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

From 1 January 2025, the maximum amount of default penalty will increase from 200,000 to 400,000 Hungarian forints (HUF) for taxable natural persons and from HUF 500,000 to HUF 1 million 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 HUF 5 million 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 HUF 10 million on the distributor in the case of distributing e-cash registers, buyer applications without a marketing authorisation, continued distribution of e-cash registers, buyer applications after withdrawal of the marketing authorisation, distribution of e-cash registers, and buyer applications differing from the ones authorised. They may impose a default penalty amounting to HUF 500,000 on the obliged person in the case of natural persons or up to HUF 1 million 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, or operation of e-cash registers.

The state tax and customs authority may impose a default penalty amounting to HUF 1 million on the distributor if they have not tried at repair of the hardware-based e-cash register within five 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 HUF 1 million 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, and the extent and nature of the services rendered if it can be expressed in some unit of measurement.

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; and 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 2023, 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.

Global minimum tax: New notification obligation

Hungarian constituent entities are obliged to submit a notification form to the tax authority regarding their Pillar 2 status. The notification form must be submitted within 12 months from the start date of the tax year beginning in 2024 (i.e. by 31 December 2024 for calendar year taxpayers) and every year thereafter.

Local business tax (LBT)

Change in the subject of the permanent establishment (PE) definition for air passenger transport entrepreneurs

On 1 January 2024, the definition of PE in The Act C of 1990 on Local Taxes was expanded. As a result, entrepreneurs who perform air passenger transport activities are subject to LBT in the jurisdiction of the local municipality where there is an airport from which these entrepreneur's flights depart, irrespective of not having any fixed establishments there. Additionally, due to the PE triggered for LBT purposes, airlines would also be subject to innovation contribution, which is calculated as 0.3% of the same tax base.

As of 1 January 2025, the scope of affected entrepreneurs has been narrowed. According to the changes, those entrepreneurs who are resident in a state that is a party to the Convention on International Civil Aviation opened for signature in Chicago on 7 December 1944 are excluded from the scope of the PE definition.

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.

Social tax

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

Advertisement tax

From 1 July 2019, provisionally until 31 December 2025, 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 protection product fee obligation ceases for products that were subject to both the product fee regulation and the Extended Producer Responsibility system. 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, tyres, 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.