Innovation contribution

In accordance with the changes in tax law, the foreign resident companies’ establishments within the meaning of the Hungarian Act on Local Taxes and Hungarian branches of foreign companies become subject to the innovation contribution.

The establishment of a foreign resident company within the meaning of the Act on Local Taxes refers to a form of business for which the foreign company has a permanent establishment in Hungary within the meaning of the relevant double tax treaty and/or the Hungarian Corporate Income Tax Act and also has permanent business premises (real estate) where it carries out business activities in whole or in part, but is not required by the effective laws to establish a Hungarian domestic branch or company. Currently, neither such establishments nor Hungarian branches of foreign resident companies are liable to pay the innovation contribution. Domestic establishments of foreign resident companies that do not qualify as establishments under the Act on Local Taxes (i.e. do not have permanent business premises or real estate where they carry out their business activity) remain outside the scope of the innovation contribution.     

Entry into force

The payment obligation arises on the 31st day following the publication of the tax law amendments.

The calculation, return filing and payment rules

The advance assessment period for the 2022 tax year will run from the 31st day after the publication of the tax law amendments until the end of 2022. The deadline for assessment, return filing and payment is 20 October 2022.

The advance contributions for Q1 and Q2 of 2023 must also be established and paid by 20 October 2022, but the deadlines for payment are 20 March 2023 and 20 July 2023 respectively.

The amount of the advances for Q1 and Q2 of 2023 is 25 % of the expected innovation contribution for the full tax year 2022.

Assessment of the contribution base for the remainder of tax year 2022

The contribution liability for the tax year 2022 should be assessed by one of the following methods, at the taxpayer's option:

• the assessment is made for the full year 2022 pro rata to the number of days during the tax year 2022, or
• the assessment is made based on the accounting closing of the taxpayer's books as at the day before the day on which the contribution liability arises.

General information on the innovation contribution

The contribution base is the same as the local business tax base. The contribution rate is 0.3%.

The annual contribution liability should be declared in the corporate income tax return by the filing deadline of the return, which is 31 May of the year following the tax year (for the taxpayers whose tax year is the same as a calendar year). This date is also the deadline for the payment of the annual contribution obligation or claiming the overpayment refund.

20 July, 2022

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This newsletter provides general information and does not constitute tax advice