On 23 November 2022, Act XLV of 2022 amending certain tax lawswas announced, reforming the procedural and tax payment rules for flat-rate taxpayers, simplifying the rules on local business tax and introducing new or amending provisions in a number of other areas. In our article, we present the most important changes; where relevant, they are compared with the previously applicable rules.
As a number of other changes affecting tax legislation were also adopted by certain decrees during the autumn (Government Decree 441/2022, Government Decree 452/2022, Government Decree 459/2022), we also include these in the below table. These changes mainly affected the so-called KATA and extra-profit taxpayers.
| TAXATION OF INDIVIDUALS | |||
| Topic | Previous rule | Change in the rule | Date of entry into force of the change / application of the tax rule |
| Personal income tax | |||
| Allowance for young people under 25 years of age | Indication by the taxpayer in the tax return of the application of the tax allowance. | The tax authority will automatically indicate the amount of the tax allowance in the draft tax return. | 2023.01.01 |
| Flat-rate taxation | – | An expense ratio of 80% can also be applied to the income from the activity of a car driver trainer. | 2023.01.01 |
| In the case of social security allowance for families, there is a monthly tax return filing obligation in tax form No. 08. | In the case of a social security allowance for families, tax advance should be calculated quarterly on tax form No. 08. | 2023.01.01 | |
| Flat-rate taxation cannot be opted again within a 4-year period of time after the year in which the taxpayer terminates flat-rate taxation or flat-rate taxation was cancelled. | Flat-rate taxation cannot be opted again within a 12-month period of time if the taxpayer terminates flat-rate taxation or flat-rate taxation was cancelled. | 2023.01.01 | |
| Daily prorating of the revenue threshold during the tax year is required if the taxpayer commences, terminates or discontinues its flat-rate taxation method. | An entrepreneur who has already commenced its activity and was a small taxpayer in the previous period is also considered to be a taxpayer who starts its business activities. | 2023.01.01 | |
| The entry requirement for this taxation method is the amount of entrepreneurial revenue in the previous year. | The amount of entrepreneurial revenue in the previous year is not a requirement to be able to select flat-rate taxation. | 2023.01.01 | |
| Real estate sales | – | As a general rule, date of acquisition is the same for spouses (also for the owner outside the scope of the land register). | 2023.01.01 |
| Long-term investment contract (so called TBSz) | The possibility of opening a TBSz extended to trust entities. | A trust established by a private individual with a private beneficiary is also entitled to conclude a TBSz. | 2022.11.24 |
| Securities provided as a benefit to employees by the Special Employee Ownership Program (so called KMRP Program) through a trust foundation | –
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The value acquired in the form of securities is tax-free. The amount spent to acquire it is considered as an expense incurred by the individual until the transfer. | 2023.01.01 |
| Group passenger transport | It can be done in a vehicle owned (operated) by the employer. | It can also be done with a vehicle rented, leased by the employer. | 2023.01.01 |
| Social contribution tax, so called Szocho | |||
| Foreign performers | Exemption for insured persons in a state of the European Economic Area. | Tax exemption in the case if the person comes from a state covered by a social security convention and can prove that he / she is insured there. | 2023.01.01 |
| Flat-rate taxpayers | In the case of main occupation, no account has been taken of the tax already paid and the uneven distribution of income receipts. | Introduction of the rolling up method. | 2023.01.01 |
| Monthly tax filing obligation. | Quarterly tax filing obligation. | 2023.01.01 | |
| Social security obligations | |||
| Flat-rate taxpayers | In the case of main occupation, no account has been taken of the tax already paid and the uneven distribution of income receipts. | Introduction of the rolling up method. | 2023.01.01 |
| Monthly tax filing obligation. | Quarterly tax filing obligation. | 2023.01.01 | |
| Identification of the employer | – | In the case of a secondment, the original employer remains the employer, unless the person employed is simultaneously carrying out the activity under another employment relationship with an insurance obligation. | 2023.01.01 |
| Health service contribution for expatriates | In the case of an individual insured abroad, an incorrect liability requirement may have arisen year after year. | Based on the information provided by the tax authority, the social security number will be invalidated and therefore no further incorrect requirement will arise. | 2023.01.01 |
| KATA (small taxpayers itemized lump sum tax) | |||
| Revenue from payer | Income from a paying agent (except bank interest, taxi drivers) will result in the loss of KATA subject status. | Only income received as consideration for the supply of goods or services ceases to be subject to KATA. Thus, tax liability does not cease if, for example, the small taxpayer receives a grant. | 2022.11.08 (application from 2022.11.01) |
| Termination of tax liability | There was no elimination rule in case the small taxpayer ceased to be a full-time employee due to a change that occurred in the meantime. | Small taxpayer position ceases to exist on the last day of the relevant month if the small taxpayer ceases to be a full-time worker in that month. | 2022.11.08 |
| – | Within 15 days, the small taxpayer must notify the tax authority regarding the change in its small taxpayer status as a full-time employee, otherwise, the tax authority will issue a decision declaring that the small taxpayer's status terminated. | 2022.11.08 | |
| THE SIMPLIFIED CONTRIBUTION FOR CERTAIN PROFESSIONS (EKHO) | |||
| Successive application of tax method of small taxpayers’ itemized lump sum tax (so called KATA) and simplified contribution for certain professions (EKHO) within a tax year | Possible until 2022.12.31 | Definitely possible. | 2023.01.01 |
| TAXATION OF COMPANIES | |||
| Topic | Previous rule | Change in the rule | Date of entry into force of the change / application of the tax rule |
| Corporate income tax (CIT) | |||
| Trust foundation | – | A trust foundation carrying out trust administration activities as well - may use a declaration in lieu of a return, and - be entitled to apply for tax exemption provided by the Act on CIT if the conditions are met. |
2022.11.24 (the taxpayer can choose to apply it for tax year 2022) |
| Corporate tax grouping | – | Cases of termination of group membership are extended (winding-up, liquidation, compulsory winding-up proceedings, termination). | 2022.12.24 |
| Tax base reduction item (TBSz) | – | Income from TBSz acquired by a trust, foundation or trust foundation reduces profit before tax. | 2022.11.24 (the taxpayer can choose to apply it for tax year 2022) |
| CIT base reduction item for electric charging station | Reducing item if certain conditions are met. | De minimis aid or, at the option of the taxpayer, crisis aid during a transitional period. | 2022.12.24 (first time applicable to tax returns filed after 31.01.2022 - self-assessment is required) |
| Incorporation of detailed rules on crisis support | – | The Commission Communication on the detailed rules was presented in our previous article. | 2022.12.24 |
| Small taxpayers’ business tax, so called KIVA | |||
| Entry requirements | Eligibility also depends on the expected level of financing costs under the Act on Corporate Income Tax. | KIVA taxation is not optional if the taxpayer would be expected to apply a tax base adjustment related to an interest deduction limitation. | 2023.01.01 |
| Termination cases | Eligibilities for KIVA taxation will cease depending on the expected amount of financing costs. | KIVA eligibility will cease if the taxpayer is expected to apply a tax base adjustment related to an interest deduction limitation. | 2023.01.01 |
| – | The KIVA eligibility ceases if the taxpayer would have made a tax base adjustment under the Act on CIT due to capital withdrawal or tax evasion. | 2023.01.01 | |
| – | The KIVA will cease to apply if the taxpayer would have made a CIT base adjustment by applying the special provisions of the CIT rules on capital withdrawal or tax avoidance. | 2023.01.01 | |
| Accounting | |||
| Report containing corporate income tax information | – | Certain multinational companies or stand-alone companies with revenues of more than EUR 750 million / HUF 275,000 million must disclose information on corporate income tax in a separate report. | 2023.01.01 (first applicable for the financial year starting on or after 2024.06.22) |
| LOCAL BUSINESS TAX AND VAT | |||
| Topic | Previous rule | Change in the rule | Date of entry into force of the change / application of the tax rule |
| Local Business Tax | |||
| Simplified tax base | There is a special rule for entrepreneurs with a turnover of less than HUF 8 million, flat-rate taxpayers, KATA and KIVA. | A single banded, lump-sum taxation applicable to all tax types for annual income not exceeding HUF 25 million (HUF 120 million for flat-rate taxpayers engaged in retail trade only) (KIVA taxpayers may opt for the former method of assessment). | 2023.01.01 |
| Tax base apportionment between permanent establishment(s). | The same tax base for all municipalities concerned. | 2023.01.01 | |
| Obligation to declare with few exceptions. | As a general rule, they may be exempted from the obligation to declare. | 2023.01.01 | |
| Advance payment obligation several times a year. | Advance payment obligation once a year. | 2023.01.01 | |
| Tax base reduction due to transfer pricing | The possibility of a tax base reduction for transfer pricing is generally available if the related partner has increased the local business tax base by the same amount. | A tax base deduction is also available if the related party has accounted for the value of the transaction concerned as a non-taxable item (e.g., service received). | 2023.01.01 |
| Value Added Tax | |||
| Reverse charge applicability | It applies to construction works subject to a building permit or notification. | This also includes other building installation works requiring official permission or notification, and changes of use. | 2023.01.01 (first application for services for which the date of supply is on or after 2023.01.01, unless the tax payable by the recipient of the service is to be assessed before 2023.01.01), any advance paid before 2023.01.01 will be subject to the old rules, and the new rules will tax the part of the taxable amount reduced by the advance.) |
| – | The application of reverse charge for certain agricultural and steel products and for marketable assets giving the right to emit greenhouse gases until 31 December 2026. | 2027.01.01 | |
| Invoice data content | In the case of invoices issued in foreign currency, the amount of VAT must always be indicated in HUF. | In the case of a foreign currency denominated invoices, the amount of VAT should only be indicated in HUF on the invoice if the transaction is taxable In Hungary. | 2022.11.24 |
| New property | A property is only considered new when it is used for the first time. | Property created by a change of function is also considered new property. | 2023.01.01 |
| – | Extension of the 5% VAT rate until 2024.12.31, and in some cases until 2028.12.31. | 2025.01.01 | |
| Alanyi adómentesség | – | The exemption does not apply to intra-Community distance and import distance sales (not included in the threshold, not deductible). | 2022.11.24, but applicable from 2022.01.01 |
| Obligation to provide information | Obligation to provide information on cash register receipts. | Data must also be provided in cases where the receipt is issued by a technical means other than a cash register, authorised by the authority. | 2022.11.24 |
| Intra-Community distance selling | There is no specific rule for distance sales. | Where an OSS scheme is chosen, this scheme should also apply to intra-Community distance supplies made in the country where the taxable person is established. | 2022.11.24 |
| Below the EUR 10 000 threshold, taxable persons can choose to apply the general rule (country of establishment) or the special rule (country of supply). The choice is declared on the change form. | The use of the OSS system also constitutes a declaration that the taxable person intends to apply the main rule (taxed in the country of departure of the goods, not the place of supply) to distance supplies below a certain value. | 2022.11.24 | |
| TAX PROCEDURES | |||
| Topic | Previous rule | Change in the rule | Date of entry into force of the change / application of the tax rule |
| Tax Procedure | |||
| APA procedures | No time limit for the procedure | For bilateral or multilateral procedures, the discussion with the foreign authority must be completed within two years (with an extension of 1 year if justified). | 2023.01.01 (application to proceedings started after 2023.01.01) |
| – | Clarification of the amount of the fee to be paid or refunded in the event of an extension or modification of the APA decision, and the procedure for refusal of the application and termination of the procedure. | 2023.01.01 (application to proceedings started after 2023.01.01) | |
| Procedural rules | Procedural rules After the termination of self-employment, whether or not the individual remains a taxable person, an additional VAT return must be submitted. | If the individual remains a taxable person after the business has ceased to exist, he or she does not have to file a special VAT return. | 2022.11.24 |
| When private entrepreneur commences its business, he / she gets a new tax number. | An individual who already has a tax number will not get a new tax number if he or she starts a private entrepreneur business. | 2022.12.24 | |
| International tax cooperation | |||
| Reporting obligations for platform operators | – | The EU Council Directive on which the detailed rules are based has been presented in our previous article. | 2023.01.01 |
| Categories of income covered by the exchange of information | The categories of income to be reported under the automatic exchange of information are: income from employment relationship, senior executive honorarium, income from life insurance products, income from pensions, income from the use of immovable property. | In addition to the automatic exchange of information, royalty income is also covered. The information exchange will also include the tax identification number of the persons concerned. | 2024.01.01 |
| Joint audit | The authorities of more than one Member State may carry out simultaneous controls on a person whose activities involve more than one Member State. | The authorities of more than one Member State may carry out a joint inspection of a person whose activities affect more than one Member State. | 2024.01.01 |
| OTHER TAXES / DUTIES | |||
| Topic | Previous rule | Change in the rule | Date of entry into force of the change / application of the tax rule |
| Extra profit tax | |||
| Exemption from Public Health Product Tax (so called NETA) | Only products resold abroad were exempt from NETA. | If you use the taxable goods to manufacture goods sold abroad, you are still exempt from NETA. | 2022.11.08 |
| New extra profit tax on power plants providing energy balancing services | – | The tax is based on the (financially realised) revenue received in exchange for the energy balancing control capacity service. Tax rate: 13% in 2022; 10% in 2023. | 2022.11.15 (applies for the first time to tax years starting after 2021.12.31) |
| Contribution by airlines | Flat rate per passenger for intra- and extra-European destinations. | The tax rate is based on the product of the carbon dioxide emission value multiplied by the engine number per seat and the number of passengers. | 2023.01.01 |
| Tax for advertisements | |||
| 0% tax rate | until 31 December 2022 | until 31 December 2023 | 2022.11.24 |
| Stamp duties | |||
| Exemption | The transfer of immovable property between related enterprises is exempt if the main activity of the transferor is the rental, operation or sale of immovable property. | Acquisitions of property may be exempt from the levy if at least 50% of the net turnover of the acquirer in the previous tax year was derived from the rental, operation or sale of immovable property. | 2023.01.01 |
| – | New gift exemption provisions for trustees. | 2023.01.01 | |
| Procedure | For vehicles purchased abroad, the deadline for notification is 15 days. | For vehicles purchased abroad, the deadline for notification is 60 days. | 2023.01.01 |
| Financial transaction tax | |||
| Exemption | – | For payment transactions related to a student loan granted by the Hungarian State Treasury (so called MÁK). | 2022.11.24 |
| – | For technical accounts opened at MÁK for local business tax payments in foreign currency. | 2022.11.24 | |
| – | Immediate credit transfer orders submitted via a single-entry solution or initiated by a payment request, if the payer is a natural person (except for self-employed persons). | 2022.11.24 | |
| – | Payments made to non-residents. Proof of residence is provided in accordance with Annex 7 of the Personal Income Tax Act in the case of individuals, and in the case of legal entities, the place of the registered office or place of effective management. | 2022.11.24 | |