Government Decree on the new surtaxes was published in the Hungarian Official Gazette on 4 June 2022. It contains provisions for almost all pre-announced sectoral special tax, as well as changes in excise duty, company car tax, public health product tax and simplified employment rules.
As indicated in our previous newsletter, the government plans to impose special taxes on eight sectors in order to reduce the budget deficit. Approximately HUF 815 billion annual tax revenue is expected in 2022 and 2023 from the introduction of the so-called extra profit surtaxes, while other tax measures will increase budget revenues by an additional HUF 100 billion per year. Government Decree No 197/2022 issued on 4 June 2022 contains detailed rules for surtaxes regarding seven sectors. Most of the changes will take effect on 1 July 2022, while certain provisions affecting the energy sector will apply from 1 August 2022. New advertising tax measures have not been published yet.
Special surtaxes introduced
The detailed rules of the special taxes introduced by the Government Decree are as follows:
1. Banking sector
In addition to the introduction of a new bank surtax, the financial sector is also affected by the expansion of the system of financial transaction fees.
New bank surtax
The subjects of the new special tax, which will generate annual tax revenue of HUF 250 billion, will be credit institutions and financial enterprises, similarly to the already existing bank tax. The new bank surtax is based on the net sales revenues determined on the basis of the annual report for the tax year preceding the tax year in accordance with the Act on Local Taxes. The tax rate will be 10% in 2022 and 8% in 2023.
The special tax for 2022 must be determined by credit institutions, financial enterprises by 10 October 2022, and the tax liability must be paid in two equal instalments (by 10 October 2022 and by 10 December 2022). For 2023, the tax assessment deadline is 10 June 2023, and the tax liability will be payable in three equal instalments (by 10 June 2023, by 10 October 2023 and by 10 December 2023).
Transactions fees on securities trading
The obligation to pay transaction fees will be extended to securities trading, more precisely to purchases of securities. The rate is 0.3 % of the value (purchase price) of the financial instrument credited to the client account (securities account) but no more than HUF 10,000 per purchase. No transaction fee is payable on the investment services provided by the Hungarian State Treasure or by the institution operating the Postal Clearing Centre. The transaction fee will be declared and settled monthly by financial service providers, and the first securities transactions subject to the fee are those performed in August 2022.
Transaction fee on financial transactions
In addition to the introduction of transactions fees on securities trading, the rules regarding financial transaction fees in force will change, too.
On the one hand, service providers performing payment services, credit and lending, money exchange and money exchange intermediation services in Hungary as cross-border services will be required to pay financial transaction fees, too, so as of 1 July 2022, the obligation to pay these fees will be extended to financial intermediaries not established in Hungary (such as Revolut and TransferWise). They must register by 1 September 2022 (if they become subject to transactions fees after 1 July 2022, by the 1st day of the month after they become subject) with the Hungarian Tax Authority. On the other hand, although the general rate of the financial transaction fees remains unchanged at 0.3%, the maximum rate per payment transaction will increase from HUF 6,000 to HUF 10,000 from 1 July 2022.
2. Insurance sector
The government will ensure the HUF 50 billion annual additional tax revenue expected from the insurance sector by introducing a supplementary insurance surtax. The tax base will be similar to the already existing insurance tax, i.e premiums from different type of non-life insurance services, however, premium from life insurance will be subject to tax, too. The supplementary insurance surtax is payable for the period between 1 July 2022 and 31 December 2023 with the following rates:
|1 July 2022 – 31 December 2022||Non-life||Life|
|Tax base not exceeding HUF 1 billion||4%||2%|
|That part of the tax base that exceeds HUF 1 billion but does not exceed HUF 18 billion||8%||3%|
|Tax base exceeding HUF 18 billion||14%||6%|
|1 January 2023 – 31 December 2023||Non-life||Life|
|Tax base not exceeding HUF 2 billion||2%||1%|
|That part of the tax base that exceeds HUF 2 billion but does not exceed HUF 36 billion||4%||1,5%|
|Tax base exceeding HUF 36 billion||7%||3%|
In certain cases, the tax bases of related parties may be cumulated.
Insurance companies will have to pay tax advance. For 2022, the base of the tax advance is the insurance premium collected for the period between 1 July 2021 and 30 June 2022 which is to be multiplied with the 2022 tax rates. The 2022 tax advance is payable by 30 November 2022. For 2023, the tax advance is equal to the 2022 tax and to be declared and paid by 31 May 2023. The final tax liability for 2022 must be declared and paid by 31 January 2023, for 2023 by 31 January 2024.
3. Energy sector
Changes in the taxation of the energy sector will enter into force as of 1 July 2022, with the exception of certain rules with respect to mining royalties and determining the specific value of mineral resources and geothermal energy, which will take effect on 1 August 2022. The government expects significant annual tax revenue of HUF 300 billion from the additional energy surtaxes.
Surtax of the producers of petroleum products
A new surtax payable by producers of petroleum products will be introduced for 2022 and 2023 with a rate of 25%. The tax base equals to the so-called world market price difference of crude oil imported from Russia multiplied by the quantity of crude oil measured in barrels that is imported from Russia in the given month, i.e the refinery spreads. The world market price difference is calculated as the positive difference between the arithmetic average of Mid values of daily quotes for Platts Crude Oil Marketwire Brent (Platts Dated Brent-PCAAS0) for the current month (US dollars / barrel) and the arithmetic average of the monthly USD purchase prices per barrel of crude oil originating from Russia.
The special surtax liability shall apply for the first time for the first full tax year that begins after 31 December 2021 and includes 1 July 2022. The tax is to be declared and paid monthly, however, for the period between 1 January 2022 and 1 July 2022, the tax is payable by 20 September 2022.
Special tax on the production of renewable energy products
The Government Decree introduces a new special tax on electricity produced by power plants from renewable energy sources and waste. The tax base is the difference between the revenue realized on the monthly transfer of energy into the electricity network and the compulsory purchase price or the subsidized price. The tax rate is 65%. Power plants generating electricity with an installed capacity not exceeding 0.5 MW or using solid biomass are exempt from the surtax. The special tax obligation must be fulfilled in the same way as the surtax of the producers of petroleum products.
Changes in the so-called Robin Hood tax
For 2022 and 2023, the scope of the income tax on energy suppliers will be extended to manufacturing producers (i.e to manufacturers of bioethanol, of starch and starch products and of sunflower oil). The special surtax liability shall apply for the first time for the first full tax year that begins after 31 December 2021 and includes 1 July 2022. Tax advance for 2022 is to be calculated and declared by 20 September 2022 on the basis of the planned 2022 annual tax liability and is payable from this date monthly in equal instalments. Tax advance for 2023 is to be calculated and declared by 20 January 2023 and payable monthly in equal instalments.
Increase in mining royalties
Mining royalties will be increased significantly for 2022 and 2023. The method of calculating the royalties and the basis of royalties for natural gas and crude oil will change, too.
Furthermore, a new obligation has been introduced. Mining contractors must, with certain exceptions, produce at least the same amount of petroleum and hydrocarbon natural gas in 2022 and 2023 as in 2021, unless there are technical or geological barriers, or a case of force majeure arose. Should the mining contractor fail to fulfil its obligation, the amount of the fine shall be at least the amount of the mining royalty calculated on the basis of the amount of unextracted crude oil or hydrocarbon natural gas, without cap.
4. Retail sector
Regarding changes of the existing retail tax, the government used a hybrid solution to ensure additional revenue of HUF 60 billion per year.
Just to recall: the retail tax is determined by net sales revenues from retail activities increased by the revenues from services provided to suppliers and the amount of discounts granted by suppliers. The tax base is subject to tiered tax rates. For 2022, these rates remain unchanged, however, taxpayers will have to pay an additional retail surtax equal to 80% of their 2021 retail tax liability by 30 November 2022. In 2023, however, the tax rates will change as follows:
- Tax base not exceeding HUF 500 million continues to be exempt.
- For that part of the tax base that is between HUF 500 million and 30 billion, the rate will increase from 0.1% to 0.15%
- For that part of the tax base that is between HUF 30 billion and HUF 100 billion the rate will increase from 0.4% to 1.0%.
- Over a tax base of HUF 100 billion, the tax rate increases from 2.7% to 4.1%.
5. Telecom surtax
Telecom companies are already subject to a special sectoral tax, the telecommunications surtax, levied on calls and text messages. In addition, from 1 July 2022, a new special tax will be introduced for 2022 and 2023, the additional telecommunications surtax. The new surcharge will be levied on all kinds of electronic communications services, such as Internet services, cable TV traffic. The tax base will be the net sales revenues from these telecom services, established according to the rules of the Act on Local Taxes. The tax rates will be the following:
- Tax base not exceeding HUF 1 billion will be exempt,
- For that part of the tax base that is between HUF 1 billion and 50 billion, the rate will be 1%,
- For that part of the tax base that is between HUF 50 billion and 100 billion, the rate will be 3%,
- Over a tax base of HUF 100 billion, the tax rate will be 7%.
When calculating the net sales revenues, in some cases – similarly to the insurance surcharge – it may be necessary to cumulate the net sales of related companies.
The additional telecommunications surtax will be an annual tax, to be determined, paid and declared by the last day of the fifth month of the year following the tax year. However, in both 2022 and 2023, a tax advance payment obligation will also arise. The tax advance for 2022 must be declared and paid by 30 November 2022 on the basis of net sales of 2021, while in 2023 a tax advance equal to the amount of the 2022 surcharge must be paid by the last day of the fifth month of 2023. The new special telecom surtax is expected to generate an annual tax revenue of HUF 40 billion.
6. Contribution of airlines
The new contribution of airlines is in fact payable by companies performing ground handling services to airlines. It is based on the number of departing passengers of the flights served by the ground handling companies, excluding transit passengers. There will be two tariffs depending on the destination. In case of flights to the EU, Albania, Andorra, Bosnia and Herzegovina, North Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, the United Kingdom, Norway, San Marino, Switzerland, Serbia or Ukraine, the rate will be HUF 3,900/passenger, in other cases HUF 9,750/passenger. From 1 July 2022, the contribution must be declared and paid monthly based on the departures of the given month, until the 20th day of the following month. The planned annual revenue from the new surtax is HUF 30 billion.
7. Pharmaceutical distributors
The government expects HUF 20 billion from the surtax levied on increasing sales of medicines due to the pandemic. The surtax is based on the social security subsidy to be reimbursed to the budget by pharmaceutical distributors. In 2022 and 2023, the tax levied on pharmaceutical distributors shall be 28% of the reimbursable amount in case of subsidized pharmaceutical products sold in pharmacies with a producer price exceeding HUF 10,000 and 20% in the case of similar products with a producer price not exceeding HUF 10,000. This means that the projected uniform 4% tax rate increase will not be implemented, the tax rate will remain unchanged for medicines with a producer price not exceeding HUF 10,000, while it will increase by 8% for medicines with a producer price of more than HUF 10,000. The increased tax rate shall first be applied to payment liabilities due on 20 July 2022.
8. Advertising tax
Provisions of the advertising tax are not yet known, as the Government Decree does not contain any rules in this respect. It is expected that the advertising tax would be reintroduced from 1 January 2023.
Further tax measures
In addition to the special sectoral taxes, the government has also introduced other tax provisions, from which it expects an additional annual HUF 100 billion in revenue.
Accordingly, as of 1 July 2022, excise rates will be increased with respect to several energy, tobacco and alcohol products. For example, the supply, sale or use of fuel oil as fuel will be subject to HUF 5,375/thousand kilograms excise tax instead of HUF 4,655/thousand kilograms, the supply, sale or use of LPG for other motor purposes to HUF 14,685/thousand kilograms instead of HUF 12,725, beer produced in a small brewery to HUF 900/hectolitre/ actual alcohol content instead of HUF 810/hectolitre/actual alcohol content and sparkling wine to HUF 18,100/hectolitre instead of HUF 16,460/hectolitre. For the period from 1 July 2022 to 31 December 2022, the rate of excise duty on cigarettes shall be HUF 27,800/thousand pieces and 23.5% of the retail selling price, but at least HUF 40,800/thousand pieces, from 1 January 2023, it will be HUF 29,500/thousand pieces and 24% of the retail sales price, but at least HUF 41,800/thousand pieces.
With regard to the public health product tax, from 1 July 2022, the scope of taxable pre-packaged products and the applicable rates will be amended in accordance with Annex 2 of the Government Decree. For example, the tax rate per litre for popular energy drinks will increase from HUF 50 to HUF 65 or from HUF 300 to HUF 390, depending on the type, while the tax rate for salty snacks will increase from HUF 300/kilogram to HUF 390/kilogram. It should also be noted that for the classification of products, customs tariff numbers as of 15 May 2022 should be used instead of 1 January 2018.
The fundamental changes announced for company car tax essentially mean a tax rate increase, as according to the tax rates published in Annex 1 of the Government Decree, the current monthly company car tax rates will approximately double as follows (company tax / month / vehicle):
|Power (kW)||environmental protection class designation „0”–„4”||environmental protection class designation „6”–„10”||environmental protection class designation„5”; „14–15”|
|0–50||HUF 30,500 (instead of HUF 16,500)||HUF 16,000 (instead of HUF 8,800)||HUF 14,000 (instead of HUF 7,700)|
|51–90||HUF 41,000 (instead of HUF 22,000)||HUF 20,000 (instead of HUF 11,000)||HUF 16,000 (instead of HUF 8,800)|
|91-120||HUF 61,000 (instead of HUF 33,000)||HUF 41,000 (instead of HUF 22,000)||HUF 20,000 (instead of HUF 11,000)|
|above 120||HUF 81,000 (instead of HUF 44,000)||HUF 61,000 (instead of HUF 33,000)||HUF 41,000 (instead of HUF 22,000)|
Changes to simplified employment have also been included in the tax package. The net daily income that can paid to film extras will increase from the current HUF 18,000 to 12% of the minimum wage in force on the first day of the month to be rounded to the nearest 100 forints, which is currently HUF 24,000 per month.
The fixed daily tax rates for each type of simplified employment and the basis for calculating the pension were also linked to the minimum wage valid on the first day of the month. For simplified employment established in July 2022 and onwards the rate of the daily tax
- is 0.5% of the minimum monthly wage for seasonal agricultural and tourist work,
- is 1% of the minimum monthly wage for casual work,
- 3% of the minimum monthly wage for film extras
with the rate to be rounded to one hundred forints. Calculated with the current minimum monthly wage of HUF 200,000, the above tax burdens will be HUF 1,000, 2,000 and 6,000 per day.