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mailingLeitner Hungary: Changes in tax 02/2023

Newsletter – 13.02.2023

Following the adoptions and modifications in several separate acts and regulations, the tax package for 2023 seems to be final. The present newsletter discusses its key changes.

Personal Income Tax, social tax and social security contributions

The amount of gross minimum wage shall amount to HUF 232,000 for the year 2023 while the tax rates of payroll-related taxes shall remain unchanged.

Parallel to the limitation of the scope of KATA taxation (i.e., small taxpayer’s tax), the possibility of the flat-rate taxation under the rules of the Personal Income Tax Act has been evaluated and the administration has been simplified.

The personal income tax and social security contributions shall be declared and paid quarterly as opposed to the previous monthly procedure.

The conditions for entry have been further simplified. From 2023, the flat-rate taxation might be opted for regardless of the amount of income earned in the preceding tax year. The income thresholds for 2023 shall, however, remain the same: The general income threshold is ten times the annual minimum wage (i.e., HUF 27,840,000), while for private entrepreneurs exclusively engaged in retail activities throughout the tax year, it is fifty times the annual minimum wage (i.e., HUF 139,200,000).

For taxpayers falling out of the flat-rate taxation, the rules of return became more flexible: In order to re-join the system, a one-year period shall replace the period of 4 years.

Local business taxation will also become simpler for flat-rate taxpayers such that they are entitled to a simplified tax base assessment, while tax advance shall only be paid just annually.

Income derived in the form of securities through the Special Employee Stock Ownership Plan or through its asset management foundation shall not be treated as income at the level of the member.

The rules on taxation of capital gains and income from long-term investments have changed such that focus is made on income earned by involving asset management foundations. Consequently, asset management foundations carrying out fiduciary asset management activities may also enter into a permanent investment contract in connection with the assets under management for the benefit of the concerned private individual as a beneficiary. The resulting return would have to be taxed according to the rules for income from permanent investments

Mothers under the age of 30 may receive tax allowance. The allowance is capped at the average gross wage (which amounted to HUF 499,952 in 2022). Thus, the 15 % personal income tax shall not be paid until this tax base.

The sub-accounts of SZÉP card benefit-in kinds ceased to exist; one unified account remains, while the taxation rules are unchanged.

Our experts are ready to support you with services within payroll, the elaboration of remuneration packages as well as in advisory connected to employment.

Corporate income tax

The cease date of a CIT group has been defined as the day before the commencement of liquidation, dissolution or forced cancellation proceedings. In this respect, the rules of advance payment have been amended accordingly.

The allowance for electric charging stations has been aligned to the de minimis regulations.

The corporate income tax may be paid in EUR or in USD. The option must be reported before the end of the financial year.

The costs of gift draws and advertising are regarded as tax deductible and acknowledged as cots for the tax base calculation, provided that it aims the income generation.

Transfer pricing

The continuously published modifications bring significant changes. Related parties now face new transfer pricing reporting liabilities: As part of the corporate income tax declaration, data on determining the price between affiliated parties shall be disclosed. This liability already concerns the 2022 tax year. In addition, the threshold for transfer pricing documentation and data provision has been increased to HUF 100 million. It is worth mentioning that the transfer pricing reporting liability is wider than the documentation obligation itself.

Preparations should start timely. In addition to the necessity to collecting data, it is recommendable to involve advisory support. Our specialist from the specialized Transfer Pricing Business Line are happy to assist you.

Local Business Tax

Instead of the previous four simplified LBT assessment methods, only two remain. The first method is a combined version of the previous three methods, while the second method applies to taxable persons under the KIVA taxation (i.e., small taxpayers).

According to the new simplified LBT assessment method, progressive tax rates are applicable below the revenue limit (i.e., HUF 25 million or HUF 120 million in the retail sector), which are unified for each municipality without further exemptions or allowances. The selection of such method shall be announced within the tax return of the previous year, i.e., until 31 May if the business year is same as the calendar year.

The LBT may also be paid in EUR or USD.

VAT

The reduced VAT rate of 5 % on the sale of new residential properties has been prolonged by 2 years. After 31 December 2024 and until 31 December 2028, transactions may fall under the preferential rate provided that the building permit has become binding until 31 December 2024.

For construction and installation activities, which are subject to the domestic reverse-charge rules, the term ‘authority’ has been simplified such that all bodies are regarded as ‘authority’ as opposed to previous understanding of the building authorities only (e.g., heritage protection bureau).

The data content of an invoice has been simplified such that the VAT shall only be expressed in HUF if the taxable person made a supply under the domestic place of supply rules.

As a further step in the whitening the economy and based on positive experience from online cash registers and real time invoice submissions, the real-time reporting will also apply to receipts.

Did you know that the majority of tax audits concern VAT? We are ready to assist you in monitoring your transactions, processing and invoicing systems such that you would be perfectly prepared for future tax audits.

Changes in extra-profit-taxes (surtax)

Following the summer tax package, the legislation on surtaxes has been amended and widened several times such that at the end of the year, we have seen a modification dumping for this area.

Insurance companies
The additional tax for the tax base up to HUF 36 million has been increased from 7 % to 12 % and for exceeding amount, from 3 % to 5 %.

Producers of petroleum products
Producers of petroleum products are also subject to surtax in 2022 and 2023 with a tax rate increased to 95 % from the price difference.

Airline companies
The highest rate of contribution has been increased to HUF 12,700 per passenger.

Pharmaceutical manufacturers
The pharmaceutical manufacturers have been included into the scope of surtax for 2022 and 2023.The tax base equals to the net sales revenues as defined for local tax purposes. The following progressive tax rates apply:

  • 1 % for the part up to HUF 50 billion,
  • 3 % for the part exceeding HUF 50 billion up to HUF 150 billion, and
  • 8 % for the part exceeding HUF 150 billion.

Manufacturing industry
The tax rate of 31 % has been increased to 41 % for manufacturers producing bioethanol products, the starch and starch products as well as sunflower oil.

Increased public health product tax
The adjusted rules redefine the tax liability for certain additional products included into taxation such as syrups, prepacked sweet and salty pastas. The tax burden has increased for all product types.

Accounting

The relevant EU accounting directive has been implemented and obliges the ultimate parent company of a multinational group to disclose certain corporate income tax related information in the form of a corporate tax report. The rules apply to multinational groups with a consolidated net sales revenues of more than EUR 750 million for two consecutive financial years.

The economic and political circumstances are changing rapidly influencing taxation. The experts of LeitnerLeitner are constantly monitoring these updates to provide the freshest and the most tailormade solutions to the clients. Do not get lost in taxation, you may rely on us!

authors

  • Judit Jancsa-Pék
    Partner | Tax Advisor
  • Gellért Menczel-Kiss
    Partner | Tax Advisor
  • Nóra Rácz
    Partner | Tax Advisor
  • Márta Siklós
    Partner | Tax Advisor | Auditor

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