Colling Accounting: Tax Changes In Hungary For 2020 - 21

  • 10 Mar 2020 1:58 PM
Colling Accounting: Tax Changes In Hungary For 2020 - 21
Value Added Tax: As of 1 January 2020, it is possible (as part of the self-check) to retroactively decrease the tax base as bad debt claims. In these cases, the tax base can be decreased in retrospect by the net value of the bad debt.

The regulation is in effect for claims classified as bad debt by the law, and whose delivery date according to the invoice falls after 31 December 2015.

Also from 1 January 2020, the tax rate related to commercial accommodation provision will decrease from the current 18% to 5%.

According to the amendment entered into the law, the condition for tax exemption of intra-community sales is that the buyer taxable person informs the invoice issuer of their Community tax number, and that the issuer reports the intra-community sales (service) in a summarized statement. In case the statement has mistakes or is incomplete, the breach is excusable.

Customer stocks

If the company stores a “customer stock” in a customer warehouse in a member state different from its seat for more than a year, they must adhere to the VAT registration and VAT payment obligations in that member state.

According to the transitional regulation, in case of products stored in Hungary in customer stocks by foreign taxable entities, the legal effects of intra-community sales of goods are guaranteed to take effect by 31 December 2020, and with it the obligations mentioned beforehand.

The fines related to EKAER control are also rising, and from January 2020, the data of EKAER reports might be modified once after closure, within 3 working days of the deadline’s expiration, but the latest before the initiation of the tax authority check related to it, for a fee of HUF 10 thousand per data.

Personal Income Tax

In case of mothers caring for four or more children, the reduction is applicable for adult (but still living in the same household without their own income) children. In case of biological and adoptive mothers, there is a complete tax exemption for the income related to their consolidated tax base in a way that they are still entitled to the family reductions in contributions for their children.

Social contribution tax, social-security contribution

According to the transitional provision, the paid dividends and the income extracted from the companies in corporations subject to the Simplified Entrepreneurial Tax will be exempt from the obligation of paying social contribution tax from 1 January 2019.

As of 1 July 2020, the contribution deducted from the gross income of employees will be consolidated (10 percent pension contribution, 7 percent healthcare contribution and 1.5 percent labor market contribution). The name of the new contribution is called social-security contribution, its rate will be 18.5 percent.

The income acting as a base for contribution will be exhaustively listed based on each of the income types. The consolidation is also related to the validation of family reductions, the portion unusable in the personal income tax can still be utilized from the social-security contribution.

Following 1 July 2020, every working pensioner is entitled to exemption from contribution. Currently, only the ones in employment are affected by the favorable regulation that only charges 15 percent of personal income tax for their income.

The rate of the social contribution tax will be reduced to 17.5%. With this modification, it is not only the tax burden of incomes, but also of the compensations provided besides the income and the cost of representation that decreases.

The rate of the simplified contribution to public revenues (ekho) for the employer and the payer will be reduced to 17.5% in accordance with the social contribution tax.

The rules for calculating the consolidated tax base are also changing: if the private individual is obliged to pay a social contribution tax after a certain income, then 85% of their income is to be taken into consideration as tax base (instead of 84% earlier).

The monthly sum of the healthcare contribution is increased to HUF 7,710 (HUF 257 per day) as of 1 January 2020.

Corporate Tax
As of 2020, the investment threshold for claiming applicable tax discounts related to small and medium-sized enterprises will be reduced to HUF 300 million for small-sized enterprises and HUF 400 million for medium-sized enterprises.

The investment threshold will continue to decrease gradually also in the coming years. As a result of the gradual decrease, by 2023, the medium-sized enterprises only need to execute an investment of HUF 100 million, the small-sized enterprises an investment of HUF 50 million to be entitled to the investment tax discount.

KATA and KIVA

The basis of benefits for small taxpayers will also increase, as the part of individual contributions is raised. As of 1 July 2019, the base of the financial contributions utilized by the KATA taxpayer (e.g. GYED, sick pay) are unchanged with the same tax paying obligations:
* With an itemized lump sum tax of HUF 50 thousand, it is HUF 98,100
* With an itemized lump sum tax of HUF 75 thousand, it is HUF 164,000

The rate of small enterprise tax will be reduced to 12% as of 1 January 2020.

Local taxes

The obligation for replenishment of business tax advances is not cancelled, its deadline remains 20 December of the reference year.

As of 1 January 2020, the local business tax return will only be available through NAV in case of a correct return calculation.

The conditional tax exemption of building and property tax is extended to non-profit organizations acting as asset managers, having usufruct or right of use.

Innovation contribution

The tax advance supplementation obligation is also cancelled for innovation contribution, which taxpayers were also not required to fulfill in December 2019.

Advertisement tax

The rate of advertisement tax will temporarily decrease from 1 July 2019, to 0% by 31 December 2022 (7.5% before 30 June 2019). This also means that the registration and tax report obligations are not required to be fulfilled by taxpayers under the effects of the law.

Related to the taxable year including 1 July 2019, the payable tax must be calculated at a pro rata basis from the tax obligation for the time period before 1 July.

Exemptions from financial transactional fees

The executed payment transactions between the payment accounts of natural persons and the accounts kept by the treasury for sovereign bond distribution are also exempted from financial transactional fees.

The cheque payments at post offices are also exempted up to HUF 20 thousand, above this amount, HUF 6,000 will be the maximum fee.

Energy efficiency investments

The cost-accounting rules for energy efficiency investments are modified favorably. In the future, fixed assets and immaterial things may both be accounted for as cost that help in reaching a higher energy efficiency class.

The previous provision was stricter, the corporate income tax law considered exclusively the cost and increase of fixed assets in value and immaterial products directly related to reaching the energy efficiency level as accountable expenses.

Transfer price rules


As of 1 January 2020, it is required to apply transfer price rules if the capital increase in kind in performed by an individual who did not possess majority influence in the receiving company before the contribution, but gains majority influence after the contribution. 

The amendment also prescribes the application of transfer price rules in the case of capital gains after repurchasing treasury stocks, and transfer without reimbursements.

The accountability of projects get simpler

A primary goal of modifying the accounting law is to align the union and local funded projects’ accountability rules to practical demands, and moving the local regulations closer to the international (IFRS-based) regulations.

The Civil Code, its permissive rules related to contracts and the accounting law, primarily its regulations regarding revenue calculation based on invoicing, altogether cause insecurity in the case of the accounting calculations of incomes and costs, expenses for contracts (projects) executed through several fiscal years.

The amendment aligns the revenue calculations and the cost and expense calculations through applying accruals according to the effective performance, independently of invoicing, and its methods.

In accordance with the modifications related to the contract’s accounting unison, it will be clear that provisions can be formed to future losses related to the effectively contracted, disadvantageous contracts.

Single-day holidays and transferred working days in 2020.

Working Saturdays in 2020:
29 August, working Saturday
12 December, working Saturday

3-day-long weekends in 2020
1-3 May
30 May – 1 June
23-25 October

4-day-long weekends in 2020
10-13 April (Easter)
19-23 August
24-27 December (Christmas)

Single-day holidays and holidays in 2020
15 March, Sunday
10 April, Friday
13 April, Monday
1 May, Friday
1 June, Monday
20 August, Thursday
21 August, Friday
23 October, Friday
1 November, Sunday
24 December, Thursday
25 December, Friday

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1134 Budapest, Váci út 49. DC Office Building, I. floor
+36 1 452 6900

 

 

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