TAX LAW CHANGES 2022

Local business tax

Extension of the reduced 1% tax rate to 2022

Due to the law amendments, from 1 January 2022 the provisions on the 1% reduced local business tax rate introduced this year has been incorporated into the Local Taxes Act. The reduced tax rate will be available not only for the tax year ending in 2021, but also for the tax year ending in 2022 for micro, small and medium-sized enterprises within the meaning of the SME Act (provided that their net turnover or balance sheet total does not exceed HUF 4 billion).

Compatibility with the EU legislation on state aid

Importantly, the grant equivalent resulting from the reduced local business tax rate constitutes state aid within the meaning of the Treaty on the Functioning of the European Union (TFEU). In particular, while for the year ending in 2021 this aid is uniformly considered to be transitional aid related to the COVID-19 pandemic (the transitional facility is generally EUR 2.3 million), for the tax year ending in 2022, companies can choose to receive it under the above-mentioned heading or as de minimis aid. The provisions on the compatibility of local business tax relief with the EU state aid legislation are also now contained in the Local Tax Law.

Administrative tasks

The 50% reduction in the local business tax advance due in the 2022 tax year will continue to be conditional on the statement made to the municipality in 2021. The missing statement (including in cases where new permanent establishments have been set up with municipalities since 1 April 2021) may be made up for until 25 February 2022 (provided that the tax authorities should be duly notified of any permanent establishments not yet declared). The statement must be submitted electronically to the municipality via the Hungarian State Authority (“NAV”). The statement must also be submitted by 25 February 2022 if the company opts for treatment as a COVID19 transitional aid for the tax year ending in 2022.

Moratorium on tax increases for the local municipalities

In 2022, the moratorium on tax increases introduced by Government Decree this year will continue, and has been included in the Local Taxes Act. For the tax year 2022, local authorities may not increase the tax rate existing on 2 December 2020, may not reduce the scope of tax exemptions or reductions, and may not introduce new local taxes or municipal taxes.

Updated: 10 December, 2021.

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Should you have any questions regarding the latest tax law changes, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice.