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, and indirect taxes.
Rules of taxation
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.
Corporate income tax (CIT)
Settling CIT liabilities in US dollars (USD) or euros (EUR)
The detailed rules regarding the option to settle Hungarian CIT liabilities in US dollars or euros were published on 9 August 2022 in the Hungarian Official Gazette. According to the rules, taxpayers shall notify the tax authority on their intention to pay their tax liabilities in US dollars or euros on the official form to be made available for this purpose before the first day of the last month prior to the tax period (e.g. if the tax period starts on 1 January 2023, the declaration shall be made by 1 December 2022 at the latest).
It should be pointed out that the declaration relates to the entire tax period, as the decision cannot be changed until the beginning of the following tax period. Consequently, this option is not applicable for the current tax period's tax advances, but only for tax settlements paid in relation to tax periods starting after 30 September 2022. Please note that the option of paying taxes in US dollars or euros is currently only available for CIT contrary to the previous unofficial announcement, where local business tax (LBT) was also mentioned.
The CIT settlements (including tax advances) with respect to tax periods affected by the declaration should be transferred to an account opened for foreign currency tax payments maintained by the Hungarian Treasury in the currency corresponding to the declaration. If the transfer is made in a different currency other than the one mentioned in the declaration, the costs of the conversion shall be borne by the taxpayer. The transferred USD or EUR amount will be credited to the taxpayer's tax account in Hungarian forint (HUF) based on the Hungarian Central Bank’s exchange rate on the day of the transaction. On days when the Central Bank does not publish exchange rates, the last published rate should be applicable.
Development tax incentive
With an effective date of 21 March 2022, aid intensity is 30% in Budapest and 45% for Northern Hungary, Northern Great Plain, Southern Great Plain, Southern Transdanubia, Central Transdanubia, Western Transdanubia, or Pest region.
Real estate transfer tax
According to the new rules, from 1 January 2023, the transfer of real estate between related companies is exempt from the duty on the onerous transfer of property. The acquiring party must declare the existence of the exemption condition (on sales revenue ratio). Under the previous rules, the exemption was subject to the main activity of the acquiring party being the rental or operation of own or rented real estate, or the sale of own real estate. Under the new rules, the exemption is subject to having 50% of the sales revenue from the above-mentioned activities, or from one of them, representing 50% of the total sales revenue, instead of just being the core activity of the acquiring party on a certain date.
Extra profit tax
The Hungarian Government issued the 197/2022 (VI. 4) Government Decree on extra profit in relation to the following tax types (both newly introduced and extended taxes are included in the following list):
- Extra profit tax on the producers of petroleum products.
- Extra profit tax on producers subject to the KÁT and METÁR Decrees entitled to mandatory takeover and on producers eligible for green premium-type aids.
- Contribution of commercial airlines.
- Energy suppliers’ income tax (Robin Hood tax).
- Extra profit tax on pharmaceutical distributors.
- Mining royalty.
- Surtax on credit institutions and financial enterprises.
- Financial transaction tax.
- Insurance surtax.
- Company car tax.
- Telecommunication surtax.
- Surtax on retail tax.
- Excise duty.
- Public health product tax.
- Simplified employment.
Local business tax (LBT)
In the tax year ending in 2022, micro, small, and medium-sized businesses have been granted with a preferential LBT rate. The maximum level of the LBT rate is 1%, even if a higher tax rate is set forth in the municipal decree.
The detailed rules regarding the option to settle Hungarian local business tax liabilities in US dollars or euros were published on 26 September 2022 in the Hungarian Official Gazette. According to the rules, the taxpayers can also fulfil their obligation to pay the LBT advance and LBT due from 1 January 2023 to the National Tax and Customs Office by transferring it to an account to be made for this purpose for tax payment in US dollars or euros.
The transferred USD or EUR amount will be credited to the taxpayer's tax account in Hungarian forint based on the Hungarian Central Bank’s exchange rate on the day of the transaction.
Calculation of LBT for small businesses
The calculation of LBT for small businesses will be amended from 1 January 2023. According to the legislation, a company will qualify as a small business if its annual income does not exceed HUF 25 million, or HUF 120 million for a retailer company. The tax will apply to the taxable base differentiated according to the income brackets (up to HUF 25 million or 120 million) and the minimum business tax will be HUF 50,000. The itemised tax must be paid once a year, and no tax return is required.
Value-added tax (VAT)
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.
Extended Producer Responsibility (EPR)
The EPR system will be introduced as of 1 July 2023.
In the framework of EPR, as a general rule, the obliged entities must pay an EPR fee to finance the management of waste from ’circular economy products‘ they put on the market or use for their own purposes.
See the Other taxes section for EPR fee rates from 1 July 2023.
Carbon Border Adjustment Mechanism (CBAM)
The European Union (EU) will introduce the CBAM system as of 1 October 2023. The EU’s CBAM legislation will be applicable in Hungary.
The social tax payable by employers after employment income is 13%.
From 1 July 2019, provisionally until 31 December 2023, 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.