VAT changes
Two-year extension of the reduced (5%) VAT rate
Tax law changes related to real estate
- Taxability arises for a new real property created by a change in use or a change in the number of units for intended use.
- Only if less than 2 years elapse between the issue of the related certificate and the sale
- Creation of taxability on a series of sales
- Extension of reverse taxation to works requiring other authority permit or notification
- 5% tax rate until 31 December 2028 if the building permit is final on 31 December 2024
M2M eVAT
eVAT M2M XML is a new type of extended VAT analytics in XML structure, which is a pre-defined data structure containing the VAT analytics of the companies for a given period and the additional information required for the VAT return in XML format.
The related XSD schema and the eVAT-M2M interface specification are published at the beginning of 2023. Companies that submit eVAT M2M XML VAT returns will probably face fewer tax authority enquiries in the future and will not have to bother with the M forms of the VAT return. Please check our blog post for more details on M2M eVAT.
SHOULD YOU HAVE ANY QUESTIONS, PLEASE CONTACT OUR EXPERTS
E-receipt and eMAP
As a further step in whitening the economy, and also taking into account environmental considerations, the act proposes the introduction of e-receipts, extending the receipt data reporting obligation to cases where the receipt is issued by technical means other than a cash register (including electronically),as authorised by the authority. The detailed rules will be regulated by legislation at ministerial level.
eMAP: The proposed measure aims to fundamentally change the data reporting obligations of employers to public authorities.
Reverse taxation
In line with EU legislation, the reverse charge rules will continue to apply to the supply of certain cereal products, steel products and the transfer of tradeable rights (emission quota) authorising the emission of greenhouse gas until 31 December 2026.
Corporate income tax
- Introduction of modifying items related to impairment and derecognition of ownership interest: two new modifying items would be added to the corporate income tax act.
- Transition difference in case of merger: The modification addresses the taxation of transition difference related to IFRS adoption in case of mergers.
- Corporate income tax information report - new data reporting obligation for multinational companies
In line with EU requirements and the intention to enhance the transparency of tax burdens for multinational companies, as of 2023 companies with individual or consolidated revenues exceeding HUF 275 million for two consecutive years will have to prepare reports containing corporate income tax information. As a general rule, the report will be prepared by the ultimate parent company and will include, in addition to general information, the revenue, profit before taxation and corporate income tax payable, as well as any withholding tax, by country. The report must be published and filed each year.
- Fiduciary trusts; exemption of trusts carrying out fiduciary activities: As of 24 November 2022 two important modifications were introduced to the corporate income tax act affecting trust property and trusts engaged in fiduciary activities.
- Deferred loss:
Under the current rules, losses generated before the tax year 2015 can be used until 2030, while losses generated from 2015 onwards may be used for 5 years (first in first out approach). A new transitional provision will apply to deferred losses incurred up to the end of the tax year 2014 that have not yet been applied to the CIT base. Losses incurred in 2014 and before can be applied as a decreasing item up to 50 percent of the tax base assessed excluding the interest deduction limitation and deferred losses. The amendment is applicable as of 1 January 2022 for the first time.
- E-charging stations – “de minimis” aid
As an option, the cost of the electric charging station may qualify for tax base reduction in the year of completion of the construction. The new rules may be applied to tax returns filed after 31 January 2022, so it will be possible to decide as early as the first time whether to claim the benefit under the de minimis or the emergency communication rules.
PLEASE CONTACT OUR TAX EXPERTS FOR ADVICE.
Transfer pricing
Massive penalties and more stringent rules in tax years starting after 27 August 2022.
The amount of the default penalty for failure to prepare transfer pricing documentation will increase from HUF 2 million to HUF 5 million, and the amount of the penalty for repeated failure will increase from HUF 4 million to HUF 10 million.
Interquartile range
As of the tax year 2022, interquartile ranges will be required in all cases.
New transfer pricing data reporting obligation
From 2023 taxpayers will also face new data reporting obligations in relation to their transfer pricing documentation, as information on controlled transactions will have to be included in the corporate income tax return as a new element.According to the applicable government decree, the full TP report will still not need to be filed with the corporate income tax return, but information on almost all relevant content of the transfer pricing documentation will need to be reported as part of the tax filing.
Please read more about extended transfer pricing data reporting in our specific blog post on the topic.
In addition to the new TP administrative task, the proposed amendment to the transfer pricing decree also includes some relief. The transaction value threshold to be documented will increase from HUF 50 million to HUF 100 million.
Local business tax
Rules on the assessment of a simplified tax base
From 1 January 2023, small businesses and retailers paying flat rate taxes with an income of maximum HUF 25 million and HUF 120 million per tax year, respectively, may opt for for simplified assessment of the local business tax base.
A further relief in the field of local business tax is the introduction of the itemised taxation for small companies. The point here is that the law assigns a tax base amount to the income bands, and the tax is paid once a year, at the end of May, and no tax return has to be filed. The lowest rate of itemised local business tax is HUF 50,000 (calculated at a rate of 2% LBT),which can be applied up to HUF 12 million of annual income.
Transfer pricing adjustment
The local business tax base may be reduced by the amount of the transfer pricing adjustment if the taxpayer holds a statement from the other party declaring that they have increased the tax base by the amount of such adjustment. The adjustment corrects cases where the related party accounts for the transaction subject to the transfer pricing adjustment in a way that has no effect on the LBT base (for example, as a service received).
Innovation contribution
Changes to the innovation contribution liability
The amendment extends the scope of the innovation contribution to establishments under the Act on Local Taxes and to Hungarian branches of non-resident companies. The innovation contribution liability is incurred on the 31st day following the promulgation of the amendment. The taxpayer may choose to assess the contribution liability for 2022 either as an amount calculated pro rata for the relevant days in the 2022 tax year or as an amount calculated on the basis of the closing balance for the day before the contribution liability is incurred.
Exemption from innovation contribution
Micro- and small-sized businesses continue to be exempt from innovation contribution. (The classification is based on the last consolidated financial statements or, in the absence of consolidated accounts, on the annual financial statements or simplified financial statements.) Related and partner enterprises must also be taken into account, and a detailed SME qualification is essential to determine these.
Changes in personal income tax
Tax benefit under 25: range of declarations that may be made in relation to the benefit is extended
Taxpayers will now be able to make a statement waiving the benefit not only to a payer of regular income but also to a payer of non-regular (one-off) income. Thus, no tax liability arises when the tax return is filed.
According to a decree published at the end of the year, from 2023, women under 30 will be entitled to an exemption from personal income tax on the birth of a child after 1 January 2023, or in the case of a certified pregnancy.
Changes of SZÉP Card
Amounts credited by 15 October 2022 can be used until 31 May 2023 with favourable tax treatment. Income earned on SZÉP cards after 15 October 2022 can be used for one year from the date of crediting. From 2023 onwards, SZÉP card sub-accounts are cancelled.
Minimum wage changes
From 2023 the amended provisions stipulate a 16% increase in the minimum wage and a 14% increase in the guaranteed minimum wage for full-time workers. As of 1 January 2023 the minimum wage is HUF 232,000 and the guaranteed wage minimum is HUF 296,400. Read our blog post on the details of minimum wage changes here.
Fuel cost accounting – for hybrid and electric vehicles
As of 1 October 2022, for solely electric vehicles, an amount equal to the price of 3 l /100 km of unleaded ESZ 95 petrol as published by the Hungarian tax authority can be accounted for. For plug-in hybrid vehicles, 70% of the fuel consumption standard, as determined by the government decree, based on the cylinder capacity of the internal combustion engine installed, can be deducted.
Relief for the taxpayers who opted out of the kata and opted for a flat-rate tax
In the future, the conditions for opting for flat-rate taxation will be extended and the frequency of contribution filings for flat-rate taxpayers will be reduced to quarterly.
More specific rules pertaining to the special employee stock ownership plan
The rules governing special ESOP organisations allow special ESOP participants to place their membership shares into fiduciary trusteeship established for this purpose. In this case, the participants receive the shares under the scheme not from the special ESOP organisation but from the trust.
Social contribution tax
Assessment of income taxable in Hungary
Rules for the assessment of income taxable in Hungary changed after 26 August 2022. If the income is taxable partly in Hungary and partly abroad according to the proportion of work performed, the contribution base and the social contribution tax base will be determined in proportion to the number of working days in Hungary and abroad, as opposed to the previous calendar day ratio.
Social contribution tax exemption for foreign performers and staff members
Performers and staff members assigned to Hungary from a country covered by a social security convention and opting for simplified taxation may also be exempt from social contribution tax. The exemption is conditional on a certificate issued by the foreign state. This provision will apply to income earned from 1 January 2023.
Changes concerning other tax types
Company car tax to be doubled
The higher rates introduced during the state of emergency will become definitive, and the tax on company cars will permanently double. Company cars are to be taxed in 2023 at the same rate as the government set for the second half of this year in the Extra Profit Tax Decree.
Advertising tax – the 0 tax rate remains
Extra profit tax
Although government efforts have previously intended administrative simplification, external and internal economic circumstances have led to the introduction of new sectoral extra-profit taxes during 2022.
Tightening of transfer tax on real estate transactions of related companies
Real estate transactions between affiliated companies will no longer be exempt from the transfer tax if less than 50% of the net revenue of the acquirer in the previous year is derived from real estate transactions.
Customs administration – clarification of the customs fine procedure
As regards customs administration, a clarification is made for customs fines that do not involve a customs deficit. In the assessment of the fine, the amendment provides that the frequency of infringement should be examined only within one year for the entity concerned. The criteria for the application of a warning as a sanction has been clarified. If the entity concerned commits the infringement for the first time within one year and fulfils the other criteria, a warning may be issued.
Environmental product charge
If the bill is adopted, the amendments will change the system of environmental product charge obligations from 1 July 2023 in the context of the extended producer responsibility system to be regulated in the Waste Act and in a separate government decree. The definition of product charge is transformed in a way that a general product charge rate is introduced minus an extended producer responsibility fee. The administrative obligations of entities will also change. They will have to fulfil two types of obligations in the future, one regarding the product charge and the other to fulfil the obligations arising from the extended producer responsibility system.
Global minimum tax
On 15 December 2022, EU leaders agreed in principle to introduce a global minimum tax of 15% by the end of 2023, as proposed by the OECD, with the Council of the European Union agreeing to include the Hungarian local business tax in the global minimum tax. This would allow the global minimum tax to be applied in Hungary without having to increase the effective corporate income tax rate. Consequently, it is expected that for most of the taxpayers concerned, the global minimum tax will not result in an additional tax liability in Hungary.
