Changes in the extra-profit tax rules
retail, banking and insurance, energy and pharmaceuticals sectors,
bioethanol/starch and sunflower oil producers are affected by the amendments
On Wednesday among other tax law amendments the provisions on extra-profit tax were also amended by government decree. The most significant changes affect the retail, banking and insurance sectors. The sectorial burdens will remain part of the Hungarian taxation system for a longer term – until 1st January 2025 – however some sectors will receive reliefs.
The largest retailers are facing an additional retail tax burden
According to the regulation amendment, the banded tax rates for retails will increase.
The tax rates after the modification will change as follows:
- 0 % if the tax base does not exceed HUF 500 million;
- 0,15 % if the tax base exceeds HUF 500 million but does not exceed HUF 30 billion;
- 1 % if the tax base exceeds HUF 30 billion but does not exceed HUF 100 billion;
- 4,5 % in case the tax base exceeds HUF 100 billion – instead of the original tax rate of 4,1 %.
To sum up the above only companies with a tax base above HUF 100 billion will be affected by the change, but they will be affected quite significantly.
Special tax for banks and financial companies – reduced tax burden under certain conditions
In 2024 (similarly to the second half of 2023), the extra-profit tax will be based on the profit before taxes in the tax year of 2022, which should be modified with certain items (dividend income in 2022, profit on sales in usual business, banking tax, transaction tax, extra-profit tax). The change will be significantly different from the original rules where the tax base was the net income.
The tax rate is 13 % up to HUF 20 billion (HUF 10 billion from July 2022) and 30 % above that.
The special tax should be declared by 10 June 2024 and paid in two equal parts (until 10 June 2024 and until 10 December 2024).
Tax relief can be claimed if the average daily balance of Hungarian government bonds of the credit institution or financial company for the period of January - November 2024 increases compared to the reference period of January - April 2023. In this case, the tax liability may be reduced by 10 % of the increase in the stock of government securities but up to 50 % of the extra profit tax liability calculated excluding this increase.
Insurance surtax and energy extra tax – no changes
The surtax introduced last year will not be modified in 2023 and 2024, thus the tax rates remain 1-5 % for life insurances and 2-12 % for non-life insurances. In 2023 and 2024 the tax base is the income of the actual tax year and the taxpayers should also perform advance payment for the next year.
The energy extra tax rate will remain 10 % of the tax base. The levy is payable by the transition system operator (TSO) after the provision of balancing control capacity.
The extra-profit tax obligation for pharmaceutical manufacturers will remain in 2024, but with lower tax rates
The tax rate is approximately the half of the original amounts, thus
- 0.5 % if the tax base does not exceed HUF 50 billion,
- 1.5 % if tax rate exceeds HUF 50 billion but does not exceed HUF 150 billion,
- 4 % if the tax base is more than HUF 150 billion.
Based on the modified legislation the pharmaceutical companies will be required to assess, declare and pay the special advance payment for the 2024 tax year.
We note that the pharmaceutical special tax payment obligation will be extended to 2024 with the change of the tax rate of 40 % - which is 12 % higher than in case of the previous rules.
In case of manufacturing the extra-profit tax obligation should be applicable for a further year
Since last year the bioethanol producers, sunflower oil producers, starch and starch products producers are also subject to the tax. The amendment – differently from the Hungarian Teleheat Act – requires the taxpayers to assess the 2024’s advance payment based on the payable tax by self-assessment and declare it until 20 June 2024. The tax payment should be performed in six equal parts until the 20th day of each month from July 2024.
The legislation does not include any changes related to the telecommunications surcharge
Taxpayers are required to perform an advance payment in the same amount as the surcharge for 2023 by the last day of the fifth month of 2024. In addition, the extra-profit tax for petroleum product producers and the special tax for producers eligible for green premium payment - covered by the Decree of METÁR - will be maintained.
The mining levy has been modified with more favourable conditions
The original tax rates have been reduced as follows:
- from 48 % to 24 % in case of hydrocarbon fields brought into production before 1 January 2008, and
- from 36 % to 18 % in case of hydrocarbon fields brought into production after 1 January 2008.
Mining operators with underground storage of hydrocarbons are not required to apply the quantity requirements.
Other extra-profit taxes did not need to be extended, as they were not linked to an expiry date originally: these include the company car tax and the transaction tax, but also the contribution from airlines remains.
6 June, 2023
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This newsletter provides general information and does not constitute advice.
