In the following we focuses on the most important recent tax related law changes. Further amendments are expected with respect to accounting, car tax, excise tax, etc.
The Hungarian Tax Authority will be able to prepare a certain kind of VAT-return “draft” based on all data in its possession, defining the payable and deductible VAT (tax base and tax liability). The taxable person will be able to modify, correct, and accept the draft made by the HTA. Effective as of July 2021.
VAT on bad debts – non taxable acquirers
If certain conditions are met, the taxable amount may be reduced subsequently by the amount of consideration in whole or in part, exclusive of VAT, shown under bad debts, if the acquirer is a non-taxable person as well. Effective as of January 2021.
e-commerce
According to the new EU Regulation, the Hungarian rules will complete the Act on VAT with the e-commerce rules, defining the EU and import distance selling rules. Effective as of July 2021.
Right of deduction in case of deleting VAT-ID No.
In case the HTA restores the VAT-ID number after its deletion for the application of the taxable person, then its right for input VAT deduction will not cease. Effective as of July 2021.
Application of reduced rate of 5% for newly built houses
According to media (legal ground is not clear), the reduced VAT rate of 5% would be applicable for newly built houses if the starting date of the construction is before 31 December 2022.
Corporate income tax
CFC/ permanent establishment
The definition of the controlled foreign company (CFC) would be completed, and in this sense the foreign company or permanent establishment being in a certain “non-cooperative state” as listed in a ministerial decree will be regarded as a CFC, irrespective of the amount defined as profit. Effective as of January 2021.
Pre-tax profit decreasing item – provision for development
The HUF 10 billion (approx EUR 28.5 million) threshold of the pre-tax profit decreasing item as provision for development would be deleted as of January 2021 (the threshold defined by the pre-tax profit itself would remain)
Personal
income tax
Tax exempt revenues
The vaccination and epidemic screening tests provided by the employer would be regarded as tax exempt revenues.
Local business tax (LBT)
LBT-returns to be submitted to the HTA
According to the modification, the tax liabilities concerning the LBT and LBT prepayment will be allowed to be submitted on an electronic from generated by the HTA. This means that the taxable person shall only submit one LBT-return to the HTA, instead of submitting the LBT-returns to each local government according to its permanent establishment. Effective as of January 2021.
Term „establishment” for temporary construction works
The term “establishment” would become more precise, and as a result, the temporary construction work, which does not exceed 180 days, would not create an establishment from LBT perspective. Effective as of January 2021.
Small business tax - Widening scope
The current entry threshold of HUF 1 billion (approx EUR 2.9 million) would be raised to HUF 3 billion (approx EUR 8.7 million), while the exit threshold of HUF 3 billion would be raised to HUF 6 billion (approx EUR 17.4 million). The entry threshold modification would be effective as of December 2020, while the exit threshold as of January 2021. The small business tax scheme is worth to consider in case the gross personal cost of the business exceeds its CIT-base.
Act on taxation
Granting automatic payment facilities – for trusted taxpayers
The scope of payment facilities would be broadened: as the net tax debt would be raised from HUF 1,5 million to HUF 3 million (from EUR 4,300 to EUR 8,600). Effective as of January 2021.
Automatic installment benefit
As of January 2021, private individuals would be entitled to get an automatic installment benefit for a tax debt amounting to max HUF 1 million (instead of HUF 500.000) once per year, for 12 months.
Private individuals would be, in its PIT-return to claim an installment payment for its PIT and social tax payment obligation if it would not exceed HUF 500.000 for 12 months (instead of the current HUF 200.000 and 6 months). Effective as of January 2021.
