On 19
October 2018, a new tax package was presented to the Parliament. Please find
the most important amendments of the package here: the threshold of VAT
exemption for SMEs will be raised to HUF 12 million, collective corporate
taxation is coming, the international tax information exchange increases, the
personal income tax liability of insurances taken out by employers is
re-regulated, and, last but not least, the rules on the abolition of employer
housing subsidies will be clarified.
Some
changes will take effect immediately after the adoption of the law amendment,
while others will only come into force as of January 1st of 2019. The
239 articles of the package affect almost all of our legislation regarding taxation,
tax procedures and accounting, already the third time this year.
Based on
the mandate given by the European Commission in October, as of January 1, 2019,
the threshold of VAT exemption for SMEs will increase to HUF 12 million; by
this it harmonizes with the previously increased revenue threshold of the so-called
“KATA” (itemized tax for small businesses). For mixed, i.e. business and
private use of rented/leased company cars, a 50% deduction rate will be
introduced to reduce administrative burden, which will also be applicable
without a logbook (travel record). The deductible proportion of actual business
use will remain available still above the 50% deduction rate; however, only on
the basis of the appropriately led travel records.
In order to
address the uncertainties associated with the exit of the 5% VAT rate, the
transitional provisions for the sale of residential property were clarified.
Accordingly, the preferential VAT rate may be applied the last time to the sale
of residential real estate for which the application for registration of
ownership is submitted to the Land Registry by 31 December 2019 and, at the
same time, the residential property is at least in the state of complete
construction and a declaration about this fact is filed to the tax authority by
the seller of the property.
Collective
corporate taxation will be introduced, and the scope of use of sports aids will
be extended to the coverage of maintenance costs of sports property. The rules
for controlled foreign companies are amended the third time before the expiry
of the transitional period. In line with the expectations of the European
Union, the rules on interest rate deduction (so-called thin capitalization)
will also be amended: interest payments exceeding 30% of the EBIDTA will not be
acknowledged in the corporate income tax base. The general principles of proper
exercising taxation rights will also be supplemented (main purpose test). A
maximum rate of 0.2% will be applied for the surtax on financial institutions
payable by credit institutions as of 2019. International tax information
exchange is intensifying both regarding private persons and related companies.
The
personal income tax liability of insurances taken out by the employer will also
be re-regulated. The tax proposal clarifies the transitional provision inserted
in connection with the abolition of the tax exemption for non-refundable
housing subsidies provided by the employer by January 1, 2019, clarifying that the
rules in force until December 31, 2018 only apply to the subsidies granted before
January 1, 2019. Thereafter such benefits will not be exempted from personal
income tax.
The new law
on social contribution tax, which enters into force on January 1, 2019, will be
fine-tuned: the tax allowance concerning R&D activity will be replaced by a
more targeted tax incentive after employing researchers and developers. Also, the
employment of persons with a protected age in the private sphere after their dismissal
from the public sector is also encouraged by a new tax allowance. Even before
the entry into force, the new rules relating to the tax and contribution
exemption of retired employees are also clarified.
Based on
the experience from the practice, the laws affecting the tax administration
procedure also change. The mandatory tax audit for loss-making mammoth
companies is to be introduced. The detailed data on the insured employees’
qualifications will no longer required to be reported by the employer. The data
requests from the tax authorities submitted by investigative authorities, the
police's internal crime prevention and criminal intelligence department, the
police's counter-terrorism department and the authorities entitled to carry out
interceptions and collect secret information will be tightened and linked to
the authorization of the prosecutor's office. The rules of enforcement
procedures to be applied by the tax authorities are also amended. As of January
1, 2019, the Hungarian Tax Authority (“HTA”) takes over the enforcement of
claims currently falling under the competence of forensic executives, the rules
of which will be also laid down in the law proposal.
The customs
regulations are also changed both at the level of the cash law and the customs
law.
Based on
the proposal, the Act on Accounting will be modified as well. Perhaps one of
the most significant changes is the new regulation of the transfer of a business.
Concerning that there is a significant difference between the sale of
individual assets and the assumption of debts and the transfer of a business as
regards their economic content, it is therefore reasonable to determine the definition
of the business as well as the accounting rules of the transfer of a business
in the Act on Accounting. In practice, the transfer of a business is considered
to be one transaction in economic and financial terms, i.e. it is treated as
one transaction by the contracting parties. Consequently, it is advisable to
treat the transfer of a business as one transaction in the accounting.
In our next
blog posts, we will discuss the most important changes also in detail.
