25 February 2022 deadline for Hungarian local business tax purposes

As we indicated in our earlier newsletter on the 2022 tax amendments, 25 February 2022 is an important deadline for small and medium-sized enterprises in terms of local business tax. The necessary details are given below.

What benefits are available in local business tax in 2022?

• The 1% reduced local business tax rate will be available in 2022 in the municipalities whose local tax rate set out in their local tax ordinance exceeds 1%;
• In 2022, 50% of the tax advances declared can be paid on both advance payment dates (16 March 2022 and 15 September 2022);
• The company can decide whether to treat the tax benefit from the reduced rate as de minimis aid or as a COVID19 transitional aid. If the enterprise already benefits from de minimis aid because of other (e.g. corporate tax) benefits, it may be a reasonable choice to opt for the transitional aid, as this will provide an additional aid facility. A company starting up without a legal predecessor can only benefit from the tax advantage as de minimis aid.

Who is affected by the 25 February 2022 deadline?

The above benefits are available exclusively to small and medium-sized enterprises (SMEs). The SME qualification criteria are set out in Sections 3-5 of Act XXXIV of 2004 on Small and Medium-Sized Enterprises and on Support for their Development (the ‘SME Act’) amended as follows:

• the total employee headcount is less than 250, and
• the annual net turnover or total assets do not exceed HUF 4 billion (this is a derogation from the SME Act introduced by Section 51/L (1) of Act C of 1990 on Local Taxes), and
• the above indicators should be assessed under the specific aggregation rules for partner and affiliated enterprises set out in the SME Act.

What needs to be done by 25 February 2022?

To reduce the local business tax advance by 50%:

• No action required if the company filed Statement Form 21NYHIPA in 2021 and does not have a registered office or place of business established after the date of the declaration, or

• Regardless of the number of business establishments, a single Statement Form 22NYHIPA should be submitted with Block B) completed, which covers the followings:
  • the company qualified as an SME for the tax year ending in 2021, or
  • the company is expected to qualify as a referred SME in the tax year ending in 2022, and
  • does not have a business establishment under the Local Taxes Act that it has not declared to the Hungarian Tax Authority. (If the company does have such an establishment, then it should make up for this omission by submitting Form 22T201T before or simultaneously with submitting Statement 22NYHIPA).

To opt for a treatment as a different type of aid:

• No action required if the company opts for treatment as de minimis aid, or
• Regardless of the number of business establishments, a single Statement Form 22NYHIPA should be submitted with Block C) completed, which covers the followings:
  • the company intends to treat the state aid constituted by the 1% reduced business tax rate as transitional aid and is eligible for it, and
  • as of 31 December 2019, the company did not qualify as a ‘micro, small and medium-sized enterprise in financial difficulty’ under the provisions of Sections 6. § (4a) to (4b) of Government Decree No. 37/2011 (III. 22.) (the ‘Atr.’), or, if it did, it was not subject to the procedure under Section 6 (4a)(c) of the Atr. at the time of the aid decision; further, it was not affected by the circumstances under Section 6(4a)(d) of the Atr., and
  • the company does not have a business establishment under the Local Taxes Act that it has not declared to the Hungarian Tax Authority. (If the company does have such an establishment, then it should make up for this omission by submitting Form 22T201T before or simultaneously with submitting Statement 22NYHIPA).

22 February, 2022

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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice