Surtax increases to 95% in the energy sector

The rules of the special surtaxes introduced in the summer are changing again. This time, the rate of the surtax levied on Hungarian oil company MOL as a producer of petroleum products is increasing from 40% to 95%, and the rate of the so-called Robin Hood tax from 31% to 41%.

We wrote about the change in special taxes affecting energy industry players a month ago, in connection with the introduction of a new surtax on balancing-capacity service providers. The government decree on extra-profit taxes, which has already been amended many times since its introduction in the summer, was changed again at the beginning of December, at the same time as the fuel price cap was abolished in Hungary. The amendment was announced on 7 December 2022, and the new rules entered into force on the very next day, 8 December 2022.

Surtax on the producers of petroleum products

According to the new rules, the rate of the surtax temporarily imposed on petroleum product producers (essentially, MOL for the tax years 2022 and 2023) will rise to an extremely high rate of 95%. The basis of the surtax remains unchanged, i.e. it is the margin realized by the petroleum product producer from the difference between the low purchase price of Russian crude oil and the world market (Brent) price. The government had already raised the monthly surtax from 25% to 40% on 1 August 2022 and has now further increased it to 95%.

Income tax on energy suppliers

The other tax rate change affects energy suppliers’ income tax (the so-called “Robin Hood” tax). In their case, the 31% income tax rises to 41%, but only for the tax year 2023.

This tax is payable by energy suppliers such as the petroleum product production company MOL, as well as licensed wholesalers of petroleum products, natural gas, electricity, etc. and some public service providers, on their taxable income. In relation to 2022 and 2023, as the tax liability was already extended to manufacturing producers earlier this year — for example to bioethanol and sunflower oil producers — the 41% tax rate will apply to these taxpayers as well.

Based on the provisions of the government decree, in the case of taxpayers who hold multiple licenses or perform activities other than those subject to income tax, the tax base must be determined proportionately in accordance with the previous rules.

Regarding 2023 tax advances, the new regulation is not entirely clear. It stipulates that the 41% rate must be applied when paying the tax advance for the tax year 2023. However, most of the taxpayers — the non-manufacturing producers — have already calculated and declared their advance tax obligations to be paid in the first half of 2023 (in their annual tax return submitted by 31 May 2022, based on their 2021 obligation). It is therefore questionable whether the tax advances, which have already been declared for 2023, must be amended, or if it is possible that the declared and actually paid tax advances will differ in the first half of 2023. It is also a possible interpretation that the 41% tax rate will only apply to the advances payable in the second half of 2023, to be calculated in the 2022 tax return, which taxpayers have until 31 May 2023 to submit.