We are hereby presenting the amendments relating to (1) corporate income tax; (2) value-added tax; (3) personal income tax; (4) duties; (5) fixed-rate tax of small taxpayer enterprises and small company tax.

1. CORPORATE INCOME TAX

Tax incentives

Companies which are not considered as small and medium-sized companies (i.e. big companies) can apply for tax incentives in two further new ways:

• an investment of 6 billion HUF in net present value terms or,
• a job creating investment of 3 billion HUF in net present value terms is carried out.

The tax incentive is applicable to investments carried out in eligible municipalities of the region of Central Hungary and can be granted in case the investment is in purpose of the production of a product not yet manufactured or of industrial research and process innovation.

The granting of this tax relief does not exclude the application of the tax regulations by which the company is obliged to increase the number of its employees by at least 50 in four consecutive fiscal years or to perform wage developments to an amount of 300 times that of the minimum wage.

If the tax incentive was granted due to realization of job-creating investment, but the new job itself (created in the frames of it) falls vacant, the holding period is extended by the period of vacancy.

In case of execution procedure due to existing tax liabilities, or imposed default penalty due to unreported employees, the tax incentive may not be granted only in the tax year concerned.

Other provisions amended in 2017

The amended tax legislation qualifies volleyball as a team sport eligible to tax relief.

As of 1st January 2018, shares inferior of 10% cannot be managed under the provisions of declared shares.

The granting of the qualification of early-stage business is not bound to the employment of an employee in charge of research and development.

The definition of controlled foreign company is amended so a foreign company is regarded as controlled foreign company in case the taxpayer holds at least 50% of its shares in the majority of the fiscal year in the company.

As per amended tax provisions, tax relief can be granted based on the establishment of recharging points and building of rented dwellings (available to be rented).

2. VALUE ADDED TAX (VAT)

Cut in VAT rates

As of 1st January 2018, new provisions of VAT rates are applied in the on-trade of fish products, that of edible pork offal: the VAT rate is reduced to 5% from 27%.

The VAT rate of internet access services and restaurant services is cut to 5% from 18%. Network services are not to be considered falling under this provision.

According to transitional provisions, the reduced rate of VAT is applied if the date of the charging or collecting of VAT is the 1st January 2018 or later.

3. PERSONAL INCOME TAX, SOCIAL-SECURITY CONTRIBUTION

Termination of tax assessment by employer

The legal institution of assessment by the employer is repealed and is no longer a possibility of an employee to comply with the obligations relating to fiscal declarations. These changes are applied over the fiscal declarations of 2017.

Other provisions amended in 2017

The costs supported by a receipted invoice incurred in an asset of joint ownership can be offset by all the positive income generated, so the income (as of the results of the reduction of costs) needs to be divided among the owners to their proportional interest, which forms their basis of tax assessment as well. In this case, the person whose name is present on the invoice, is not relevant.

Cars leased or owned by close relatives can be eligible to/included in cost statements.

The basis of personal income tax paid by those private persons obliged to pay social contribution tax and healthcare contribution is amended.

According to tax legislation taking effect as of 1st January 2018, the rate of social contribution tax is decreased to 19,5% from 22%.

The amount of healthcare contribution is increased to HUF 7.320/month (or HUF 244/day) from HUF 7.110/month (HUF 237/day).

4. DUTIES

Duty on onerous transfer or property

Tax advantage can be granted in the case of changes of dwellings as of 1st January 2018, if the acquisition of property of the dwelling in question was the object of reciprocal contracts and a natural person acquires from a legal person.

In case a natural person acquires the property of a dwelling and sells another of his/her dwelling in less than a year and the open market value of the newly acquired dwelling is inferior to that of the sold dwelling, administrative proceedings are to be stayed and a request can be formed on levying the duty of onerous transfer on the dwelling with a value below.

Taxpayers can submit in advance their declaration of income to their local municipalities and can make such payments in advance. These declarations can be submitted – in the absence of provisions of local legislation – by electronic means.

A modification of the calculation of total net turnover has taken place and is to be applied for taxable persons preparing IFRS accounts.

5. FIXED-RATE TAX OF SMALL TAXPAYER ENTERPRISES AND SMALL COMPANY TAX

Amended rate of small comp

any tax

The rate of small company tax is cut to 13% .

The foregoing summary is intended to raise awareness and does not constitute legal advice.

If you have any questions or need further information, please do not hesitate to contact us.

Gerey & Partners Law Firm