On 13 June 2017, the Hungarian Government passed a bill including numerous tax law amendments. In our current newsletter we summarize the most important changes, most of which comes into effect as of 1 January 2018.
Corporate income tax, surtax on financial institutions, energy suppliers’ surtax
UPDATED: 21 June 2017
On 13 June 2017, the Hungarian Government passed a bill including numerous tax law amendments. In our current newsletter we summarize the most important changes, most of which comes into effect as of 1 January 2018.
On 13 June 2017, the Hungarian Government passed a bill including numerous tax law amendments. In our current newsletter we summarize the most important changes, most of which comes into effect as of 1 January 2018.
Corporate income tax, surtax on financial institutions, energy suppliers’ surtax
CORPORATE INCOME TAX
New tax base allowances
Creating new electric car charging stations
The new rule aims to support the establishment of new electric car charging stations; in the tax year putting the investment into operation, the investor will be entitled to decrease its corporate tax base by the value of investment exceeding the potential profits to be realized from these stations in the next 3 years (to be revised based on factual figures after year 3). As a limitation, the amount of effective tax saving may not exceed EUR 1.8 million per filling station (meaning the tax incentive can be maximized for investment of EUR 20 million per filling station, taking into account the current tax rate of 9%). The change will be applicable for investments starting after 30 June 2017.
Building of rental apartments for employees
To further enhance mobility of employees, an additional tax benefit will be added to the already existing ones: the cost of rental apartments built or acquired for employees (and their close relatives) will also decrease the corporate income tax base of the employer. The tax base deduction may be utilized on top of the depreciation.
Tax incentives for supporting sports
In addition to team sports already eligible to tax subsidies (i.e. football, handball, basketball, ice hockey and water polo) volleyball will also be supportable in this way. In other words, taxpayers granting donations against their corporate income tax payable (either directly or via the tax authority) will be entitled to support volleyball teams and exercise the tax incentives already in 2017.
In addition, financial institutions will be entitled to provide donations against their bank surtax liability (up to 50% thereof) if their corporate income tax liability is not sufficient to cover the amount of support effectively paid.
Miscellaneous changes
· Shareholdings under 10% can be reported to the tax authority and to enjoy participation exemption.
· The employment of at least one researcher/developer will cease to be a condition for qualifying as a start-up company.
ENERGY SUPPLIERS’ SURTAX
Similarly to the new corporate income tax incentives mentioned above, the cost of investment in electric charging stations will also be deductible from the energy suppliers’ surtax base. As an additional incentive, energy suppliers will be entitled to decrease their surtax base by the cost of such investments made by their related parties (if they are not able to utilise it from corporate income tax). The upper cap of such tax saving will be EUR 6.2 million, which is referenced again to EUR 20 million investment value in light of the surtax rate of 31%. In other words, under ideal circumstances, energy suppliers could recover 40% of their investment value (from corporate income tax and energy surtax collectively).
SOCIAL SECURITY
The social security tax rate cut announced and promulgated in December 2016 will not change as per the bill passed, thus employers may still plan with the decreased social security tax rate of 20% from 1 January 2018, instead of the current 22%.
VALUE ADDED TAX (VAT)
From 1 January 2018, the VAT rate applicable on fish and certain pork products will be reduced from 27% to 5%, and the VAT rate on internet access services will also be reduced to 5% form 18%.
REAL ESTATE INVESTMENT TRUST (REITs)
The European Commission has concluded that the current Hungarian rules discriminate REITs established in other member states, as the scope of the act on real estate investment companies does not cover them even though they are subject to corporate income tax and local business tax in Hungary. Therefore, the amendment will extend the scope of this act to REITs having their seat in any other member state of the European Economic Area.
DUTIES
Duties
Transfer tax on residential properties
Currently, the exchange of residential properties may only be exempt from transfer tax if the individual acquires the property from another private individual. This exemption will be extended from 1 January 2018 to those transactions where the private individual obtains the property from person other than a private individual.
TAX PROCEDURE LAW
Tax procedure law
Reporting foreign bank accounts
Companies will be obliged to report their foreign bank accounts to the Hungarian Tax Authority (NAV). In the case of missing, delayed, erroneous, incomplete reporting, or invalid data, a default penalty may be imposed (up to HUF 600,000). Bank accounts valid on 1 January 2018 will need to be reported by 31 January 2018.
Tax payment guarantee to come
· As of 1 January 2018, newly established companies will be obliged to pay a tax guarantee to the tax authority if any of its executives or owners were decision maker position in a company that had tax arrears earlier.
· The amount of guarantee will equal to the amount of previously unpaid taxes (decreased by any overpayment). The tax guarantee can be payable to an escrow account of the tax authority or by placing a bank guarantee. The tax guarantee will serve as coverage for eventual unpaid taxes. Any residual amount should be paid back to the company after 12 months.
· Taxpayers will be obliged to top-up the guarantee without delay if it is used to settle unpaid taxes. Otherwise, the tax authority will cancel the tax ID of taxpayers.
Online invoicing
The entry into force of real-time reporting of VAT-able invoices over HUF 100,000 will be postponed by one year (from 1 July 2017 to 1 July 2018).
Miscellaneous amendments
· Starting from 1 January 2018, the tax authority may only allow taxpayers to opt for more beneficial rules than the general (where this option is granted by law) if the taxpayer does not have a net tax debt on the day of filing the claim. In our interpretations this would be the case, for example, for the establishment of a VAT group.
· The tax authority has to publish data of taxpayers failing to file their VAT returns for two consecutive periods. This allows taxpayers to check whether the party charging VAT may potentially be involved in tax evasion or fraud. Prior to this change[OT1] , this could only be done by using indirect methods that were rather expensive and time-consuming and the judgement was subjective.
· Taxpayers seated at registered seat service providers have to report this to NAV by 29 September 2017.