These are the main tax changes expected in 2023 and 2024

 

The summer tax package, which includes amendments regarding several tax rules for 2023 and 2024 has been accepted by the Parliament in the previous week. Although taxpayers should expect further changes in the future, the main points of the recently accepted amendments are outlined in our newsletter, with indication of the rules effective dates.

Personal Income Tax

The modification introduces new rules on the tax liability of fiduciary trust (in Hungarian: “bizalmi vagyonkezelés”) and private foundation assets.

Fiduciary trusts are an increasingly common form of tax planning in Hungary. Before the modification the advantage of the fiduciary trust was that the revaluation of the assets placed in trust by the individual (the trust order of assets at market value) used to be exempt from tax. The regulation has treated in the same manner the transfer of property by the founder and the joining private individual in case of the private foundation. The amendment will remove this tax exemption, making the revaluation margin taxable on the private individual's side, while allowing for the deferral of tax liability. Since the rules should be applicable to transfers of assets made after the modification enters into force, in the meantime, before the rules enter into force, the favourable rules can be applied. The exemption rules may also be applied to trusts whose registration was initiated before the entry into force.

According to the modification in the future it will be not possible to avoid the tax payment on the revaluation between the acquisition value and the market value in case of sales of companies or shares by the application of the fiduciary trust.

The amendment also specifies the acquisition value of assets (e.g. motor vehicle) transferred to beneficiaries from a trust or private foundation for non-cash purposes, in order to avoid the application of tax payment advantages on the subsequent sale of these assets by the individual.

These amendments are expected to come into force in mid-September, on the 60th day after the announcement of the rules.

The rules – which have been previously promulgated in a government emergency decree - are raised into statutory level from 1st August 2023 with unchanged content. Please find below our newsletter in this regard by clicking on the link https://vgd.hu/en/news/professional-publications-newsletters/changes-to-employee-benefits-and-allowances-from-2023

The rules which have been raised into statutory level are the followings:

• A benefit of mothers under 30 years of age;
• Family tax relief for families with a permanently sick or seriously disabled child;
• Changes regarding the tax rules in connection with the termination of the Széchenyi Card sub-accounts;
• An increase of the rate (i.e. from 15 HUF/km to 30 HUF/km) of travel expenses that can be disregarded when calculating income

Please find below our previously prepared newsletter in this relation by clicking here: https://vgd.hu/en/news/professional-publications-newsletters/the-statutory-amount-of-the-commuting-reimbursement-doubled

For cryptoassets, important amendments will come into force from 1 January 2024. Under the current regulation, individuals can only accounting transaction loss if they have received any income from a cryptoasset related transaction in the reference year. However, the provision confirms that a transaction loss can be accounted even if the individual has not received any income from transactions related to cryptoassets in the reference year. The amendment applies further changes with the expansion of the definition of expenditure on the acquisition of a crypto-asset by the case when the individual has acquired the crypto-asset itself as income, for example as a dividend.

 

Social contribution tax

From 1 August 2023 the social contribution tax credit will be available not only for the employment of disabled people with a complex qualification, but also if the employee is in receipt of disability allowance or personal allowance for the blind, i.e., the scope of the disability tax credit will be extended.

The amendment also extends the obligation to pay social contribution tax to non-monetary benefits which are granted to guest workers who coming to Hungary from non-EU countries. In the future, the workers will not be eligible for the benefit for labour market entrants.

 

Simplified employment

The amendment raise into statutory level with unchanged content form 1 August 2023 the rules previously promulgated in the emergency government decree. In this regard the public charges payable for employment in simplified employment and the basis for calculating the related pension benefits will be based on the minimum wage. The legislation determines the public charge payable for simplified employment as a percentage of the minimum wage applicable on the first day of the month, instead of the previous fixed daily amount.

 

Simplified contribution (EKHO)

From 1 August 2023 the rules related to the simplified contribution (EKHI) is also raised to statutory level. By the changes, the contribution payer is not liable to pay simplified contributions in certain legal relationships.

 

Corporate Income Tax

The amendment removes the time limit on the use of carry-forward losses. The unused carry-forward losses incurred up to the last day of the tax year starting in 2014 can be used after 2030, as required on the last day of the 2014 tax year.

Without any content changes, the new regulation clarifies the rules of the tax base adjustments for the transfer of assets to a transferee: in line with the Accounting Law, the amount of the tax base reduction/increase that can be applied to the transferor is determined by the gain on the transfer of the business instead of the amount of the gain recognized in excess of the carrying amount of the assets transferred.

The amendment repeals the requirement to treat advertising and publicity costs in excess of HUF 30 million as expenses not recognized in the interest of the business activity, under certain conditions.

In addition, the rules for companies owning immovable property converted from agricultural land are tightened. The regulation will take effect immediately while the rules for companies owning immovable property converted from agricultural land will be tightened from the 31st day after the announcement of the rules.

An additional change allows businesses to benefit from a transitional development tax relief from the following  day after the announcement of the law, also for the installation and operation of investments of strategic importance for the transition to a net-zero emission economy, as defined in the government decree. Investments that benefit are those involving the production of batteries, wind turbines, solar panels, electrolysers, heat pumps, related components or the production or recovery of related raw materials. The subsidy rate for such completed projects will be 15% in Budapest and 35% in the rest of the country.

The amendment also contains a provision that the amount of a donation made to the National Solidarity Account (in Hungarian: “Nemzeti Összefogás Számlaszáma”) will be classified as an expense in the corporate tax base without the need for a separate certificate. The change will also come into effect on the day following the publication of the legislation.

 

Income tax on energy suppliers

The legislation raised certain emergency provisions previously regulated by government decree into statutory level. From 1 August 2023 traders engaged in the wholesale supply of petroleum products and traders selling petroleum products purchased from abroad in Hungary will be permanently subject to the income tax of energy suppliers and will also be subject to special administrative obligations.

 

Local business tax

The amendment extends the advance payment rules for those entitled to opt for the simplified business tax base to all people who choose the use of the simplified tax base.

The regulation also introduces new conditions for the establishment of a permanent establishment:

The activity will create a permanent establishment in the territory of a municipality where temporary agency workers perform business activity for a total of at least 21,000 hours during the tax year.

For air passenger transport operators, permanent establishment is created from local business tax perspective at the airport from which their flights depart. The net income includes the value of the air passenger transport service provided on their flights from Hungary and the consideration for the service provided in conjunction with the flight.

The amendment also includes changes for taxpayers who applies individual IFRS.

The changes regarding the LBT will come into effect from 1 January 2024.

 

Innovation contribution

The amendment includes the correct legal interpretation of the innovation tax base, by the determination of the tax base in line with the local business tax base from transfer pricing perspective. The market price - which should be taken into account for the contribution base - will be determined according to the transfer pricing methodology prescribed in corporate taxation, including the obligation to adjust to the median.

If the small business taxpayer is liable to pay an innovation contribution the innovation tax base on the basis of its local business tax base also should be determined in the simplified way. The choice should be made for the tax year and with the notification of the Tax Authority.

These amendments will enter into force on the 31st day after the publication of the legislation, which is expected to be in mid-August.

 

VAT

In order to further whiten the economy, the details of the “eNyugta” concept will be set out in a ministerial decree. In the amendment the necessary enabling provisions and basic definitions have been defined in this regard.

For the time being, it appears that real-time data will also be collected in a separate receipt repository - operated by the Hungarian Tax Authority - which is intended to allow customers to access the data uploaded and stored there via an application.

These rules will come into effect on 1 July 2024.

From 1 January 2024, the rules on the deadline for issuing invoices will change. Accordingly, an invoice should be issued immediately if the payment is made before the date of performance (or on the date of performance in the case of daily summary invoicing). The new time limit should be respected regardless of the way of the payment (i.e. from January 2024 the invoice  not only in case of cash or cash substitute payments should be issued immediately if the above conditions are met).

As of the day following the announcement of the amendment, the new provision of the Act on the Rules of Taxation explicitly requires the Tax Authority to inform the developer of the invoicing software ex officio of the system's feedback and the tax number of the taxpayers concerned in order to identify and correct the causes of the incorrect online data provision, thus facilitating the proper fulfilment of the online invoice data provision obligation.

The amendment - for harmonization purposes – determines that taxpayers who not established domestically, but established in another Member State of the European Union will be able to recover input VAT charged on the purchase of domestic real estate – assessed after 31 December 2021 - under the special VAT refund procedure.

According to the modification, the withdrawal from the group tax status and the reorganization of the state's tasks should be treated as succession.

The above rules shall take effect from the day following the announcement of the regulation.

From 1 January 2024 special rules on the compulsory redemption of roll-overs will be determined in the amendment.

The amendment clarifies the rules of the quarterly reporting obligations for payment service providers and includes special sanction provisions in the Act on the Rules of Taxation for the default of the obligations. The rules will enter into force on 1 January 2024.

 

Excise duty, customs duty

From 1 October 2023 the amendment introduces a change by allowing tax warehouses to take back excise goods released for free circulation for commercial purposes, with the provision that they have to be stored and registered separately from excise goods under duty suspension. The excise goods to be dispatched under cover of a consignment note which clearly separate them from the excise goods giving rise to the chargeability of the duty. No excise security has to be provided in the case of retail activities with a tax warehousing authorization, but stock changes have to be included in the daily electronic reporting.

It will be possible from the 31th day after the announcement of the regulation to adapt the KN code classification for changing circumstances, but in case of withdrawal, a new KN code classification has to be issued because of the changed conditions.

According to the amendment, taxpayers will have to apply a higher tax rate on LPG from 1 August 2023 and also on petrol and diesel oil from 1 January 2024 in order to comply with the EU minimum standards of taxation.

The regulation related to the rate of excise duty - determined in the government decree on extra profit tax – will be raised to statutory level from 1 August 2023.

The amendment clarifies the cases which do not qualified as a customs shortage with effect from the day after the announcement of the regulation. It also considers the cancellation of an export declaration prior to the release of the goods as a legitimate behavior of the customer and exempts it from customs administrative penalties.

 

Tax procedure rules

By the amendment from the 31st day after the announcement of the regulation, the conditional tax assessment could be also initiated for type contracts in future. The legislation also sets the fee for the initiation of a conditional tax assessment (HUF 10 million for a type contract, HUF 8 million for other contracts, and HUF 12 million for an application under the emergency procedure).

From 1 January 2024, as regards the annual vehicle tax, the amendment reduces both the administrative burden for taxpayers and the tax administration by modifying the payment deadline (15th April is the new deadline), thus the payment obligation should be performed once instead of twice. The legislation allows a five-monthly instalment payment of the annual vehicle tax liability for the current year, upon request by the individual taxpayer, if the request is submitted by 30th June of the current year.

Under the amendment, the Tax Authority extends the automatic instalment facility to legal entities, and upon request, the Tax Authority will be able to authorize one instalment payment of up to six months per year, free of surcharges, for tax debts of up to HUF 1 million registered by the taxpayer. This comes into effect after 90 days from the announcement of the modification.

In order to reduce the possibility of tax evasion and to improve the white economic environment, the amendment will reduce the period for monitoring the failure to file a return from 365 days to 180days which come into effect 60 days after the announcement of the amendment. It is proposed that in the future the Tax Authority will cancel the tax number if the taxpayer fails to comply with the obligation to submit ESPL to Tax Authority or to submit a monthly tax and contribution return within 180 days of the statutory deadline, despite the request of the Tax Authority.

The amendment will also re-regulate the requirement to submit data supplement regarding the change request form. Currently there is no guarantee that the Tax Authority notifies the taxpayer in case of any missing data on the change request form, thus the Tax Authority with levy up penalty immediately. By the amendment the Tax Authority should request the missing data from the taxpayer in case of the submission of a non-compliant change request form. The rules come into effect the day after the announcement of the modification.

From 1 November 2023 under the amendment, a taxpayer will remain in “free of public debt database” if the debt is less than HUF 30,000 or if the net tax liability does not exceed HUF 5.000. The change could be a particular assistance to taxpayers, who have a certificate relating to family allowances or are claiming various allowances.

According to the amendment, the day after the announcement of the modification the criteria for determining a reliable taxpayer will be clarified. The Tax Authority will not take into account in the qualification process the enforcement requests that do not exceed HUF 100,000. The amendment also clarifies the situation where individual members of a VAT or CIT group or the VAT / CIT group itself cannot be granted a reliable taxpayer classification, even though all members will be entitled to do so without the group being formed. The modification also eliminates anomalies for taxpayers carrying out holding activities.

 

Accounting

From 1 January 2024, the amendment will supplement the rules on reporting corporate tax information under the Accounting Act, which currently requires the report and, where applicable, a declaration that the report is incomplete, to be published on the entrepreneur's website. In order to comply with EU legislation, this requirement will be supplemented by the addition that the report and the declaration must remain available on the relevant website for at least 5 consecutive years.

The amendment also includes an addition to the transformation rules, according to which Act CXXIV of 2021 on cross-border transformations, mergers, divisions and other legislative amendments to the Act on cross-border transformations, mergers, divisions and other legislative amendments of capital companies for harmonization purposes contains several special provisions - other than those applicable to purely domestic transformations, mergers, divisions - which must be taken into account when performing accounting tasks in cross-border transformations, mergers, divisions. The change of transformation rules will take effect on 1 July 2024.

 

Airline contributions, additional extra profit taxes

Under the amendment, the airline tax will remain unchanged from 1 August 2023. The contribution introduced as an extra profit tax will in future operate as a green tax in line with EU legislation and will therefore be raised from the emergency regulation into statutory level which comes into effect on 1 August 2023.

We also wrote about the airline levy in our previous newsletter: https://vgd.hu/en/news/professional-publications-newsletters/changes-in-hungarian-extra-profit-taxes-in-effect-from-1-march-2023

Please find below our newsletter regarding the changes affecting other extra profit: https://vgd.hu/en/news/professional-publications-newsletters/changes-in-the-extra-profit-tax-rules

 

Transaction tax

From 1 August 2023, all providers who provide payment services, lending and borrowing money, currency exchange and currency exchange intermediation activities, and having a foreign seat or branch, are expected to be subject to the regulation if the customer using the service is resident in Hungary. This amendment extends the scope of foreign persons who will potentially be subject to the transaction tax/securities transaction tax.

14 July, 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.