SUMMARY OF AMENDMENTS OF TAX LEGISLATION OF THE YEAR 2021


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.

SUMMARY OF AMENDMENTS OF TAX LEGISLATION OF THE YEAR 2021


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.

SUMMARY OF RELEVANT CHANGES OF THE HUNGARIAN LABOUR CODE ON THE USE OF COMPUTER DEVICES BY THE EMPLOYEES

SUMMARY OF RELEVANT CHANGES OF THE HUNGARIAN LABOUR CODE ON THE USE OF COMPUTER DEVICES BY THE EMPLOYEES

SUMMARY OF RELEVANT CHANGES OF THE HUNGARIAN LABOUR CODE ON THE USE OF COMPUTER DEVICES BY THE EMPLOYEES

We are hereby presenting the amendments of the Hungarian Labour Code, which will (possibly) come into force this spring in 2019 related to the usage of computers and other electronic devices by the employees, provided by the employer, especially granted for private usage purposes.

This summary is not exhaustive and only contains the most significant modifications. The analysis goes beyond the scope of this newsletter and in case of request, we gladly provide you further information on essential content.

1.       THE CURRENT RULES FOR USE OF COMPUTER EQUIPMENT PROVIDED BY THE EMPLOYER

The Section 2 of Art 197 of the Act I of 2012 on the Hungarian Labour Code (hereinafter: the “Labour Code”) regulates the use of computer devices by the employee on private purposes in the following way:

„The employer may restrict the use of computing equipment or electronic devices in a way, that it supplies solely to the work of the employee performed on its behalf.”

Based on this fact, the employee is entitled to use the computer devices for private purposes as well, if the respective labour contract, or other company regulation/internal policies are not containing any special regulation in this matter.

2.       THE RULES RELATED TO THE PROPOSAL LAID BY THE MINISTER OF JUSTICE

The possible forthcoming change of the Labour Code recently filed under nr. T/4479 by the Minister of Justice to the Hungarian Parliament revers the regulation of the Labour Code, as the following:

  • Under the new regulation, unless otherwise agreed by the parties, the employee may not use the computer equipment, tools (pc, notebook, smart -, mobile phone etc.) provided by the employer for work purposes for any private purpose. (Currently the opposite is the case.)
  • Based on this rule, the employer may check compliance with the abovementioned prohibitions, though during the controlling process the employer is restricted for the purpose of reviewing employment relationship related data.
  • On the other hand, control check performed on private employee data it is strictly prohibited. However, any data necessary for the verification for compliance shall be deemed to be employment-related data based on presumption of the law.
  • The rules on control check shall apply in all cases when, based on the agreement of the respective parties, the employee uses own computer device, or tools for the purposes of fulfilling the respective employment relationship.

Once the proposal is accepted,

(i) There might be a need to modify labour contracts of the employees, to regulate whether the private use of computing devices (computers, mobile phone, etc) of the employer are allowed, and

(ii) The rules of private usage, plus the control for compliance with the abovementioned provisions possibly set as internal stated policy.

*

This summary intends to raise awareness and does not constitute legal advice.

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

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

SUMMARY OF the PROVISIONS OF act LIV of 2018
ON BUSINESS SECRET PROTECTION

Nowadays in our constantly changing economic environment innovation and new technologies can greatly boost a company’s development life, whatever the type of that new and exciting actual idea it may be. If one day a young man showed up at your door, claiming that he has a couple of excitingly great ideas, which would thrill your business for further success, would you not grab the instantly occurring opportunity? One would say that all company leaders would immediately live with the chance offered, though consciousness and awareness should be raised about the real consequences if that idea or technology was used by someone before or actually was owned by someone.

Would it be satisfactory to claim the fact, that you did not know that this new idea or technology originally affects another company’s business secret protection?

The Hungarian and European Union law on business secret protection is constantly evolving and developing, in order to provide suitable answers for the constantly changing challenges and also to protect the interests of those who act in good faith. In this newsletter we will intend to share the novelties of the recently introduced Hungarian act.

  1. Actual changes within the regulation of business secret protection

According to the new Hungarian act, implemented based on the European Union legislation criteria, business secret is a fact, information, or any other data and a compilation of those activities, related to one company’s economic activity, which is secretly kept – meaning that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question and therefore it has commercial value because it is secret, and it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The respective act defines the ‘know-how’ as a specialty of business secrecy, thus fully extends all effective and actual rules of the business secret protection regulation to know-how. Business secrets are also considered to be ‘know-how’ related facts containing technical, economic or organizational knowledge, solutions, experiences, or compilation of all those in an identifiable way. With respect to the ‘know-how’, the right holder may be a person other than the creator, so it is particularly emphasized who has made the presumption of confidentiality in the context of secrecy, since in the case of know-how, this person is essentially the holder of the business secret.

Based on the new act, the right to business secrets is clearly marketable. The right holder may transfer in whole or partially the respective business secret right (business secrecy transfer agreement) and may also authorize others in interest to exploit business secrets (commercial secret exploitation contract).

2. Renewed sanction system for business secrecy breach

Anyone who acquires, exploits, or discloses business secrets without the consent of the holder violates the business secret rights of the holder. The exploitation or disclosure of those secrets is considered unlawful if it is carried out by a person who has unlawfully acquired it or had legitimately acquired it, but it does exceed the actual agreement of the legitimate holder.

The scope of the sanctions applicable in case of business secret breach is commonly covered in the new law. The sanctions include, among others, the Civil Code’s penalties applicable in cases of personal infringements, termination or the disqualification of infringement, not at last all legal consequences of protection, competition and intellectual property law sanctions, i.e. disclosure by the infringer of the participants in production, distribution or performance of goods that violate business secrets, the destruction of objects, materials or files containing business secrets or the transfer to the creditor.

In the event of business secret breach, the claimant has the right and possibility to claim for compensation under the rules of the Civil Code of Hungary concerning liability for damages, regardless of all other applicable sanctions.

The new law introduces an additional, new legal consequence, not yet known and applied in Hungarian law, which is the possibility of financial compensation.

The court may order the payment of financial compensation if:

either a person was in good faith in the possession of business secrets and only later became aware of the fact that this information came from sources that were illegal,

the application of the financial compensation is requested by the bona fide offender,

the use of other sanctions would cause disproportionate injury to the persons concerned,

and the amount of the compensation to be granted to the claimant seems reasonably satisfactory.

It is important to highlight that the amount of compensation may be up to the limit of unused utilization fee.

We would like to emphasize that financial compensation does not affect any other claim of the claimant, especially his claim for damages.

In the case of business secrecy breach, it is important to note that business associations or any other legal persons may be responsible for violations committed by their employees during the course of their employment relation. In order to exclude such risks, it is appropriate to settle liability for the breach in the employment contract, or in a separate employee statement.

*

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.

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

EFFECTIVE REGULATIONAL CHANGES IN BUSINESS SECRET PROTECTION

SUMMARY OF the PROVISIONS OF act LIV of 2018 ON BUSINESS SECRET PROTECTION

Nowadays in our constantly changing economic environment innovation and new technologies can greatly boost a company’s development life, whatever the type of that new and exciting actual idea it may be. If one day a young man showed up at your door, claiming that he has a couple of excitingly great ideas, which would thrill your business for further success, would you not grab the instantly occurring opportunity? One would say that all company leaders would immediately live with the chance offered, though consciousness and awareness should be raised about the real consequences if that idea or technology was used by someone before or actually was owned by someone.

Would it be satisfactory to claim the fact, that you did not know that this new idea or technology originally affects another company’s business secret protection? The Hungarian and European Union law on business secret protection is constantly evolving and developing, in order to provide suitable answers for the constantly changing challenges and also to protect the interests of those who act in good faith.

In this newsletter we will intend to share the novelties of the recently introduced Hungarian act.

  1. Actual changes within the regulation of business secret protection

According to the new Hungarian act, implemented based on the European Union legislation criteria, business secret is a fact, information, or any other data and a compilation of those activities, related to one company’s economic activity, which is secretly kept – meaning that it is not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question and therefore it has commercial value because it is secret, and it has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The respective act defines the ‘know-how’ as a specialty of business secrecy, thus fully extends all effective and actual rules of the business secret protection regulation to know-how. Business secrets are also considered to be ‘know-how’ related facts containing technical, economic or organizational knowledge, solutions, experiences, or compilation of all those in an identifiable way. With respect to the ‘know-how’, the right holder may be a person other than the creator, so it is particularly emphasized who has made the presumption of confidentiality in the context of secrecy, since in the case of know-how, this person is essentially the holder of the business secret.

Based on the new act, the right to business secrets is clearly marketable. The right holder may transfer in whole or partially the respective business secret right (business secrecy transfer agreement) and may also authorize others in interest to exploit business secrets (commercial secret exploitation contract).

2. Renewed sanction system for business secrecy breach

Anyone who acquires, exploits, or discloses business secrets without the consent of the holder violates the business secret rights of the holder. The exploitation or disclosure of those secrets is considered unlawful if it is carried out by a person who has unlawfully acquired it or had legitimately acquired it, but it does exceed the actual agreement of the legitimate holder.

The scope of the sanctions applicable in case of business secret breach is commonly covered in the new law. The sanctions include, among others, the Civil Code’s penalties applicable in cases of personal infringements, termination or the disqualification of infringement, not at last all legal consequences of protection, competition and intellectual property law sanctions, i.e. disclosure by the infringer of the participants in production, distribution or performance of goods that violate business secrets, the destruction of objects, materials or files containing business secrets or the transfer to the creditor.

In the event of business secret breach, the claimant has the right and possibility to claim for compensation under the rules of the Civil Code of Hungary concerning liability for damages, regardless of all other applicable sanctions.

The new law introduces an additional, new legal consequence, not yet known and applied in Hungarian law, which is the possibility of financial compensation.

either a person was in good faith in the possession of business secrets and only later became aware of the fact that this information came from sources that were illegal,

the application of the financial compensation is requested by the bona fide offender,

the use of other sanctions would cause disproportionate injury to the persons concerned,

and the amount of the compensation to be granted to the claimant seems reasonably satisfactory.

It is important to highlight that the amount of compensation may be up to the limit of unused utilization fee.

We would like to emphasize that financial compensation does not affect any other claim of the claimant, especially his claim for damages.

In the case of business secrecy breach, it is important to note that business associations or any other legal persons may be responsible for violations committed by their employees during the course of their employment relation. In order to exclude such risks, it is appropriate to settle liability for the breach in the employment contract, or in a separate employee statement.

*

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.

SUMMARY OF AMENDMENTS OF RELEVANT TAX LEGISLATION TAKING EFFECT as OF 1st  JANUARY 2018

SUMMARY OF AMENDMENTS OF RELEVANT TAX LEGISLATION TAKING EFFECT as OF 1st  JANUARY 2018

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

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