Innovation contributions 2013

Innovation contributions 2013: who and when shall it pay?

In Act XC of 2003 on innovation contribution the Reasearch and Technology Innovation Fund regulates the tax liability.

1. Who shall and who shall not pay it?

Companies that are classified as small or micro-enterprises shall not pay innovation contribution, so companies that do not classify as small enterprises are obliged to pay innovation contribution. If the company in question is considered to be small or not is decided by its state on the first day of the fiscal year.

In order to specify the classification of a company, the number of employees and the net income or the balance sheet total is necessary. If the operating time of the company is less than one year, the data shall be reviewd at an annual level.

In case of newly founded companies the business plan of the reference year shall be considered, but it shall not be annualized.

The business plan does not include balance sheet total, thus the net income and the number of employees are necessary without annualization. If the taxpayer has an affiliated or partner company, the net income of the last available report of the affiliated or partner company consolidated for the classification and the number of employees shall be summed with the data included in the taxpayer’s business plan.

For the taxpayer’s 2013 classification, the data indicated in the 2011 report shall be determined on an annual basis because the financial year is less than one year.

It means the following:

  • The net income of sales shall be annualized (the net sales data shall be divided by the number of operating days covered by the report and multiplied by the number of days of the given year);
  • There is no need for the number of employees of the given period or the annualization of the balance sheet total referred to in the report.
  • If the taxpayer has an affiliated or partner company, then for the classification the umber of empoloyees and the data of the financial indicator shall be summed.
  • If, as a result, the taxpayer is obliged to pay innovation contribution as a medium enterprise in 2012 – regardless of the fact that the size of the company shall be determined for 2013 as well – it does not lose its medium enterprise classification in 2013, that is the company is not exempted from the requirement of paying innovation contribution.

2. What is the deadline for the payment of innovation contribution?

The contribution shall be paid in advance once in be supplemented to the expected contribution payable for the tax year (advance supplement). The taxpayer subject to contribution supplement shall submit a return until the 20th of the month following the period. The advance contribution shall of the last month of the relevant tax year and pay the liability.

3. The rate and calculation of innovation contribution

The basis of the calculation of contribution is tha same as in case of business tax (the net income less the acquisition value of the goods sold, the value of the intermediary services, the cost of materials, and direct costs of basic research, applied research and experimental development recognized in the relevant tax year).

The rate of contributin in case of small (500-1500million HUF annual income or 10-50 employees), medium and large enterprises (>1500million HUF annual income or >50employees): 0,3 %.

The direct costs of research and development activities conducted in the companies’ own business operations cannot be deducted from the gross amount of the annual innovation contribution as of January 1, 2012. The provision related to reductions has been repealed.