Extra profit tax changes affecting pharmaceutical manufacturers
and insurers at the end of December 2022

The year-end decision of the Hungarian government on introducing of extra profit tax for the pharmaceutical sector and increasing the extra profit tax for the insurance sector has been published in the Hungarian Official Gazette late at night on 23 December 2022. In this newsletter, we would like to give you an insight into the details of this change.

With Government Decree 197/2022 (4.VI.) introducing extra profit taxes, the government imposed extra taxes on a number of industries last summer in order to increase budget revenues. Details of this were given in our previous newsletter: https://vgd.hu/en/news/professional-publications-newsletters/hungarian-extra-profit-taxes-2022-summer . The former provisions are amended by the new decree of 582/2022 (XII.23.) promulgated by the government before Christmas. Below we summarize the rules on the special tax on pharmaceutical manufacturers' and insurers' extra profits, as laid down in the government decree and as amended.

Extra profit tax on pharmaceutical manufacturers

For pharmaceutical manufacturers, the new government decree introduces, with effect from 24 December 2022, the obligation for the payment of the extra profit tax for the tax years 2022 and 2023, which, like the previous sectoral taxes, is determined at a banded rate.

• The tax base:
  The tax base should be the net turnover determined on the basis of the financial statements for the tax year under Act C of 1990 on Local Taxes (the “Htv. Act”).
  For taxpayers preparing their separate financial statements in accordance with the IFRSs, the tax base should be the net turnover as set out by Section 40/C of the Htv. Act. 

• The tax rate:

    a) 1 per cent on the part of the net turnover not exceeding HUF 50 billion;
    b) 3 per cent on the part of the net turnover exceeding HUF 50 billion but not exceeding HUF 150 billion;
    c) 8 per cent on the part of the net turnover exceeding HUF 150 billion.

• The taxpayer:
  pharmaceutical manufacturing companies operating in the sectors NACE 2120 (“Manufacture of basic pharmaceutical products”) and NACE 2110 (“Manufacture of basic pharmaceutical products”).

• Tax advance payment liability
  Tax advance for the tax year 2023 should be paid by 20 November 2023.

• Deadline for tax declaration and for tax payment
  The extra-profit tax should be assessed, declared and paid for the 2022 tax year by 20 May 2023. 
  For the tax year 2023, this deadline is the 20th day of the 5th month following the tax year 2023 (it is 20 May 2024 for taxpayers with the same fiscal year as the calendar year).

Extra profit tax on insurance companies

Another provision of the government decree in question is that the special tax burden of the largest insurers in Hungary will grow in 2023, as the tax rate in the highest premium income band has been increased:

• if the insurance premium from insurance services under Hungarian Act CII of 2012 on Insurance Tax (the “Bizta Act”) exceeds HUF 36 billion, the previous tax rate of 7% has been increased to 12%, and

• if the insurance premium under the Bizta Act from the provision of insurance services in the insurance sectors listed in Annex 2 to Hungarian Act LXXXVIII of 2014 on Insurance Activities exceeds HUF 36 billion, the previous tax rate of 3% has been increased to 5%.

The latter change also entered into force on 24 December 2022. 

19 January, 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.