Allow time for amending your Hungarian PIT draft tax return!

20 May 2022 which is the deadline for submitting the 2021 personal income tax returns is approaching. In this context, we would like to draw our clients' attention to some important, but perhaps less well-known information.

Everyone may already know that from 2017 onwards the Hungarian tax authority prepares a draft personal income tax (“PIT”) return for all individuals who have taxable income in Hungary from a Hungarian employer or payer. The draft PIT return is available online for those who have the so-called Client Gate (Hung. “Ügyfélkapu”) access, but in the lack of Client Gate access, the draft can be requested also by post.

In many cases, however, it is not worth sitting back and thinking that there is nothing to do about personal income tax, as there are some types of income that the Hungarian employer/payer is not aware of, or that have been derived from a foreign employer/payer or not even a payer, and therefore are certainly not included in the draft PIT return.

We would therefore like to draw your attention that it is always worth consulting a tax advisor if, for example:

! you are entitled to the PIT refund for families. This year's PIT return is therefore also special and requires increased attention from the parents entitled to the family allowance. During the preparation of the return, it is possible to change the distribution of the family allowance between the parents, which in some cases may result in an additional tax refund. Moreover, the parents who did not receive an automatic PIT refund can claim it in their PIT return;

! you are employed by a non-resident employer in Hungary or receive a benefit from abroad (e.g.: from a foreign parent company) in respect of your Hungarian employment;

! you let your property for rent to an individual, sold a property, or received interest or dividend income from abroad earned from your movable property;

! if you had cryptocurrency transactions. The taxation of income derived from the cryptocurrency transactions has been settled since 2021, so this year this income should be included in a separate line in the PIT return. Taxation of cryptocurrency income has become more favorable compared to previous years;

! if the payer has determined the amount of your income earned on the sale of securities (even in relation to a controlled equity transaction (Hung. "ETÜ"), the taxpayer is entitled to take into account the incremental costs related to the security that the payer has not taken into account, and to determine the transaction costs based on his/her own records;

! if you wish to switch from the 10 percent expense ratio used to determine your advance taxable income to itemized cost deductions (if you do not claim the 10 percent expense ratio deduction on any of your other income on your return). However, if you opted for itemized cost deduction for the calculation of the tax advances, you are not allowed to switch to the 10 percent expense ratio in your PIT return.

In summary, the following incomes are the most frequent ones that require the amending of a draft PIT return and possibly payment of additional personal income tax:

• Income from a foreign employer/payer;
• Income from the earned foreign share benefits;
• Interest income earned abroad;
• Dividend income earned abroad;
• Income from the letting for rent of real estate property;
• Income from the sale of real estate property;
• Income from the sale of movable property;
• Income from the sale of securities;
• Cryptocurrency trading income;
• Claimable PIT refund.

It is therefore recommended that you allow time to consult with a tax advisor for amending your draft tax return if you earned income in the above categories in 2021.

If you do not use this possibility to amend your PIT draft return, it will become final and any subsequent amendments can only be made by submitting corrective returns. However, if the taxpayer has legitimately exercised the option provided by law (e.g. in respect of cost deductions), their choice cannot be changed even by submitting corrective PIT returns.

VGD Hungary Kft. has many years of experience in preparing personal income tax returns, so we can provide you with efficient assistance at short notice, even online.

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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.

3 May, 2022