Another omnibus act with tax law amendments is expected
The Hungarian Parliament is currently debating Proposal Nr. T/10856 on the establishment of Hungary’s central budget for 2021 (hereinafter referred to as “the Proposal”). In this newsletter, we have summarized the most important tax-related innovations of the Proposal, with the fact that, of course, the content of the law that will actually enter into force may differ from the wording of the Proposal.
As mentioned, the Proposal not only contains tax-related amendments (the law on concessions or motion pictures may be also changed), but in this letter we focus exclusively on the expected changes in taxation, which cover 4 major issues.
According to the Proposal, local taxes, personal income tax and social security, the so-called EKÁER, as well as the rules for the introduction of the “DAC6 Directive” in Hungary (which we have summarized on one of our news-letters in May) will also change.
Local taxes
Under the Proposal, the obligation to complete the local business tax advance at the end of the business year will be abolished, similar to the amendment made last year in connection with the corporate income tax. Taxpayers who have been required to do so are not expected to have to do this again this tax year, if their tax year includes the date of entry into force of the Proposal.
The construction tax liability for advertising materials, introduced on 1 January 2018, will also be abolished.
Personal income tax and social security
According to the Proposal, sole proprietors (like corporate taxpayers) could reduce their entrepreneurial income with the full amount (instead of the current 50%) that remained after the deduction of entrepreneurial costs, as a development reserve. However, unlike corporate taxpayers, sole proprietors will not be subject to the corporate taxpayers’ current ceiling of HUF 10 billion (approx. EUR 28,5 million), for sole proprietors this upper limit will be HUF 500 million (approx. EUR 1,4 million).
From 2021, an indexation mechanism – based on the data of the Hungarian Central Statistical Office – will be introduced to determine the monthly and daily amount of the health service contribution. The results of the calculation will be published by the Hungarian Tax Authority on its website by 31 October of the year preceding the year in question.
Electronic Road Traffic Control System (abbreviated in Hungarian as “EKAER”)
The Proposal – with explicit reference to the Hungarian Tax Authority’s audit experience of the last 5 years – would significantly simplify the current EKAER regulations, however, the exact rules will be included in a later ministerial decree
Under the simplifications, the notification obligation would be completely abolished for non-risky products, but would remain (along with the obligation to provide risk coverage) for risky products. However, it is not yet known whether the ministerial decree containing these clarifications will, for example, extend the scope of risky products or the current classification will remain.
Reducing Aggressive Tax Structures (DAC6)
The dates for the implementation of DAC6 in the Hungarian legal system, mentioned in one of our previous newsletters, are also changing due to a deadline extension at Community level: the EU has granted a 3-month prolongation, while the Hungarian legislator has settled 6 months.
As a consequence, instead of the originally planned 31 August 2020, the planned deadline for reporting will be 28 February 2021 for cross-border tax schemes implemented between 25 June 2018 and 30 June 2020, while for those implemented between 1 July 2020 and 31 December 2020, the 30-day reporting period starts on 1 January 2021. In close connection with those dates, the Hungarian Tax Authority will provide data to the other European authorities by 30 April 2021 at the earliest.
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We would like to emphasize again what was described in the introduction, i.e. that our present newsletter was written on the basis of a proposal, so there may be differences between the above written information and the final regulation. However, we considered it important to inform our clients of the changes as soon as possible and, of course, if the text of the adopted, valid law differs from the above, we will also inform our clients immediately. Should you have any questions about the contents of this newsletter, VGD Hungary’s tax advisors are gladly at your disposal.
