Autumn tax law changes 2024 – Part Two

Tax package 2024

In the second part of our newsletter, we highlight the most relevant changes to VAT, procedural rules and other tax categories.

Value added tax

Introduction of e-VAT and M2M data reporting

The e-VAT system is introduced as from 1 January 2024, taxpayers are be able to submit their VAT returns via the e-VAT system and M2M data service in addition to the traditional VAT return forms. Under the e-VAT, the VAT return may be completed and approved via the electronic interface of the Hungarian Tax Authority, using the draft VAT return prepared on the basis of the information available to the NAV. It will also be possible to upload a standardised file of VAT analytics to the NAV interface via a direct machine-to-machine (M2M) connection, which, after data verification by the authorities, can be finalised by the taxpayer and used as a VAT return.

In both cases, the tax returns prepared can only be considered final with the taxpayer’s approval (unlike the e-PIT return, where approval is not required). The eVAT system is available in parallel with the usual assessment and VAT return methods. As such, everyone may choose their preferred filing method.

E-Register

With a view to the introduction of the e-cash register system, the autumn tax package has introduced new provisions in VAT law on receipts. Taxable persons will, for example, be obliged to indicate the following information on their e-receipt: the description of the goods or services, the global commercial identification number of the goods, if available, and the reference to an exemption. The tax package also provides for a new reporting obligation, i.e., to be reported in real-time for e-receipts and within three days for other documents. It is envisaged that any digital device will be able to issue receipts under the e-receipt system, with the provisions applying from 1 January 2025.

The amendment also introduces the concept of a document to be treated in the same way as a receipt. This will allow taxpayers to issue a document to correct a receipt in the same manner as an invoice.

The new rules also set out NAV’s entitlements and the obligation to keep receipts in the receipt book for 10 years.

Tax rate changes

The tax package clarifies the classification of breast milk substitutes for special medical purposes, infant formulae, and follow-on formulae, which are subject to the reduced VAT rate of 5 %. From 1 January 2024, the 18 % VAT rate will additionally apply to dessert cheese products, such as cottage cheese sticks (Túró Rudi). The VAT rate for daily newspapers has been changed from 5 % to 0 % as from 1 January 2024. Daily newspapers are defined as publications that appear at least four times a week.

Reverse charge on real estate activities

Tax on construction, installation and other services relating to immovable property must be paid by the recipient of the service, provided that the activity on the property is subject to an official permit or notification to the authorities. Until now, the recipient of the service had to declare the reverse charge in these cases. As from 1 January 2024, the obligation to declare will be reversed. As such, the service provider will be liable if the official authorisation or notification relates to the activity of the service provider.

Virtual events

To comply with the EU VAT Directive, the tax package has amended the place of supply rules for cultural, artistic, scientific, educational, entertainment events and activities from 1 January 2025- In case of virtual participation in a cultural, artistic or scientific event, the transaction will be taxed in the country of the recipient. This is a clear deviation for the previous rules, according to which “only” the venue of the event was considered the place of supply. In case of virtual events, this meant that the place of supply was assumed in the country of the supplier of the service. In addition, the provision of such online services to non-taxable persons will be taxed according to the residence of the non-taxable person using the service.

Tax exemption

The package has also significantly changed the tax exemption system through harmonisation with EU law. In this respect, from 1 January 2025, it will allow domestic taxpayers to opt for an exemption in another EU Member State for transactions carried out in that Member State. At the same time, foreign taxable persons will also be able to opt for an exemption for transactions carried out within the EU.

Dental technical activities and patient transport

Until now, there has been uncertainty among taxpayers as to the exact scope of VAT exemptions for dental technicians and dentists. In order to eliminate this uncertainty and to comply more accurately with the Directive, the amendment clarifies that services supplied by dental technicians or dentists and the supply of dental prostheses are eligible for exemption.

The amendment has also extended the scope of the exemption covering the transport of sick and injured persons by providers other than public service providers. For purposes of the exemption, the transport must be carried out in a vehicle specially equipped for that purpose.

Small business tax (KIVA)

In determining the KIVA fund, the discount for doctoral students was brought in line with the social contribution tax discount, which is effective from 1 January 2024 and now amounts to a maximum of twice the minimum wage.

The status as a KIVA subject generally expires on the day before the change of corporate form if the KIVA subject closed corporation is converted into a public limited company. If a taxpayer had opted-out of the KIVA form, he was unable to opt-in again for a period of two years. This was amended as of 1 January 2024. If a taxpayer now ceases to be a taxable entity due to a merger or division at book value, the legal successor(s) can opt for the KIVA tax form again within 15 days. This provision entered into force on 1 December 2023.

Simplified employment

As of 1 January 2024, the special public charge payable on simplified employment will be considered a social contribution tax. It is worth mentioning, however, that the public charge will continue to be paid in accordance with the rules of the Simplified Employment Act. ´Social contribution tax benefits will not apply to the special public charge.

Advertisement Tax

The suspension of the advertisement tax has been extended for a further year until 31 December 2024.

Tax on public utility lines

The tax on public utility lines will be phased out in two stages: from 1 January 2024, the tax will no longer apply to communication lines, while from 1 January 2025 onwards, the tax will be abolished completely.

Average gross earnings at the level of the national economy

The tax package introduces the concept of average gross earnings at the level of the national economy, which corresponds to the average gross earnings of full-time employees as published by the Central Statistical Office in the Official Gazette. In 2024, this is the average gross monthly earnings at national economy level published for July 2023, in the amount of HUF 576,601.

It is also worth mentioning that from 1 December 2023, the gross minimum wage was increased to HUF 266,800 and the guaranteed minimum wage to HUF 326,000. This corresponds to an increase of 15 % for the minimum wage and 10 %t for the guaranteed minimum wage.

Changes to trust asset management

The rules on the management of trust assets have been changed again from 1 December 2023. As part of the changes, output taxation will be introduced instead of input taxation. As such, a tax liability will arise if income is distributed to the beneficiary from the assets under management and an asset transfer takes place in the last five years prior to the distribution, in which the distributed assets have increased in value and there has been an increase in the value of the assets as a result. The changes only affect trusts and private foundations created after 12 September 2023.

Family home creation allowance / exemption from duty

The existing rules on the exemption from transfer duty on residential property acquired with the family home creation allowance (CSOK) have been supplemented. Following these changes, the exemption from transfer duty will also apply to the CSOK for small municipalities starting 1 January 2024.

Taxation, Tax administration procedures

Declaration ’08

Due to the entry into force of the seventh amendment of the EU Directive on Administrative Cooperation (DAC7) on 1 January 2024, the ’08 return needed to be amended to comply with the new reporting obligations. The reporting obligation was extended to include data for which information was not previously available in the tax administration’s systems. Therefore, the ’08 return, ‘monthly return of taxes, contributions and other data relating to payments and benefits’ had to be amended.

Joining a VAT group

According to the tax package, from 1 December 2023, taxable persons who start their activities during the year must submit their application to join the tax group within 30 days of the date of their registration with the tax authorities. Until now, the application had to be submitted at the same time as the registration. If the deadline is missed, the request for certification will be declared invalid.

List of tax debtors

The regulations on the list of taxpayers with tax debts have been revised with effect from 1 January 2024 for both central and municipal tax authorities. In the future, it will be possible to remove a taxpayer who has settled a payment or tax debt within eight days from the publication list upon request.

The rights of taxpayers have been extended even further. The amendment creates the possibility for taxpayers to exercise their right to lodge objections even during liquidation. They will have eight days from the date of receipt of the tax audit report to comment on it. The new regulation applies to tax audits that are initiated after 1 December 2023.