TAX LAW CHANGES 2022

Accounting rules, Civil Code

(Tax law changes adopted during 2021)

Percentage of completion method of accounting – options available

As of 1 January 2022, for contracts that cover a large quantity of serially manufactured products with the same workflow (e.g. serial production), the rules of the percentage of completion method of accounting which will apply from 2020, would no longer be mandatory. If a company opts for not applying this method, then it is not entitled to apply any [other] rules relating to it.

Recognition of investment grants as deferred income

As from 1 January 2022, the expected amount of non-refundable grants based on statutory provisions, contracts or agreements for the development of intangible assets and tangible fixed assets put to their intended use, which have not yet been recognised, may be recognised as deferred income against other revenue. This is conditional on the company being able to demonstrate that it will comply with the conditions attached to the grant and that it is probable that the grant will be received (the deferred income is reversed when the grant is settled or when the grant is not received).

Changes to the Civil Code relating to supplementary capital contributions

Act XCV of 2021 ("On Amendment of Act V of 2013 on the Civil Code"), adopted in the summer, transposes the rules on the supplementary capital contribution of limited liability companies into the common rules of business companies as of 1 January 2022.

This means that in the future, with the exception of public limited companies, any company may be subject to a supplementary capital contribution, which will help to ensure the stability of the company's operations and to restore its solvency effectively and quickly.

As from 1 January 2022, the settlement of any supplementary capital contributions not used to cover losses will also become more flexible. In contrast to the current rule, whereby any supplementary capital contributions not used to cover losses have to be paid back to members of company, from 1 January 2022 the company's supreme body will be able to decide otherwise.

Business shares held by members of a limited liability company („Kft.”)

From 1 January 2022, a member of a Ltd. company can have more than one business share. However, a member will continue to be considered as one member of the company regardless of the number of shares he or she holds, i.e. the number of votes he or she is entitled to for each share will be added together. Exclusion from the company, failure to make a contribution to the assets, whichever business share being involved, may lead to the termination of his membership of the company. Any other provision in the Articles of Association shall be null and void.

30 November, 2021

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Should you have any questions regarding the latest tax law changes, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice