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Recent tax developments

Newsletter – 10.09.2022

Dear Client,

In this newsletter we would like to inform you about the most important amendments published in Act XXIV of 2022 (the “Amendment Act”), promulgated on 27 July 2022 as the summer “tax package”. Should you have any questions regarding the interpretation of the new measures and their application in your company, please do not hesitate to contact our expert colleagues.

 

Personal Income Tax

Fuel price to be used in cost accounting

As of 28 July 2022, in connection with fuel cost accounting according to the consumption standard, the Hungarian Tax Authority (HTA) may also publish the consumer price of a fuel that is typically distributed by only one large fuel distributor with national jurisdiction (CNG).

Article 14 of the Act on Amendments, Section 82 (2) of the Income Tax Act

Fuel accounting for hybrid and pure electric vehicles

From 1 October 2022, the income tax law will also define the costs that can be deducted without a certificate for rechargeable hybrid and pure electric vehicles:

Vehicle Costs eligible without justification
Chargeable hybrid vehicle 70 % of the fuel consumption standard set in the fuel consumption standard regulation according to the cylinder capacity of the installed engine
Purely electric vehicle 3 litres/100 km ESZ 95 unleaded petrol at the price published by the HTA

Art. 15, para. 5, Annex 6 of the Act of Amendment, Annex 3 to the Income Tax Act

Tax allowance for young people under age 25

Young people under the age of 25 can now declare that they are not claiming tax relief – which is automatic otherwise – not only to their regular income payer, but to all payers, thus avoiding the risk of having to pay tax when they file their annual tax return.

Entry into force: 28 July 2022

Art. 17 (2) 1. Point 1 of the Act on Amendments, Section 48 (3d) of the Income Tax Act

 

Social tax and social security contributions

If an individual earns both taxable and non-taxable income in Hungary in the same tax year, the part of the income subject to Hungarian social security contributions must be determined on the basis of working days instead of calendar days (and thus harmonized with the personal income tax regulations).

Articles 209, 218 of the Act on Amendments., Szocho Act, § 1 (8), Tbj. § 27 (6) b)

 

Company car tax

The government decree on extra-profit taxes nearly doubled the monthly rate of company car tax for the period 1 July to 31 December 2022. From 1 January 2023, this change will become law. The rates of tax based on performance and environmental classification are included in Annex 1 to the Motor Vehicle Tax Act.

A B C D
1. Performance (kW) “0”-“4” environmental class “6”-“10” environmental class “5”, “14-15” environmental class
2. 0-50 HUF 30,500 HUF 16,000 HUF 14,000
3. 51-90 HUF 41,000 HUF 20,000 HUF 16,000
4. 91-120 HUF 61,000 HUF 41,000 HUF 20,000
5. above 120 HUF 81,000 HUF 61,000 HUF 41,000

Articles 6-7, Annex 1 of the Act on Amendments of the Motor Vehicle Tax Act 1991.
LXXXII of 1991, § 17/E, Annex 1

 

Corporate income tax

Impairment loss recognised on ownership interest

For the 2022 tax year, a new tax base adjustment related to the impairment loss recognised on ownership shares is already applicable, allowing the taxpayer to defer the deduction of the impairment loss in the tax base. The taxpayer may decide to increase its tax base by the amount of the impairment loss recognised on the ownership held in the tax year of recognition, which will be taken into account as a tax base reduction when the ownership is removed from the books.

Articles 25-26 of the Act on Amendments, Art. 7 (1) j), 8 (1) w) of the Tao Act

 

Transfer pricing

New reporting obligations

Taxpayers required to keep transfer pricing records must provide information to the Hungarian Tax Authority on the determination of the fair market price in their annual tax returns. The new reporting obligation applies for the first time to CIT returns filed after 31 December 2022. The detailed rules will be set out in the Transfer Pricing Regulation.

Art. 27 (1) of the Act on Amendments, Art. 18 (5) Tao Act

Use of interquartile range

From the 2022 tax year, all taxpayers using database research (benchmark analysis) to support the fair market price will be required to use the interquartile range to determine the fair market price. This means that the full range must be narrowed down to the middle range, in which half of the elements from the sample fall.

Art. 27 (2) of the Act on Amendments, Art. 18 (9) Tao Act

Transfer price adjustment to median

From the 2022 tax year onwards, if the consideration applied to related parties is outside the fair market price range, the transfer pricing adjustment must be based on the median value (the midpoint of the fair market price range at which the data is less than half or equal to half and greater than or equal to half).

The adjustment to the median is not mandatory if the taxpayer can demonstrate that a value within the fair market price range other than the median best reflects the transaction under consideration.

Art. 27 (3) of the Act on Amendments, Art. 18 (11)-(12) Tao Act

Default penalty

The fines for breaching the transfer pricing documentation obligation will increase significantly: the default penalty will rise to HUF 5 million, approx. EUR 12,500 (from HUF 2 million) for a first breach and to HUF 10 million, approx. EUR 25,000 (from HUF 4 million) for a repeat breach.

Entry into force: 27 August 2022.

Article 193, Paragraph 2 of the Act on Amendments, Art. 230 (1)

APA application

As of 27 August 2022, all taxpayers will be able to submit an APA (application for a market price assessment).

At the same time, the procedural fees will increase as follows:

  • for unilateral proceedings: HUF 5 million, approx. 12,500 (previously HUF 2 million);
  • for a bilateral or multilateral procedure: HUF 8 million, approx. EUR 20,000 (previously HUF 2 million for each side of the procedure initiated).
Instalment payment or deferred payment of this fee may still not be requested.

Art. 189 of the Act on Amendments, Art 175(1) of the Act on Tax procedure

Transfer pricing principles now have to be used in KIVA taxation too

If the transaction with a related party does not meet independent market conditions, the taxpayer must determine the taxable amount using the transfer pricing methods set out in the Act on Corporate Income Tax, which are also subject to change, first for the determination of the liability for the 2022 tax year in KIVA (the small business tax).

Entry into force: 26 August 2022

Art. 118 § of the Act on Amendments, Kiva tv. 32/G.§

 

VAT

Group VAT subject

It has been clarified that the representative appointed by the members of the VAT group is the person to be involved in court and other official proceedings during the existence of the VAT group and after its termination.

Entry into force: 28 July 2022

Art. 52.§ of the Act on Amendments, VAT Act § 8 (4)

Retroactive tax base reductionRetroactive tax base reduction

A refund is handled like a cash reimbursement even if it is made to person other than to whom the goods were supplied.

Entry into force: 28 July 2022

Art. 53-57.§ of the Act on Amendments, VAT Act. 77.§ (4a) –(4b)

 

KATA (Small Taxpayers Act)

New KATA law

From 1 September 2022, new rules will come into force for small taxpayers that will only allow full-time private entrepreneurs who carry out only B2C transactions (excluding taxi drivers) to be subject to the small taxpayer flat rate. For businesses for whom the new KATA rules are not applicable, we recommend reading our blog post on the subject.
https://adozasrolerthetoen.blog.hu/2022/07/15/a_legfontosabb_kata-szabalyok

 

Tax procedures

Administrative tax assessment – incomplete data

In the event that the information received for an administrative assessment is insufficient and the authority requests the taxpayer to submit additional data, if this is unsuccessful, it terminates the tax assessment procedure and the authority may assess the local tax by means of an audit.

Entry into force: 27 August 2022

Art. 188. § of the Act on Amendments, Art. 141.§ (6) of the Act on Tax Procedure

Tightening of sanctions: closure of shops

It is mandatory to order the closure of a business if the taxpayer is found to have repeatedly engaged in undeclared employment, failed to submit invoices or distributed goods of unknown origin.

Entry into force: 27 August 2022

Art. 191. § of the Act on Amendments, Art. 245.§ (1a) of the Act on Tax Procedure

Audits that may be ordered during the procedure

A tax audit before a tax refund may be ordered after the application for determining the fair market price has been submitted, but no other tax audit may be ordered while the procedure is pending.

Entry into force: 27 August 2022

Art. 193 § (1) of the Act on Amendments, Art. 180.§ (1) of the Act on Tax Procedure

 

Innovation contribution

Establishment or branch of a foreign enterprise in Hungary

The obligation to pay innovation contribution now also covers previously exempt Hungarian establishments and branches.

Establishments that now become subject to the innovation contribution must declare and pay the advance payment of the 2022 contribution by 20 October 2022.

Entry into force: 26 August 2022

Article 143 § of the Act on Amendments, Innovation Act 15§ (1)

authors

Judit Jancsa-Pék
Tax Advisor | Partner
Nóra Rácz
Tax Advisor | Partner
Márta Siklós
Auditor | Tax Advisor | Partner

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