Dear Madam, dear Sir,
The following is a summary of relevant amendments/innovations which are expected in 2020, with regards to (1) value added tax; (2) corporate income tax; (3) personal income tax; (4) simplified entrepreneurial tax and small business tax and (5) some other areas related to accounting/administration.
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 (VAT)
From January 1, 2020 – under the conditions specified in Act CXXVII of 2007 on Value Added Tax –, it is possible to reduce the VAT base related to uncollectible claims through self-auditing. This rule may also be applied to transactions executed after December 31, 2015, so the option for VAT reduction is enforceable for claims which were created in the past and have become uncollectible.
It might be an important help for companies that if VAT was wrongly passed onto a company and the partner is not willing to refund it, there is an opportunity for a tax-refund in a separate procedure after taking the necessary steps.
From the beginning of 2020, deliveries to Hungary for the purpose of customer stock are exempt from registration and reporting obligations, if all of the following conditions are concurrently met:
when moving the products, an agreement is already available regarding who the purchaser of the product is;
the customer has a tax-number in the Member State of the place of shipment or the destination of the product and the sending company knows the customer’s Community tax-number and declares the shipment of the product in the summary statement;
the products are sold within 12 months;
the transporter does not have a business establishment where the customer stock is located;
both parties keep itemized and continuous quantitative registers.
2. CORPORATE INCOME TAX
The development tax benefits were decreased from July 24, 2019 for small businesses to HUF 300 million, for medium-sized businesses to HUF 400 million. A significant change is that these limits will be the following in the future: in the year 2021 HUF 200 million / HUF 300 million and from January 1, 2022 HUF 50 million / HUF 100 million. It may be worth scheduling development investments in the coming years in consideration of this.
3. PERSONAL INCOME TAX
Hungary provides a lifetime personal income tax exemption for any mother, who has given birth or adopted and is raising or already raised at least 4 children in her household, in terms of her incomes from work. This exemption will be applicable for the first time for income earned after December 31, 2019 – that is for the tax year 2020.
4. SMALL BUSINESS TAX, SIMPLIFIED ENTREPRENEURIAL TAX (EVA)
As of January 1, 2020, the legislature terminated the Simplified Entrepreneurial Tax (Hungarian abbreviation: EVA), as an option.
At the same time, as of January 1, 2020 the rate of the small business tax and tax-advance payment has been reduced from 13% to 12%.
5. OTHER PROVISIONS
However, the amount of the health-care contribution is increasing: the amount of payable contribution will be HUF 7,710 per month (HUF 257 per day) instead of HUF 7,500 per month (HUF 250 per day), as of January 1, 2020.
From the year 2020, the Electronic Trade and Transport Control System (EKÁER) will be modified to deal with problems encountered in practice: It will be possible to subsequently modify some data (such as the EKÁER numbers, which are finalised or became inactive due to timeout) within 3 business days after their closing, by paying a surcharge. This will help the involved companies.
Provisions regarding that the suspension of the advertising-tax is expected to remain in force until December 31, 2022: According to the rules in force from July 1, 2019, the advertising-tax rate of the publisher as well as the customer was temporarily reduced to 0 %. This provision was initiated by the Government, with special regard to the ongoing appeal procedure against the decision of the European Commission. Therefore, the relevant regulation may be amended, when the appeal procedure is completed.
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.