As a closing of the spring session, the Hungarian Parliament adopted and promulgated on 9 June 2021 the latest tax package, which essentially contains changes to the tax law for 2022 and partly for 2021. The following addresses the most significant changes.
“SZÉP Card” in-kind benefits
The extension of the increased recreation cap
and the SZÉP Card threshold remain in force until the end of 2021. Thus,
employees in the public sector may be granted a total recreation amount of HUF
400,000, for private sector the amount is HUF 800,000. The thresholds are:
- HUF 400,000 for accommodation,
- HUF 265,000 for restaurants, and
- HUF 135,000 for leisure activities.
The flexibility between the above ranges also remains in force. Within the above ranges, the benefit-in-kind falls under preferential taxation of 15% in 2021, without being subject to social security taxes.
Tax return draft
In the draft tax return, the voluntary mutual
fund declaration, pension savings declaration and pension insurance declaration
prepared by the Hungarian tax authority, if they are not amended by the
taxpayer by the declaration deadline, will become final such as the tax return
itself. In addition, in the future, heirs will be also able to obtain a tax
refund for the deceased's pension savings if he has not been able to provide
for his tax in his tax return. In such cases, the tax office will arrange for a
tax refund in an extraordinary tax assessment procedure. Entry into force:
10/06/2021
„Bitcoin-tax”
As a reflection of the transformation of the market and the growing practical importance of cryptocurrencies, a new type of income can be expected: income from transactions executed with a cryptocurrency as transaction profit. This means greater tax security than before and should be treated as separate taxable income instead of other income which was falling under higher tax rates. From here, income from cryptocurrencies, like capital income, is subject to the 15% PIT only and no social contribution tax is levied. In addition to profits, losses are also recognized by law and the principle of tax equalization applies. Entry into force: 01/01/2022, however, the favourable rules may be applied as early as 2021, and the previously earned income is also subject to temporary moratorium rules.
Flat-rate sole proprietors
For sole proprietors, it is a significant relief that flat-rate taxpayers will only have to set a tax advance at half the annual minimum wage (calculated from the beginning of the year), and in this case only after the part of the tax advance that has exceeded half the annual minimum wage.
The threshold for opting for flat-rate taxation will also be changed from 2022 onwards, from HUF 15 million to 10 times the annual minimum wage (calculated from the annual minimum wage valid from February 2021, this is HUF 20,088,000). The ceiling for flat-rate taxation for retailers will also change from HUF 100 million to 50 times the annual minimum wage (this is HUF 100,440,000 calculated from the minimum wage valid from February 2021). In the future, both thresholds will increase in proportion to the increase in the minimum wage. Entry into force: 01/01/2022
CORPORATE INCOME TAX
Hybrid entities
Based on the EU Tax Avoidance Directive, the system of hybrid business as a taxable person will be introduced in Hungary. The concept includes business entities with a Hungarian registered office in which non-Hungarian organizations hold more than 50% of the shares or votes or are entitled to more than 50% of the after-tax profit. In addition, such businesses are subject to a tax system that treats a hybrid business entity with a seat or registered office in Hungary as a corporate taxpayer.
Investment funds and other forms of collective investment that have a wide, diversified portfolio of securities and are subject to investor protection regulations in Hungary do not qualify as hybrid entities. The income of a newly taxed hybrid business entity is taxed to the extent that this income is not taxed under the tax legislation of Hungary or another country. Entry into force: 01/01/2022
Trusts of public interest
The CIT Act will be supplemented at several points due to the newly introduced “public trust fund” performing public functions. Such funds are, for example, foundations established in higher education area to operate and support universities. The pre-tax profit will be reduced by 20% / 40% of the benefits given to the public trust foundation and of the founders 'or affiliates' asset orders, as well as by 300% of the higher education subsidy, but not more than the sum of the pre-tax profit. Entry into force: 10/06/2021
VALUE ADDED TAX
VAT return draft
From the second half of 2021, the state tax and customs authority will prepare a draft VAT return for taxpayers on the basis of the data received from the real-time invoice data service and the data provided by online cash registers. The first draft return is expected for July period with a target date of 12 August. The amendments extend the possibility for the tax authority to use data from these reporting obligations. Entry into force: 10/06/2021
VAT of foreign
passenger
A minor change is that the foreign passenger's VAT will also be refundable by "presenting" an electronic invoice. Entry into force: 10/06/2021
Commercial transactions of a defense nature
The VAT Act is amended at several points regarding Hungary's NATO membership and in connection with the implementation of the common defense policy of the EU. The changes affect intra-Community acquisitions, tax exempt imports, supply of goods and services. Entry into force: 01/07/2022
Special tax refund procedures
The right of the taxpayer to reclaim the amount of VAT deductible or payable, for reasons not attributable to him, which has not been reimbursed or will be reimbursed in any other way. Refunds must be claimed separately. If the circumstances giving rise to the application occurs within the 6-month period prior to the end of limitation period, the application may be submitted within 1 year of the event. Entry into force: 10/06/2021
Subsequent reduction of the tax base – bad debt relief
The rules for the subsequent reduction of the tax base in exchange for bad debts also change. In general, the system of conditions will be also simplified, and the refund of VAT on bad debts out of the expiry period appears as a new option, within 1 year from the occurrence of the reason giving rise to such a basis, if the other legal conditions are met. Entry into force: 10/06/2021
Payment service providers
The special rules for the supply of goods and services facilitated by electronic interfaces regulate the obligation of payment service providers to register and provide data. The introduction will take the form of legal harmonization in connection with the e-commerce VAT rules, which will enter into force on 1 July 2021. The transmission of available payment data on cross-border payments will provide a tool for the tax authority to monitor the fulfilment of VAT on cross-border e-commerce transactions. Entry into force: 01/07/2022
SOCIAL TAX
Tax rate
The rate of the social contribution tax will be reduced to 15% and the vocational training contribution will be included in the tax, while maintaining the benefits. Entry into force: 01/07/2022
Pensioners
The pensioner in his own right shall be also
exempt from the social contribution tax in respect of his taxable activity,
with the exception of his other income. Entry into force: 10/06/2021
Tax exemption
The social security tax exemption for in-kind benefits to the “SZÉP Card” has been extended until the end of 2021. Similar exemption applies for representation and business gifts granted between 10 June and 31 December 2021.
DUTIES
Domestic real estate holding companies
The concept of domestic real estate holding companies is also changing. In addition, the 75% real estate ratio should be monitored between two balance sheets, including their increase and decrease in asset value. The interim balance sheet or, failing that, the relevant general ledger accounts are acceptable to support the calculations. Entry into force: 10/07/2021
Duty exemption
Under the amendment, public interest trusts performing public functions will be granted with full personal tax exemption. Entry into force: 10/06/2021
Housing acquisition with state support (CSOK)
In order to prevent misconduct, the conditions for exemption from the acquisition of housing with CSOK are tightened. As from 1 January 2021, a property transfer tax exemption came into effect in the case of the purchase of a home using state subsidy (CSOK). However, in the event of non-fulfilment of childbearing (advance CSOK), the tax authority imposes the tax retrospectively. In the future, the tax authority will also have to levy the tax retrospectively if the acquirer repays or have to repay the full amount of the CSOK for any reason (e.g. if the acquirer disposes of the dwelling during the ban on alienation and encumbrance registered in favour of the state, otherwise exploits or establishes a right of use or usufruct and must therefore repay the aid). Entry into force: 10/07/2021
SECTORAL TAXES
Income tax on energy suppliers
To help relaunch the economy, the proposal also introduces the institution of loss relief in the income tax on energy suppliers. Provisions will also be introduced for benefits to public trust foundations performing public functions. Entry into force: 10/07/2021
Special tax on financial institutions
The tax liability of venture capital fund managers and stock exchanges in the special tax on financial institutions will be abolished. Entry into force: 01/01/2022
Turistical contribution
The exemption from turistical contribution that was originally granted concerning the COVID special order regulations, had been extended for 2021.
TAX PROCEDURES
Tax reliefs
Subject to a written claim of the taxpayer, the Hungarian tax authority may postpone for 6 months or grant a 12-month instalment payment for any tax shortfall up to HUF 5 million, without late payment interest. The relief is available until the end of 2021. Additionally, corporate taxpayers may also request one-time elimination of a tax payment obligation by 20%, up to HUF 5 million. Claims may be submitted until the end of 2021.
Seat providing services
The obligation for registered office providers to register or report on the pursuit of this activity is introduced. The tax authority may cancel the tax number of a taxpayer who uses a seat service provider who is not on its register. In other words, not only service users but also service providers will be registered by the tax authority - otherwise in accordance with the Anti-Money Laundering Act. Entry into force: 10/06/2021
ACCOUNTING
Contract unit of account
In some cases, the new rules on the unit of account of a contract may extend to contracts for which their application is not justified or difficult. For this reason, the current provision has been clarified such that in case of series production (e.g. in the case of mechanical engineering and construction suppliers), the rules on the unit of account of the contract are not applicable. Entry into force: 01/01/2022
Subsidies
Advance-based financing and ex-post settlement, even after several years, are becoming more and more common in the EU and domestic development aid applications. In these cases, it is often that some of the assets realized are put into operation before being accounted for with the grant and are subsequently depreciated according to a plan, while the related grant income is due only after the settlement and will appear in several years later.
Because of this, one business year will be unprofitable for the beneficiary while the other will be profitable. In order to enforce the principle of comparison, the change in legislation creates the possibility that in such cases the development of the documented income expected to be realized according to the grant conditions may be accrued, similarly to the accounting of operating grants. Entry into force: 01/01/2022
OTHER
In addition, the amendments affect a number of
points in the areas of accounting, social security, customs administration,
excise duty and the rules for the prevention and detection of money laundering.
