Allow time for amending your Hungarian PIT draft tax return in 2024!

The draft tax return will be available on March 15. It is possible to review and approve this until May 20, 2024, the deadline for submitting the 2023 personal income tax return. 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 employed by a non-resident employer in Hungary or you receive some kind of benefit from abroad due to your Hungarian employment relationship (this is most often realized in the form of a foreign share bonus, in the event that the foreign parent company has a share bonus program to which Hungarian colleagues can also join);

! you let your property for rent to an individual, sold a property or movable property of greater value (e.g.: car, motorbike), and the income from the sale of movable property exceeds HUF 200,000,

! If you keep part of your investments abroad (have an account with a foreign bank or investment service provider), on which you received interest, exchange rate gains or dividend income. We draw your attention to the fact that the tax authority does not have these data on these incomes at the time of preparing the draft return, but receives information from more than 100 countries during the year as part of an automatic exchange of information. Based on our experience, in an increasing number of cases, the tax authority initiates a support procedure for reconciliation of income from abroad. It is therefore important that these incomes are properly recorded when preparing the tax return.

! 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"), then this will be included in the draft declaration, however, it is important to know that the taxpayer has the right to take into account the additional costs related to the securities that the payer did not take into account, and to determine the transaction costs based on his own records, and also the part of the declaration concerning tax equalization it must be filled out by the private individual in view of the fact that the tax on ETÜ profit and ETÜ loss for the tax year and the two years preceding the tax year/the following two years can be set off against each other, so by filling them in, you can save tax.

! When preparing the tax return, it is possible to switch to itemized cost accounting instead of the 10 percent cost ratio used in determining the tax advance funds (if you do not apply the deduction of the 10 percent cost ratio to any of your other income in the tax return). At the same time, if you declared itemized cost accounting for the tax advance, you cannot switch to the 10 percent cost ratio in your tax return at the end of the year.

! If you are entitled to any tax allowance (family tax allowance, personal tax allowance, tax allowance for first married couples, etc.), it is definitely worth checking these, because if the employer did not take them into account during the year, or only partially, then you can apply them in the tax return for the whole year.

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;
• Tax allowance

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 2023.

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.