strict conditions relate to the application of the allowance, which would be audited by the tax authority at least once until the end of the third calendar year from the application of the tax allowance.
The tax allowance may be applied first for the tax year staring on 1 January 2015 or after this date. The new rule would enter into force on the day following the promulgation of the amendment.
The draft proposes a tightening of the rules relating to the application of the social contribution tax allowances. In the future, in the case of simultaneous employment relationships between a payment and an individual, the tax allowance may only be applied for one legal relationship. If a new employment relationship is established between a payment and an individual, the social contribution tax allowance may only be applied once. This change would take effect on the day following promulgation of the act.
In line with social security regulations, from 1 January 2017, in the case of the announcement of the extension of an assignment, social contribution tax payment obligation will also arise after two years from the announcement. It is important, however, that this rule only applies if the term of the assignment exceeds 2 years after 31 December 2016.
