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Extra profit taxes: fine-tuning of the rules

The Government Decree No. 197/2022 (published on 4 April 2022) on extra profit taxes was also amended in the Hungarian Gazette No. 118 promulgating the new Small Entrepreneur Tax Act (so called KATA Act). Although the focus has been almost entirely on the new KATA rules, it is worth mentioning the amendments to the extra profit taxes.

In our previous article, we outlined which sectors will be hit by extra profit taxes from 1 July 2022. Part of the amending decree (257/2022) published on 18 July 2022 contains only stylistic clarifications, the more significant changes are summarized below:

  • Credit institutions and financial enterprises:in their case, the basis of the special tax is the net turnover according to the Act on Local Taxes. As a result of the amendment, the amount of net turnover does not include the income from the sale of goods and services not generated in the ordinary course of their business, as defined in the Act on Local Taxes. In addition, the book value of assets acquired back and sold onward during the term or at the end of the term of the financial lease (excluding the amount accounted for as the acquisition value of the asset under financial lease) is not included in the tax base.
  • Investment firms and credit institutions:originally, only investment services provided by the Hungarian State Treasury or the institution operating the Postal Settlement Centre were exempt from financial transaction tax. As a result of the amendments, purchases of financial assets for the benefit of an individual not carrying out a business activity with a value not exceeding HUF 20,000 per purchase are also exempt. In addition, the scope of this tax is extended to those who provide investment services as cross-border services under the Act for Investment Firms. In their case, the amending regulation also clarifies when and how they have to register with the Hungarian tax authority.
  • Ground handling entity (for air passenger transport activity)the scope of the obligations has been clarified with retroactive effect from 1 July 2022. The obligation will be imposed on ground handling entities that provide passenger and baggage handling services.
  • Insurance companies:the additional advance tax payable by 30 November 2022 will be calculated on the basis of the more favorable additional tax rate specified for 2023 and not with the one for 2022.
  • Taxpayers subject to the public health product tax (so called NETA):the scope and definition of products subject to NETA have been clarified and two products with a more favorable tax rate have been distinguished within snacks.
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