Tax payment discount in Hungary – What opportunities do the laws provide if you have financial difficulties?

In this article we would like to provide you with information on how, by what means you can use tax payment discounts and what are the possibilities of taxpayers to mitigate financial difficulties in Hungary.

When evaluating tax payment relief requests, the Hungarian tax authority may exercise its discretionary right within the limits provided by law, if the taxpayer is not able to fulfill its liabilities in time due to reasonable economic or personal cause. Financial difficulties caused by coronavirus is an objective circumstance that cannot be attributed to the taxpayer. Considering this fact, the taxpayer has the possibility to ask for delayed payment, payment in installments or the combination of these from the tax authority in line with the Hungarian legislation.

The frame of tax relief includes the postponement of the payment, payment in installments, reduce of the tax payment and payment release.

For reliable taxpayers tax relief is automatically given once a year without investigating the reason and the duration of the financial difficulties. This tax relief includes the possibility of paying outstanding tax amounts in maximum 12 monthly installments without paying any penalty. This rule can be applied for maximum net 1,5 million HUF tax liability on tax accounts which are subject to the Act on taxation (exceptions are personal income taxes and contributions deducted from the employees). In other cases, it is up to the tax authority to decide on the request for tax relief.

What does tax payment relief cover?

Relief on tax payment obligation is only allowed for actual (overdue, unpaid) liabilities, however there are cases where the law explicitly prohibits the application of the relief. In this case the tax authority has no discretionary right.

No tax relief can be permitted for:

a) personal income tax advance and personal income tax deducted from the employees,

b) collected local tax,

c) social security contributions deducted from private persons.

For certain tax types (such as corporate income tax and local business tax), taxpayers are also required to pay tax advances. There is a possibility also to reduce the amount of the tax advances if based on the calculation of the taxpayer the 2020 tax amount will be less than the tax advances calculated based on the previous year’s results.

In the case of legal persons and other business entities, penalties and the fines may be reduced (released) only in exceptional circumstances, in particular where the payment of these debts would make the taxpayer ‘s business operation impossible.

How tax relief can be claimed?

Tax relief can be approved only based on a request filed by the taxpayer. In order to speed up the process it worth using the template of the tax authority for the claim. If the taxpayer is not obliged to electronic communication, then the request can be sent via post, but if electronic communication is applicable by the taxpayer than the form must be submitted electronically.

Similar to other processes, the taxpayer will also have to bear certain costs when applying a tax relief. The fee of the process of tax payment relief and tax reduction initiated by each business organization at the tax authority is HUF 10,000.

For further information we are at your service: [email protected]