With the amendment of the tax administration rules, new allowances have been introduced according to the Hungarian Journal published on April 21, 2020.
Some of the allowances are about deferrals and installment payments, but the most exciting new allowance is perhaps a tax reduction on request.
The tax authority may grant a one-time 6-month deferral or a maximum 12-month installment payment without surcharge. The deadline for processing the application is 15 days; the procedure is free of charge.
The condition for a successful application is that the applicant should prove or make it probable in some way that their difficulty of payment is due to the emergency. It is expected that the stronger the evidence the taxpayer can provide to support the correlation between the consequences of the coronavirus pandemic and the loss of their revenue, the more likely it is that the application will be accepted.
For example, if a sports event organizer is unable to hold their planned event due to a ban on holding events and therefore has to pay the previously paid charges back, there is a good chance that they can claim a 6-month deferral or a 12-month installment payment for their taxes. The allowance can be claimed for up to 30 days after the end of the emergency.
This allowance does not reduce the amount of tax to be paid, only the payment dates can be postponed, or the tax can be paid in installments, but eventually it must be paid.
The other allowance, on the other hand, reduces the amount of tax payable. According to the provision, the tax debt can be reduced by twenty percent, but not more than by five million forints, if the taxpayer can prove, similarly to the rules of installment payment/deferral that payment difficulties have arisen in connection with the emergency. For the remaining 80% tax, no more concession can be claimed, so this allowance cannot be combined with installment payment or tax deferral. It also must be noted that a reduction can only be claimed for one type of tax, so VAT, corporate income tax or social contribution tax debts cannot be combined. You must choose one. The tax authority also decides on this within fifteen days and free of charge. This allowance can be claimed for up to 30 days after the end of the emergency.
Continuing the previous example, the sports event organizer can request a reduction of VAT from HUF 25 million to HUF 20 million.
According to our interpretation, it is not impossible that a taxpayer requests an installment payment or deferral for one tax debt and a reduction for another tax debt.
To return to our example, if the sports event organizer was in a very big trouble, they can request a reduction of VAT from HUF 25 million to HUF 20 million, as well as a 12-month installment payment for the HUF 5 million small business tax payable.
Before applying for the allowances, it is essential that you consult with your accountant or tax advisor and decide together on whether to apply for an allowance and the content of the application.
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