Hungary

The following significant changes were recently introduced in the Hungarian tax system. The changes are mainly related to corporate income tax (CIT), personal income taxes (PITs) and related contributions, indirect taxes, and the implementation of global minimum tax.

Rules of taxation

Penalties, tax authority measures

In view of the emergency situation, as per Government Decree 181/2024 (VII.8.), the increased default penalty rates introduced from August 1, 2024, will amend the provisions of Act CL of 2017 on the Rules of Taxation as follows from January 1, 2025:

The maximum amount of default penalty will increase from 200,000 HUF to 400,000 HUF for taxable natural persons, and from 500,000 HUF to 1,000,000 HUF for other taxpayers.

Timeframe of a tax audit initiated concerning a taxpayer, which shall be considered as unreliable

According to the rules in affect prior to the latest update of the respective document, where a taxpayer is considered unreliable during any period audited by the state tax and customs authority, or in a fraction of such period, or during the audit or any part thereof, the time limit for such audit shall be extended by 60 days.

Nevertheless, as of 28 February 2024, if liquidation, dissolution proceedings are commenced at an unreliable taxpayer during an audit in progress, or the liquidation, dissolution proceedings are concluded with continuation of the taxpayer’s activity in an audit in progress, the time limit of audit shall be calculated in accordance with the rules applicable on the start date of the audit.

New reporting obligation on healthcare providers

As of 1 June 2023, the public administration responsible for healthcare shall provide records on the officially registered data of healthcare providers and their tax IDs to the tax authority by the end of the month following the given quarter.

In case the tax authority establishes a breach of the invoicing obligation of a healthcare provider, the public administration responsible for healthcare is notified electronically within 15 days of the reporting deadline.

Non-compliant fulfilment of payment services providers’ general obligations under the Value-added Tax (VAT) Act

As of 1 January 2024, the state tax and customs authority may impose a default penalty of up to 5 million Hungarian forints (HUF) on the entity required to keep records, supply data, and retain records in case of non-compliance or late, erroneous, or incomplete compliance with the obligation of keeping records as specified in the VAT Act. However, no default penalty shall be imposed if the entity required to keep records, supply data, and retain records exculpates its non-compliance or late, erroneous, or incomplete compliance by certifying that it has acted as it may be usually expected in the given situation.

Violation of the rules with regard to cash registers and customer application

As of 1 January 2024, the tax authority imposes a default fine of up to HUF 10 million on the distributor for the distribution of an e-register or customer application without an authorisation or for the distribution of an e-register or customer application other than an authorised one. Moreover, the tax authority may impose a default penalty of up to HUF 500,000 on natural persons and up to HUF 1 million on non-natural persons in the event of a breach of the statutory obligations relating to the mandatory use, distribution, and operation of registers. The tax authority may impose a default fine of up to HUF 1 million on the distributor if it has not attempted to repair the hardware-based e-register within five days of receiving the operator's notification.

As of January 2025 state tax and customs authority shall impose a default penalty amounting up to ten million HUF on the distributor in the case of distributing e-cash registers, buyer applications without a marketing authorization, continued distribution of e-cash registers, buyer applications after withdrawal of the marketing authorization, distribution of e-cash registers, buyer applications differing from the ones authorized, may impose a default penalty amounting to five hundred thousand HUF on the obliged person in the case of natural persons or up to one million forint in the case of non-natural persons, in the case of a violation of obligations determined by legal regulations with respect to the obligatory use, distribution, operation of e-cash registers.

The state tax and customs authority may impose a default penalty amounting to 1 million HUF on the distributor if he has not tried at repair of the hardware-based e-cash register within 5 days from receipt of the operator’s indication by the distributor. In the case of violation, the obligations of servicing hardware-based e-cash registers, the state tax and customs authority may impose a default penalty amounting to 1 million HUF on the distributor, manufacturer.

Obligation to Issue E-Receipts

As of January 2025, an e-receipt shall be considered issued when admitted to the receipt repository.

Content of Receipts

As of January 2025, receipts shall contain the following details in addition to the already existing obligatory details: the description of the goods supplied, the global trade identification number, where applicable, and the quantity of the goods, description of the services rendered, furthermore, the extent and nature of the services rendered, if it can be expressed in some unit of measurement.The percentage consistent with the applied rate as specified under Section 83. If the transaction is exempt, clear indication that the supply of goods or services is exempt from the payment of VAT; Where one of the special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques is applied under the special provisions of Chapter XVI, the words “különbözet szerinti szabályozás - használt cikkek” (“margin scheme - second-hand goods”); “különbözet szerinti szabályozás - műalkotások” (“margin scheme - works of art”) or “különbözet szerinti szabályozás - gyűjteménydarabok és régiségek” (“margin scheme - collector’s items and antiques”) respectively.

Documents Treated as Receipt

As of January 2025 any document, other than receipts, that contains the information specified below and that amends and refers specifically and unambiguously to the initial receipt shall be deemed equivalent to the receipt.

The documents treated as receipt shall contain at least the following information: the date of issue; a sequential number, which uniquely identifies the document; reference to the initial receipt that is being amended by this document; an indication of the detail that is being amended, and the reason for the amendment, including any revision of numbers, where applicable.

Corporate income tax (CIT)

Global minimum tax

On 1 December, the Hungarian Parliament promulgated the law on the introduction of a global minimum tax (GloBE), which transposes European Union (EU) Directive 2022/2523 into Hungarian law. The law follows to a large extent the Organisation for Economic Co-operation and Development (OECD) model rules and their commentary, including the Administrative Guidance published so far by the OECD.

The proposed bill contains a full list of Pillar 2 collection mechanisms, including a Qualified Domestic Minimum Top-up Tax.

The collection mechanisms will come into force according to the following timetable:

• Income Inclusion Rule (IIR) from 1 January 2024.
• Undertaxed Payments Rule (UTPR) from 1 January 2025.
• Qualified Domestic Deduction Top-up Tax (QDMTT) from 1 January 2024.

Change in the legislation on reported shareholdings (Hungarian participation exemption regime)

Considering that the global minimum tax legislation is applicable as of 1 January 2024 in Hungary, the legislator deemed it necessary to regulate unreported shareholdings in a manner that enables their smooth handling in the new global minimum tax environment.

The new rule allows subsequent reporting until the last day of the deadline for submission of the CIT return for 2023 in the case of shareholdings that taxpayers have not reported until the day preceding 31 December 2023.

The legislator made this subsequent reporting option subject to an additional tax liability payable on the tax base, amounting to 20% of the positive difference between the market value and book value of the shareholding as at 31 December 2023. Taxpayers using this option must obtain a report issued by an independent auditor or an expert having the necessary expertise for the valuation of the shareholding, which supports the arm's-length value of the shareholding. When determining the tax payable, deductions cannot be applied on any grounds, such as loss carryforwards or tax allowances, to decrease the tax base or the tax payable. However, following subsequent reporting, taxpayers are able to take advantage of the Hungarian participation exemption regime (i.e. exemption regulations for reported shareholdings) as if they had originally been reported. In this case, the future tax base must be determined as if the cost were identical to the market value as at 31 December 2023.

Local business tax (LBT)

New permanent establishment (PE) definition

The Act introduces a new PE definition for entrepreneurs who perform air passenger transport activities. From 1 January 2024, these entrepreneurs are subject to LBT in the jurisdiction of the local municipality where there is an airport from which the entrepreneur's flights depart, irrespective of not having any fixed establishments there. The Act also explicitly states that the net sales revenue of the airlines should include the consideration received for the air passenger transport service provided on flights departing from Hungary and the services provided together with it.

In addition to the above rules, the Act also introduces a special calculation method for splitting the LBT base between the Hungarian PEs, if more than one is created.

As many airlines with departing flights from Hungary are not Hungarian tax residents and have no fixed establishment in Hungary that would have qualified as a PE for the purposes of the LBT under the previous rules, the Act introduced a new levy for non-resident airlines that results in additional tax payment and compliance obligations for these entities in Hungary. Additionally, airlines with fixed establishment in Hungary may also be impacted to the extent they do not already report all of the revenue earned from their Hungarian departing flights for LBT purposes (e.g. because the tickets are not sold through the Hungarian establishment).

Additionally, due to the PE triggered for local business tax purposes, airlines would also be subject to innovation contribution, which is calculated as 0.3% of the same tax base.

Value-added tax (VAT)

The introduction of the Deposit Refund System (DRS)

In connection with the DRS, the range of goods to be introduced as of 1 January 2024 will be metal, plastic, and glass beverage packages with a capacity of 0 to 6 litres (with the exception of milk-based beverage products).

According to the VAT Act, unreturned products shall be regarded as supply of goods. The chargeable event shall occur and VAT shall become chargeable on the last day of the calendar year. The taxable amount means the return fees on products not returned by the date of the chargeable event, and the return fees on unreturned products shall be applied as it contains the VAT payable as commensurate.

According to the new provisions, VAT shall be payable by the taxable person operating a binding return fee scheme.

Changes in VAT rates and VAT exempt cases

• The definition of infant formulae under the 5% VAT rate was clarified based on the customs tariff number.
• The supply of dental prostheses will be exempted from the tax.
• The activity of transporting injured persons and patients by a service provider carrying out this activity with an official licence and using a vehicle specially equipped for this purpose is now exempt from VAT (until now, only taxable persons who were public service providers could carry out this type of activity exempt from tax).
• Journals published at least once a year are also included in the 5% VAT rate (previously only journals published at least four times a week were included).
• Journals published at least four times a week (daily newspapers) are under a 0% VAT rate.

An increase in the maximum amount of the VAT exemption for members of diplomatic missions and professional consular posts

According to the amendment, the exemption provided for private purposes shall be available to the staff of diplomatic missions and consular posts and to officers of international bodies up to the limit determined according to reciprocity for any calendar year, up to maximum HUF 600,000, unless the international convention expressly provides otherwise.

New reporting obligation on payment service providers

Starting from 1 January 2024, payment service providers shall keep records of certain intra-Community transactions and report this data to the tax authority. The record-keeping requirement shall apply to payment services provided as regards cross-border payments. A payment shall be considered a cross-border payment when the payer is located in a member state of the Community and the payee is located in another member state of the Community, in a third country, or in a territory considered equivalent to a third territory. Payment service providers shall supply data from their records by the end of the month following the given quarter.

New exemption for military use

As of 1 July 2022, VAT exemption shall be applicable on the importation of goods by the armed forces (and the civilian staff accompanying them) of member states other than Hungary, when such forces take part in defence effort carried out for the implementation of a Union activity under the common security and defence policy.

Major changes in the Electronic Road Freight Control System (EKAER)

As of 1 January 2021, the range of product to be reported has narrowed since EKAER numbers need to be requested only in case of transportation of risky products on the road. This means that if a product not included on the list of risky products is being transported on the road, EKAER obligation will not arise. Going forward, as of 1 January 2021, simplified reporting could be made on risky products as well.

New rules are coming into force in terms of sanctions: the 40% penalty on the transported goods might only be assessed in case of incomplete reporting or when the reporting is made incorrectly regarding the weight or value of the goods (other mistakes in the reported data results in a default penalty of HUF 500,000).

As of 1 January 2021, reliable taxpayers are not required to provide EKAER risk deposit; furthermore, no risk deposit is required for requesting EKAER numbers for products with the 5% reduced VAT rate.

Also, from 1 January 2021, individual road exemption can be requested for all traffic directions, and the permit will be valid until revoked.

As the Government Decree 403/2021 was published on 8 July, the scope of products subject to the EKAER reporting has been temporarily re-extended. According to the Decree, from 9 July the transport of raw materials and products of strategic importance for the security of supply of the construction industry are also subject to EKAER reporting.

For the sake of clarity, we note that this newly implemented rule has not extended the scope of risky products, but, in addition to them, it has included among the products to be reported the listed raw materials and products for construction. Also, in relation to these new products to be reported, no EKAER guarantee has to be provided. Please note, however, that although the taxable persons concerned are exempted from providing EKAER guarantee, they will still be subject to penalties for failure to submit an EKAER declaration.

The above-mentioned temporarily extended scope shall be applied until the end of October 2022.

Place of supply of virtual services

As of 1 January 2025, subsection (1) shall not apply to events and programs where participation takes place virtually, instead where the services defined therein relate to activities which are streamed or otherwise made virtually available, the place of supply shall be the place where the non-taxable person to whom the service is provided is established or, in the absence of an establishment, has his permanent address or usually resides.

Provisions governing access to tax exemption for taxable persons established in Hungary and applying such exemption in any other Member State of the Community as of January 2025

Section 195/A of the law applies to taxable persons who have their business established in Hungary or reside there. These persons can opt for tax exemption like Article 284 of the VAT Directive in another EU Member State. Key terms like "turnover in the Union" and "turnover in a Member State" are defined for clarity. The tax exemption can be chosen if the person's turnover in the Union is below 100,000 euros, both in the preceding and current calendar years, and the Member State-specific threshold is not exceeded.

The taxable person must notify the state tax and customs authority in Hungary of their choice in advance. Upon receipt, an individual identification number with an "EX" suffix is assigned, provided the conditions are met, within thirty-five working days. Any changes to the initial notification must also be communicated, including any new Member States involved. Notifications and amendments contain detailed information about the taxable person and their turnovers.

Section 195/B outlines the quarterly reporting requirements for those who have opted for the tax exemption, including turnover in Hungary and other Member States. Any exceedance of the 100,000 euros turnover limit must be reported within fifteen working days, along with detailed turnover data.

Section 195/C specifies the use of euros for reporting turnovers and exchange rate conversions if needed.

Section 195/D mandates that notifications and data submissions to the tax authority must be done electronically.

If certain conditions arise, such as exceeding the turnover limit or ceasing activities in a Member State, the state tax and customs authority will deactivate the individual identification number given under Subsection (4) of Section 195/A.

Section 195/F states that if the turnover limit is exceeded, the taxable person cannot opt for the tax exemption again until the end of the following year.

For taxable persons not established in Hungary but applying the exemption in Hungary, Section 195/G sets similar rules, with additional requirements for declaring in their home Member State.

Section 195/H specifies the exemption application process in Hungary based on identification from the home Member State.

Section 195/K details the termination conditions for the individual exemption, including options for reapplying after specific periods if the limit is exceeded or other criteria are not met.

Social tax

The social tax payable by employers after employment income is 13%.

Advertisement tax

From 1 July 2019, provisionally until 31 December 2024, the advertisement tax rate is reduced to 0%, and taxpayers subject to the advertisement tax do not have to fulfil their reporting and filing obligations during this period.

Environmental protection product fee

From 2025, the environmental product fee obligation ceases for products that were subject to both the product fee regulation and the Extended Producer Responsibility system, and in the future only other oil products, other plastic products and other chemical products will be subject to the product fee.

Accordingly, the product fee administrative obligation (i.e. the declaration and registration obligation) ceases for packaging/packaging materials (except for plastic bags), electrical and electronic equipment, tires, batteries, advertising carrier paper and office paper.

For these product groups, the obligations prescribed in the Extended Producer Responsibility system, including data provision and payment of the Extended Producer Responsibility fee, must continue to be fulfilled.

Registration tax

Registration tax rates will change from 1 March 2025.

The tax rate will depend on the environmental class and power (kW) of the vehicle, and in most cases, it will increase compared to the previously effective tax rate.

Excise duty

The excise duty rates will increase from 1 January 2025 and will be the following.

• Fuels (petrol, jet fuel, gas oil [diesel]): HUF 148,760 to HUF 158,800 per thousand litres, depending on the world market price of crude oil and on the type of product.
• Heating oil: HUF 5,970 to HUF 120,760 per thousand kilogrammes, depending on the purpose of the usage.
• LPG: HUF 0 to HUF 99,730 per thousand kilogrammes, depending on the purpose of the usage.
• Electricity: HUF 398/MWh.
• Coal: HUF 3,230 /1,000 per kilogramme.
• Natural gas: HUF 0.3879/kWh or HUF 36/nm3 depending on usage.
• Alcohol products: HUF 589,040 per hectolitre of pure alcohol. Special rules are applicable to spirits manufactured in private distilleries.
• Beer: HUF 1,870 per alcohol degree and per hectolitre, HUF 940 per alcohol degree and per hectolitre for beer produced in a micro-brewery.
• Still wines: HUF 0 per hectolitre.
• Sparkling wines: HUF 18,840 per hectolitre.
• Other still fermented beverages: HUF 11,350 per hectolitre for other fermented beverages, HUF 0 per hectolitre for still wine of an actual alcoholic strength by volume not exceeding 8.5% volume mixed with carbonated water without added flavouring, where the ratio of still wine exceeds 50%.
• Other sparkling fermented beverages: HUF 18,840 per hectolitre.
• Intermediate alcoholic products: HUF 29,250 per hectolitre.
• Cigarettes: HUF 32,300 per thousand pieces and 24% of the retail selling price, but not less than HUF 45,200 per thousand pieces. The tax base per cigarette also depends on the length of the cigarette (without filter). It is double if the length of the cigarette is 8 cm to 11 cm, triple if the length is 11 cm to 14 cm, and so on.
• Cigars and cigarillos: 14% of the retail selling price, but not less than HUF 5,230 per thousand pieces.
• Fine-cut and other tobacco: HUF 28,060 per kilogramme.
• Refill liquid: HUF 36 per millilitre.
• Other consumables that contain tobacco or are consumed with tobacco: HUF 38 per piece; HUF 76 per millilitre for liquid.
• Smokeless tobacco products: HUF 28,060 per kilogramme.
• Smoking-substitute, nicotine-containing tobacco products: HUF 28,060 per kilogramme.
• Heated products: HUF 38 per piece.