Legislative proposal no. T/13258. on the amendment of certain tax laws was submitted on 13 October 2020. In our customer briefing, we summarize the most important expected changes of the ‘fall tax package’.
Personal income tax (PIT) 2021 in Hungary
Based on the submitted proposal, the tax allowance system will become simpler. The legislative proposal modifies the rules pertaining to personal allowance while keeping the conditions giving rise to the entitlement unchanged. From 2021 personal allowance shall be applied as an item reducing consolidated tax base, its rate shall still depend on the minimum wage, i.e. each month when the taxpayer is entitled to the allowance one-third of the minimum wage will be rounded to the nearest hundred HUF.
In addition, the proposal abolishes the difference between the so-called recreational limit amounts established for the tax obligation of fringe benefits provided by budgetary authorities and other employers. As of 1 January 2021, the limit will be HUF 450 000 for every employer, and any provided benefit exceeding such amount shall be regarded as a certain, specified benefit.
Corporate income tax (CIT) 2021 in Hungary
According to the proposal, if passenger vehicles and electronic passenger vehicles are bought, tax allowance for energy-efficient investments, renovations may not be applied in the future.
The item amending the corporate tax base related to divestment and dividend associated with controlled foreign company status will be supplemented in order to exempt from taxation such parts that are connected to real legal transactions.
Shall not be exempt from ‘controlled foreign company’ status:
– a foreign person resident for tax purposes in a state that is not, for tax purposes specified in the issued ministerial decree, regarded as cooperating
– and a foreign establishment located in a state that is not, for tax purposes, regarded as cooperating.
The rules of forming an establishment would generally be made stricter. Service provision via a natural person employed by a foreign person or via a natural person carrying out such activity under another legal relationship shall be regarded as an establishment, provided that the service has been provided, with or without interruption, for more than 183 days over any period of 12 months.
The provision stipulating the reduction of the corporate tax base if the declared but unpaid dividend is released would be repelled. Exemption from tax base increase applicable to the member of the company declaring the dividend will also be abolished.
If the legal package is adopted, higher corporate tax base reduction will be available in 2021, as the HUF 10 billion cap on the companies’ development reserve will be abolished.
Small business tax (KIVA) 2021 in Hungary
It the legislative proposal is adopted, the KIVA turnover threshold and balance sheet total value limit would increase to HUF 3 billion and, in line with this, the small business taxpayer status could be kept up to a turnover of HUF 6 billion.
On the basis of the proposal, the regulations of moving from KIVA to corporate tax would be modified. According to the current regulations, the earnings of the last KIVA tax year preceding the year of returning to corporate tax is not included in the difference on the basis of which the former KIVA taxpayer will be subject to tax liability during the corporate tax period; therefore, without the amendment proposal, such profit would not be subject to taxation. The proposal makes sure that such profit is subject to taxation and also that the necessary data are available to the taxpayers, therefore recording requirements are introduced.
In accordance with the proposal, the KIVA status shall not terminate if:
- the taxpayer pays its enforceable
- net tax debt
- registered at the National Customs and Tax Administration
- and exceeding HUF 1 million on the last day of the calendar year before the decision on the termination of taxpayer status becomes final.
Value added tax (VAT) 2021 in Hungary
Hereinafter the requested date of creating a taxpayer group may be indicated in the application for the creation of such a group.
The proposal transposes the so-called EU e-commerce vat package into the Hungarian law. The amendments include the changes in the rules of distance selling within the Community and the abolition of VAT exemption of low-value import consignments.
The proposal allows the tax authority to prepare the draft VAT return of companies based on the invoice data received by it, further reducing therefore the administrative burdens of the companies. The active cooperation of the concerned taxpayers is necessary for the prepared VAT return to qualify as a return, as for each invoice the taxpayers have to decide on the deductible tax.
Based on the proposal, from 1 January 2021 subsequent tax base reduction will be possible in relation to those irrevocable receivables as well, where the customer (the debtor) is not a VAT payer.
Local taxes 2021 in Hungary
According to the submitted legislative proposal, the submission of the local business tax will be easier for companies having several establishments. From 2021 taxpayers will be able to fulfill their local business tax and tax advance reporting obligations only electronically at the National Tax Authority via an electronic form supplied by the National Tax Authority.
According to the legislation in force, the tax authorities of the local governments are responsible for the collection of vehicle tax. From 2021 this shall fully be paid to the central budget.
Duties 2021 in Hungary
In order to reduce the financial burdens of the clients and administrative burdens of the authorities, the amendment of the act on duties aims to eliminate – with certain exceptions – the duty payment obligation related to administrative proceedings at first instance. Therefore, the administrative procedural fee would only have to be paid if review proceedings are initiated, if certain personal documents are requested or if a tax and valuation certificate is issued.
Rules of taxation 2021 in Hungary
The submitted proposal will also facilitate the settlement of tax debts.
Private persons may request – via a simple application – to pay their debts not exceeding HUF 1 million free of surcharge by installments in 12 months, while for companies qualifying as trustworthy based on their background such debt may reach HUF 3 million.
Private persons not carrying out business activities and not obliged to pay value added tax may request – in their personal income tax return – instalment payment up to an amount of HUF 500 000 for 12 months, instead of the automatically provided amount of HUF 200 000 for 6 months.
Tourism development contribution (TFH) 2021 in Hungary
The proposal would, in order to reduce tax burdens, abolish the contribution obligation arising when the service subject to the contribution is provided as intermediary service.
We hope that you found our summary helpful. After the proposal is adopted, we will report on the adopted amendments.
In the meantime, please also check out our other materials on taxation matters.