Taxpayers allocated to the agricultural sector may reduce – through self-revision – the profit of the two tax years preceding the current tax year with the accrued loss incurred in the current tax year, but maximum by 30% of the pre-tax profit by tax year.

Legal successor companies may recognise the loss taken over from the legal predecessor through transformation only in cases existing under certain circumstances:

• such member obtains direct or indirect majority control which or the related company of which used to have such control in the legal predecessor on the day preceding the day of transformation, and
• the legal successor company in the two tax years following the transformation earns income or obtains revenues from at least one activity pursued by the legal predecessor.

If such taxpayer obtains direct or indirect majority control that in the two tax years preceding the acquisition of such control had not had continuous business relationship with the taxpayer or its legal predecessor, it shall not be entitled to release the accrued loss incurred in the tax year or in any other tax year preceding that, except, if

• at least part of the shares issued by the company obtaining majority control has already been admitted to a regulated market stipulated in the Act on Capital Markets, or
• the company obtaining majority control continues its activity in the next two tax years following the acquisition of the majority control and the nature thereof does not materially differ from that pursued prior to the acquisition of the majority control and realises income/revenues therefrom in both tax years.

Additional changes impacting the tax base:

• New depreciation rate applicable to residential buildings constructed for the employees as tenement flats: the employer may recognise a depreciation of 6%,
• Upon transformation the depreciation of goodwill does not have to be deemed recognised,
• R&D costs
• R&D activity performed by the taxpayer’s own assets and employees to its own benefit and risk, if the result thereof is utilised by the taxpayer,
• the R&D activity performed by taxpayer using its own assets and employees at the order of another taxpayer,
• R&D direct cost notion performed within the own sphere of activity
• The notion of registered participation will change, according to which no announcement is to be made if only the value of the participation increases rather than percentage rate thereof. The date of acquisition of participation has been also stipulated. The deadline for registration shall be 60 days (instead of 30) following the acquisition.

Recognised costs, expenditures:

• benefits recognised under the title of entertainment, business gift,
• aids granted in the tax year under the title of donation, if the taxpayer has the appropriate certificate
• assumed chamber membership fee, if it is related to mandatory chamber membership,
• granting of non-refundable aids, if the disbursement took place on a legal basis,
• the amount stated in the aid certificate received on the sponsoring of spectacle team sports.

Unrecognisable costs

• aids granted not as donation (not film, not performing artist organisation, not spectacle team sports)
• direct costs of research and development activity if that is not connected to the taxpayer’s entrepreneurial, revenue earning activity,
• consideration paid to controlled foreign companies, if the taxpayer fails to demonstrate that it serves the business activity (separate registers are to be kept by contracts).

Additional changes modifying the tax base:

• rule applicable to undercapitalisation: the pre-tax profit will be increased by
• the interest recognised in the tax year as expenditure, accounted for as part of the cost value of assets proportionate to the part of the liability (expect the outstanding liabilities to financial institutions) exceeding threefold the equity
• the amount, connected to the liability (expect the outstanding liabilities to financial institutions) recognised as an item reducing the pre-tax profit

• In the case of related party transactions the increasing/decreasing item shall not be applicable to transactions between the foreign business site of resident taxpayers and its related company, if the resident taxpayer modifies its corporate tax base – pursuant to the provisions of an international contract – to eliminate the revenues taxable abroad. The rule shall be applicable to transactions between the foreign business site and the taxpayer.

• Dividends received shall not be deemed dividends if the payer accounts for it as expenditures. Temporary provision (even in the case of waiving dividends approved between 2007 and 2009, but not paid in related company relationship decreasing revenues, not increasing expenditures).

• The repurchased participation is a decreasing item which is subject to abrogation.

• Corporation tax paid abroad shall not increase the tax base.

Changes in tax allowances as of 2012:

• The investment allowance is not available as of 2012.
• Based on a temporary provision no entitlement can be obtained for the 10% and 15% tax allowance related to the R&D direct wage costs and the wage of software developers, respectively
• The development tax allowance:
• in case of capital construction exceeding the value of EUR 100 million shall be authorised by the government,
• the application is to be submitted to the minister responsible for the fiscal policy,
• the increase of the employee headcount and their wage costs is to be calculated net of the employees employed at foreign business sites,
• Utilisation up to 100% of the tax is cancelled.

Transition:
• For capital constructions that had commenced before 1 October 2008 and were deployed between 1 January 2009 and 31 December 2010 the headcount and the wage cost base (3-year average)
• and the 10% and 15% tax allowance applicable to wages costs recognised until 31 December 2011 can be used for the last time in respect of the tax applicable to the tax base of year 2014."

Source: Colling Accounting & Consulting Ltd.
Address: 1138 Budapest, Váci út 141.
Danubius II. Office Building, III. floor
(Enter: Babér street)
Phone: +36 1 452 6900
Fax: +36 1 452 6910