Corporate Income Tax Changes in 2014

Changes in tax benefits:

1. Subsidy to prominent team sports:
The scope of beneficiaries of complementary sports development subsidy has changed: now it can be provided not only to the national sport federation, but also to the organization which has received the basic subsidy. In order to make use of a tax concession, the complementary sports development subsidy should also be transferred and report is to the NAV (National Tax and Customs Administration of Hungary).
If the complementary sports development subsidy is not transferred to a sport federation, it is advisable to send them the contract thereon not to expect this amount (this is not mandatory).
Change in tax benefit: instead of +3 years the tax benefit can be made use of in the sixth calendar year following the calendar year when the subsidy was provided.
It is applicable to subsidies provided after the date of entry into force.

2. By analogy to the subsidy provided to prominent team sports, complementary subsidy shall be applied here as well from 2014 and the tax holiday period will also be extended here.
Complementary subsidy can be provided to Magyar Nemzeti Filmalap Közhasznú Nonprofit Zrt. (Hungarian National Film Fund Nonprofit Private Limited Company) or to those receiving a basic subsidy. It is applicable to subsidies provided after December 31, 2013.
Difference from the subsidy provided to prominent team sports is that the tax concession is not conditional on reporting it to NAV.

3. Rebate after loan interest of SME investments:
From 2014 the rate of the tax concession will increase: 60% of the interest paid in the tax year (maximum HUF 6,000,000, and maximum 70% of the calculated tax) from the previous 40%. It is applicable to credit agreements concluded from 2014.

Changes in the tax base concessions:

1. SME investment tax base deductions:
From 2014 this benefit can be also used for software products and intellectual property which have not been put into service before. These software products should be reported as rights representing assets instead of intellectual property. The rate of the benefit has not changed.

2. Division of R&D relief among the members of a group of companies:
The taxpayer may reduce the pre-tax results with the direct cost of the R&D activities of their related undertaking subject to corporate income tax, carried out in their respective field of activity, which cost has not been validated yet by the related undertaking and in case the R&D activities are related to the activity of the taxpayer and the related undertaking. To do this, a statement is required from the related undertaking including the sum of the direct R&D costs and the amount the taxpayer may use. Information about this must be included in the corporate income tax return.

3. Correction and self-revision of no significant amount of error:
It is no need to increase the corporate tax base and apply the provision for self-revision if the taxpayer observes a no significant amount of error in the return of the tax year of the disclosure. In this case, the no significant amount of error will be accounted for in the year of disclosure, it does not constitute an addition to the tax base and it is no need to self-revise retroactively the tax year in which the error was found. This is applicable only if the tax base of the year of no significant error is bigger than the amount of the no significant error.
It is optional to choose that the return of the previous tax year is self-revised and the no significant amount of error will be an addition to the tax base in the year of disclosure.

4. Recognized costr in the tax base:
Restaurant service, if the taxpayer pays with a company credit or debit card, is eligible and constitute a recognized cost in the corporate income tax even if there is no invoice of it only a receipt, provided that the service was made use of for representation purpose.

5. Deferral of losses at acquisitions:
The following passage is added to the rule for deferral of losses: at acquisition the successor can validate the losses resulted at the predecessor first in the tax year of the acquisition as a deduction to the tax base.

6. Changes in transfer pricing regulations:
From 2014 tax base adjustments between affiliated undertakings due to application other than the usual market price shall be applied in the following cases as well:
– if the provider of in-kind contribution gains a majority interest or in the raising of shared capital the provider of in-kind contribution has majority influence;
– if the increase in capital is not made with cash contribution.

Other changes:

1. Changes related to nonprofit organizations:
Nonprofit organizations should determine the corporate income tax base according to the general rules in the tax year when their business-related income reaches 60% of the total income.

2. Changes in reported share:
By decision of the taxpayer, the acquisition of at least 10% share can be registered within 75 days of the acquisition. Previously, it related to the acquisition of at least 30% share and the deadline was 60 days.

3. Company with real-estate property:
From 2014 the term will change under which instead of the market value of the assets shown in the financial statements the book value of balance sheet date shall be examined when determining the value of a domestic real estate. A company is classified as a company with real estate property if the value of the domestic real estate is more than 75% of the value of the total asset.