The legislation containing the summer tax package was enacted on 14 July 2023, it is the Act LIX of 2023 on the airlines’ contribution and the modification of certain tax legislation. The legislation does not contain significant new changes, for the most part it only elevates the rules already introduced via emergency government decrees to the level of legislation.
Extra profit taxes
The retail sector’s tax is raised from 4.1% to 4.5% in the highest category, and this new rate shall be already applied for the calculation of the tax advance for 2024.
The extra profit tax of the credit institutions and financial services is prolonged for 2024, too, with significant changes in its methodology. In 2024 the base of the tax is the profit before tax reported in the 2022 financial statement, reduced by revenues from dividends and profits obtained through non-ordinary activities. The tax base is elevated by the banking tax, transaction fee and extra profit tax included in the 2022 results. The rate of the extra profit tax is 13% for the part of the tax base not exceeding HUF 20 Billion, and 30% above. The tax liability may be reduced if the daily average stock of Hungarian government bonds held by the taxpayer is increased between January-November 2024, compared to the stock held during January-April 2023. The rate of the reduction is 10% of the stock increase, up to the maximum of 50% of the tax liability.
The extra tax on the pharmaceutical sector is extended for 2024 in case of both the producers and the distributors. However, the rate of the tax in 2024 is reduced to 50% of the previous rate with respect to producer companies. The tax rate of distributors is increased from 28% to 40% in case of medicine with a producer price exceeding HUF 10,000, and this increased rate is already applicable for the calculation of the tax payable until 20 July 2023.
The tax package elevates the rules of the extra profit taxes introduced previously via government decrees to the level of legislation with unchanged content in case of the airlines’ contribution, the income tax of energy suppliers, and the rules of transaction fees, public health product tax and excise tax. Insurance and telecommunication taxes are also extended for 2024 with unchanged content.
Personal Income Tax
The tax package elevates the rules previously introduced via government decree to the level of legislation with unchanged content regarding the benefit of mothers under 30 years, and the additional family tax benefit for those dependents who are with long-term illness or are severely disabled.
Likewise, the rule that raises the amount of cost reimbursement for going to work by one’s own car from HUF 15 to HUF 30 per kilometer is elevated from government decree to legislation.
In case of the SZÉP card the benefit is elevated to the level of legislation that employers may provide their employees between 1 August and 31 December 2023 with a one-time additional allowance up to a maximum of HUF 200,000 as a non-wage benefit, which is not included in the yearly recreation amount and there is no need to calculate it proportionately for the tax year.
If the income which is falls into the category of other income based on the Act on personal income tax is provided by a disburser entity, then the tax shall be determined by the disburser in line with the Act on the rules of taxation on a monthly basis and reports and pays it until the 12th day of the following month, unless the disburser is not obliged to determine the tax advance.
In case of income from crypto transactions the losses may be considered in the person’s tax return even if the person had no revenues from crypto transactions in the given year.
Social Tax
There is a significant change in case of individuals who are deemed to be foreign based on the rules of Act CXXII of 2019 on Entitlements to Social Security Benefits and on Funding These Services, that income provided to them as non-wage benefits and specific defined benefits is no longer exempted from social tax liability.
Employees who are citizens of third countries may not be deemed as employees entering the labour market, and thus no social tax benefit may be applied due to their employment.
At the same time, the social tax benefit for employing persons with disabilities is extended to employees receiving disability support or personal allowance for blind people.
As of 1 July 2023 the majority of community investments and savings is charged with social tax, meaning that in addition to the 15% personal income tax 13% of social tax is also payable on them. Such income types are for example:
interest received for deposits at credit institutions, and interests on deposits fixed after 30 June;
interest, yield, income from redemption received with respect to publicly introduced and traded securities, in case it was purchased after 1 July 2023.
It should be noted that social tax liability on these income types is not capped. However, income of persons who are insured in another EU country or a third country is exempted from the social tax liability.
Corporate Income Tax
the final deadline of 31 December 2030 is abolished in case of deducting those losses carried forward which are not yet validated in the tax base and which were generated before the end of 2014.
The ban on deducting advertisement costs is also abolished.
Value-Added Tax
The amendment makes it possible for entrepreneurs residing within the EU to claim back VAT in the course of a VAT refund procedure paid for acquiring real estate in Hungary without registering for VAT in Hungary. The transitional rules of the amendment stipulate that VAT refund can be claimed at the earliest for VAT charged after 31 December 2021.
As of 1 January 2024 the redemption system of products distributed domestically with mandatory redemption charge will be introduced. The products covered by the system is listed in the Government decree 450 of 2023 (X. 4.), which entered into force on 1 November 2023. The tax package contains the VAT-related rules. Distributors are not required to pay VAT on the redemption charge at the time of the sale, but only for those packaging which are not redeemed. The amount of products that were not redeemed shall be determined by the distributors at the end of the calendar year, and the tax payment liability occurs at the same time. The VAT base for not redeemed products is the redemption charge for these products, which is a gross value based on the amendment, and the payable VAT must be determined from above, with 21,26 VAT content. If the amount of redeemed packaging exceed the number of distributed packagings in the given calendar year, then no VAT is payable. However, the distributor is not entitled to claim back VAT based on the surplus.
The tax package also contains explanatory and authorizing provisions connected to electronic receipts.
Local Business Tax
A fixed place of business is generated in case of temporary employment agencies in the territory of a municipality if the termporary workers carry out work activity there for at least 21,000 workhours in total in the given tax year.
Financial transaction fee
The tax package elevates to the level of legislation the obligation of persons with foreign seat or branch office to pay financial transaction fees and security transaction fees. At the same time, the purchase of financial instruments is exempted from the security transaction fee if the owner of the security account is a non-Hungarian tax resident.
Tax Procedure
The conditional tax assessment procedure becomes available with respect to type contracts. The fee of the conditional tax assessment procedure is HUF 10 Million in case of type contracts, and it is HUF 12 Million in urgency procedure.
The fee of the arm’s length price assessment procedure is raised to HUF 8 Million in case of unilateral procedures, and to HUF 12 Million in case of bilateral or multilateral procedures.
An automatic instalment payment benefit becomes available to legal persons, too, so once a year they can request a maximum 6-month instalment payment in case of a maximum of HUF 1 Million tax liability.
If the power of attorney is declared by the client then this declaration itself may serve as the authorization, if it contains a clear statement and the extent of the authorization granted. In such cases it is not necessary to submit a separate power of attorney form with the declaration.
The Tax Authority may cancel the ta number if the taxpayer does not comply with the VAT summary statement submission obligation or tax reporting obligation within 180 days of the original reporting deadline despite receiving a notice from the Tax Authority.