Further expected tax law changes in Hungary (summer 2022)

On 21 June 2022, the Hungarian Government submitted its Bill T/360, which includes also tax law amendments. The bill has not yet been adopted by Parliament, but is expected to be debated quickly in extraordinary sessions of Parliament. In this newsletter, we briefly outline the expected changes as they are currently known.

Small Business Tax Scheme (“KATA”)

The Government has previously announced its intention to reform the KATA, but the current amendment only contains purely technical and minor substantive changes to the KATA scheme. We assume that the significant changes will only be announced by the Government towards the end of this year.

Corporate income tax

Significant changes are expected in the transfer pricing area, which would apply to controlled transactions as early as the tax year 2022:

• taxpayers applying transfer pricing adjustments will, as a general rule, have to adjust their applied prices to the median of the arm's length price range;
• taxpayers will have to provide information in connection with the determination of the arm's length price in their corporate tax returns;
• the definition of the interquartile range will remain unchanged, but the requirement to use it will be renewed.
• in this context, the Government Decree detailing the transfer pricing rules will also change.

A new, optional tax base adjustment would become available: the impairment loss recognised on the shareholdings for the tax year.

The income tax of energy suppliers (“Robin Hood tax”)

For the 2022 tax year, a grant to a Special Employee Stock Ownership Plan organisation or the managing trust would be a recognised expense for energy supplier income tax purposes.

Company car tax

From 1 January 2023, the rates of company car tax in force from 1 July 2022, as announced in the emergency Government Decree, will be enacted by law. More details here: https://vgd.hu/en/news/professional-publications-newsletters/other-taxes

VAT

• the VAT groupings’ rules would be further clarified;
• in line with the CJEU judgment on the Hungary-related case C-717/19, the substantive conditions for the subsequent tax base reductions for pharmaceutical companies resulting from payments made under a price-volume agreement would be defined in law.

Excise tax

• the concept of "combusted tobacco product" would be introduced, whereby products that can be consumed by heating but do not contain tobacco or nicotine would also become excisable products from 2023;
• the registration obligation for small-scale wine producers exporting to a Member State would be clarified.

Tax procedure rules

• the default penalty for determining the arm's length price and for breaching the transfer pricing record-keeping obligations would be increased to HUF 5 million and, in case of repeated breaches, to HUF 10 million (from the current HUF 2 million and HUF 4 million respectively);
• the advanced pricing agreement (“APA”) fee would change to HUF 5 million in unilateral proceedings and to HUF 8 million in multilateral proceedings (the current rule is HUF 2 million for each party to the initiated proceedings). The legislator would remove the prohibition on payment in instalments or deferral of payment;
• along with the above, the current rule that only taxpayers obliged to prepare transfer pricing records (except for taxpayers under majority state control) can initiate an APA procedure would be removed. This would make the APA procedure available to all taxpayers;
• the entitlement to late payment fee on the related claims for reimbursement would also be aligned with the judgment in the above-mentioned preliminary ruling case C-717/19. The starting date of late payment interest would be the starting date for entitlement to the VAT base reduction;
• penalties for repeated cash register failures would be adjusted in the light of tax audit experience;
• The rules on taxpayer data reporting, returns, data provision and, in the absence of data reporting, the rules on the assessment of tax in the context of a tax audit would be clarified.

Personal income tax

• the official price of CNG used as fuel will also be available in connection with the tax-deductible fuel cost calculation based on the consumption standard.

• the tax exemption of receivables waived by banks, and financial companies. as well as the tax-deductibility of costs related to the use of cars will be re-regulated.

Further amendments

Minor amendments have been made to the Social Security Contributions Act and the Social Contribution Tax Act.

Hungarian Act CXXIV of 2021 on the cross-border transformation, merger, division and other legislative harmonisation amendments of capital companies would be amended before its entry into force in September 2022.

We will inform our Clients of the adopted amendments after the final vote in Parliament.

28 June, 2022.

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the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice