As of 1st January
2021, the system of online invoice data reporting also applies to invoices
issued to private individuals and foreigners. The tax authority will also
prepare the draft of the VAT return for companies, which the taxpayer can
modify.
From January, the scope of
possibilities for reducing or reclaiming the tax base in relation to
irrecoverable claims is also extended to claims against private individuals. As
a transitional measure, VAT reclaiming will be possible retroactively back
until 31 December 2015.
As of 1st July 2021,
as a general rule, distance sales in the European Union will be taxed based on
the VAT rate of the country of destination of the product (the state of
establishment of the end-user). In order to lighten administrative burdens, for
sales not exceeding the value threshold of EUR 10,000 the state of
establishment is deemed as the place of performance, though the taxpayer can
also opt for taxation under the general rule below the value threshold too.
In 2020, the corporate tax rate
could already be reduced by the amount carried over from the profit reserve to
the reserve, but only up to the amount of the profit before taxes. The upper
limit of the allowance was HUF 10 billion, which upper limit was abolished as
of 1st January 2021.
2. SMALL BUSINESS
TAX AND SIMPLIFIED ENTREPRENEURIAL TAX
The rate of the small business tax (“KIVA”) is reduced to
11%, while the value limit of KIVA taxpayer status for revenue and the balance
sheet total is increased to HUF 3 billion, and the value limit for exiting KIVA
taxpayer status is increased to HUF 6 billion in 2021. The value limits shall
be applied with consideration to the aggregated turnover of the affiliated
companies.
The most significant change in KATA (simplified
entrepreneurial tax) taxation is that as of 1st January 2021, if a
customer pays a given KATA-subject enterprise more than HUF 3 million in a
year, this customer shall declare and pay tax at a rate of 40% for the amount
in excess of HUF 3 million. Having regard to this, when engaging sole trader or
corporate service providers providing various services to companies (e.g.
translator, interpreter, IT professional, certain marketing services, coaching,
trainer, etc.) who (which) are KATA taxpayers, special attention has to be paid
during the year to the fact that payments made to such KATA taxpayers are
subject to the aforementioned 40% extra tax above the HUF 3 million limit. In
connection with this, we recommend a review of the expenses of recent years in
order so that such expenses can be identified and planned beforehand.
The above value limit can only be observed if the customer
company (principal) is aware that the contractual partner is a KATA taxpayer.
For this purpose, the legislation requires that KATA-payer businesses notify
their business partner regarding their KATA taxpayer status in writing at the
time of conclusion of the contract, or in the case of an already existing
contractual relationship, until 15 January 2021. This notification may be made
by any written means (email, postal letter, personal handover of declaration).
3. LOCAL BUSINESS TAX
Administrative
burdens related to local business tax will be lightened in 2021 for businesses
having more than one premise in a way that it will be sufficient to send one
local business tax return to the National Tax and Customs Administration (NAV),
and the municipalities will not need to be notified separately. Further, having
regard to the economic challenges posed by the coronavirus pandemic, for the
year 2021, the rate of the local business tax will be cut by 50% for micro,
small and medium enterprises having a balance sheet total or net revenue under
HUF 4 billion.
4. ELECTRONIC PUBLIC
ROAD TRADE CONTROL SYSTEM (EKÁER)
The reporting obligation
will fully cease for products that are not risky with respect to EKÁER, and
only so-called “risky products” – based on the value or weight limit – will be
subject to the EKÁER.
*
This 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.
The following is a summary of relevant
amendments/innovations in 2021, with regards to (1) value added tax and
corporate income tax, (2) small business tax and simplified entrepreneurial
tax, (3) local business tax and (4) electronic
public road trade control system.This summary only contains
the major lines of the most significant modifications, due to the numerous detailed rules. The analysis of the details
goes beyond the scope of this newsletter, however at your request we gladly
give further information about their essential contents.
1. VALUE ADDED TAX
AND CORPORATE INCOME TAX
As of 1st January
2021, the system of online invoice data reporting also applies to invoices
issued to private individuals and foreigners. The tax authority will also
prepare the draft of the VAT return for companies, which the taxpayer can
modify.
From January, the scope of
possibilities for reducing or reclaiming the tax base in relation to
irrecoverable claims is also extended to claims against private individuals. As
a transitional measure, VAT reclaiming will be possible retroactively back
until 31 December 2015.
As of 1st July 2021,
as a general rule, distance sales in the European Union will be taxed based on
the VAT rate of the country of destination of the product (the state of
establishment of the end-user). In order to lighten administrative burdens, for
sales not exceeding the value threshold of EUR 10,000 the state of
establishment is deemed as the place of performance, though the taxpayer can
also opt for taxation under the general rule below the value threshold too.
In 2020, the corporate tax rate
could already be reduced by the amount carried over from the profit reserve to
the reserve, but only up to the amount of the profit before taxes. The upper
limit of the allowance was HUF 10 billion, which upper limit was abolished as
of 1st January 2021.
2. SMALL BUSINESS
TAX AND SIMPLIFIED ENTREPRENEURIAL TAX
The rate of the small business tax (“KIVA”) is reduced to
11%, while the value limit of KIVA taxpayer status for revenue and the balance
sheet total is increased to HUF 3 billion, and the value limit for exiting KIVA
taxpayer status is increased to HUF 6 billion in 2021. The value limits shall
be applied with consideration to the aggregated turnover of the affiliated
companies.
The most significant change in KATA (simplified
entrepreneurial tax) taxation is that as of 1st January 2021, if a
customer pays a given KATA-subject enterprise more than HUF 3 million in a
year, this customer shall declare and pay tax at a rate of 40% for the amount
in excess of HUF 3 million. Having regard to this, when engaging sole trader or
corporate service providers providing various services to companies (e.g.
translator, interpreter, IT professional, certain marketing services, coaching,
trainer, etc.) who (which) are KATA taxpayers, special attention has to be paid
during the year to the fact that payments made to such KATA taxpayers are
subject to the aforementioned 40% extra tax above the HUF 3 million limit. In
connection with this, we recommend a review of the expenses of recent years in
order so that such expenses can be identified and planned beforehand.
The above value limit can only be observed if the customer
company (principal) is aware that the contractual partner is a KATA taxpayer.
For this purpose, the legislation requires that KATA-payer businesses notify
their business partner regarding their KATA taxpayer status in writing at the
time of conclusion of the contract, or in the case of an already existing
contractual relationship, until 15 January 2021. This notification may be made
by any written means (email, postal letter, personal handover of declaration).
3. LOCAL BUSINESS TAX
Administrative
burdens related to local business tax will be lightened in 2021 for businesses
having more than one premise in a way that it will be sufficient to send one
local business tax return to the National Tax and Customs Administration (NAV),
and the municipalities will not need to be notified separately. Further, having
regard to the economic challenges posed by the coronavirus pandemic, for the
year 2021, the rate of the local business tax will be cut by 50% for micro,
small and medium enterprises having a balance sheet total or net revenue under
HUF 4 billion.
4. ELECTRONIC PUBLIC
ROAD TRADE CONTROL SYSTEM (EKÁER)
The reporting obligation
will fully cease for products that are not risky with respect to EKÁER, and
only so-called “risky products” – based on the value or weight limit – will be
subject to the EKÁER.
*
This 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.
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