Changes in Hungarian extra profit taxes in effect from 1 March 2023

Government Decree No 62/2023 (28.II.28.) introduced new changes to the extra-profit taxes, which entered into force on 1 March 2023. In this newsletter, we summarise the new provisions, which in some cases have retroactive effect.

Extra profit tax on pharmaceutical manufacturers

With retroactive effect - already for the tax year 2022 - the scope of pharmaceutical manufacturers liable to pay the extra profit tax has been narrowed: only those taxpayers engaged in activities under NACE 2110 (Manufacture of basic pharmaceutical products) and NACE 2120 (Manufacture of pharmaceutical preparations) remain liable to the extra profit tax, whose aggregated net turnover from these activities exceeds 33.33% of their total net turnover based on the latest annual financial statements available on the first day of the tax year.

Previously, the government decree did not contain a threshold, so all pharmaceutical manufacturers were subject to an extra profit tax on their total turnover, regardless of the turnover from the activities concerned.

Airline contribution

Tax rates for certain destinations, and within these for certain categories of aircraft by emission value, have changed. Tax rates have changed upwards in some cases and downwards in others. In addition, the tax base determination method has been amended with a retroactive effect to 1 January 2023.

Due to the change in the tax base determination method, airlines will have to repeat their reporting obligations to the ground handling entity for January 2023. The latter, as the taxpayer liable to the airline contribution assessment, may self-revise its January 2023 return before the deadline set by the government decree, without any self-revision fee.

Public health product tax

The scope of tax exemptions has been extended to include products used in the production of own taxable goods, provided that the buyer pays the public health product tax on the goods produced.

The tax exemption is conditional on the buyer issuing a statement (to make such use) to the taxpayer at the time of sale and providing, within 366 days of the date of the statement, credible proof of payment of the tax and of the quantity of taxable products used and purchased from the taxable person.

If the buyer has produced a product on the sale of which he has not paid public health product tax, he should notify the taxpayer within 8 days of the date of supply of his own product, specifying the quantity of the product. The taxpayer should assess and pay the tax, plus a late payment fee calculated from the original due date, for the tax assessment period including the date of receipt of the notice by the buyer.

If the buyer fails to comply with this notification obligation within the time limit provided, he will be liable for the unpaid tax, late payment fee and, in the event of a tax audit, the tax penalty and late payment fee.

Retail tax

The rules for taxpayers with a fiscal year other than the calendar year have been clarified. If such taxpayers have a tax year starting after 1 July of the calendar year and are subject to an extra profit tax for the tax year including 1 July 2022, they will have to apply the higher tax rates for their tax year starting after 1 July 2022.

02. march, 2023

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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.