We will cover the topics below at our MGI-BPO Tax Conference on 9 December 2022, after which we will send the tax law changes in writing to our Clients.
In the meantime, here is a brief overview of the changes:
Tax procedures, small business tax (SBT)
The SBT rate for 2023 remains 10% as set for 2022.
From 2023, companies that relocate their place of business/assets/activities outside Hungary will no longer be subject to SBT and would have to apply a tax base adjustment under the Hungarian Corporate Tax Act.
From 2023, the Hungarian establishment (branch) of a foreign-based company will also have to pay innovation contribution. The tax rate will remain unchanged: 0.3%.
There are four cases when the Hungarian authority may close a business:
– in the case of undeclared work,
– distribution of goods of uncertified origin,
– failure to issue invoices or receipts, and
– failure to comply with the obligation to use and operate a cash register.
Cash register-related infringements:
In the case of repeated infringements, closure of the business has so far been mandatory in all four cases. However, since cash register-related infringements include both budget-damaging (e.g. cash register manipulation) and administrative (e.g. small cash register discrepancies, misspelling) infringements, from 27 August 2022 the inspector may decide that there is no reason to impose a mandatory closure of business even in the case of repeated infringements.
As data is primarily provided electronically in the case of a tax authority inspection, the investigation is based on communication and the data sent. So not only can investigations be carried out by a department of the local Hungarian tax authority, but they can also be outsourced to other areas.
Local business tax
A new, simplified tax base will enter into force from 1 January 2023. A company can use this method if its annual revenue (net turnover or net turnover according to PIT/ fixed rate tax of low tax-bracket enterprises) does not exceed:
- 25 million HUF,
- or 120 million HUF if it carries out only retail trade activities as a flat-rate taxpayer as defined in the Hungarian Personal Income Tax Act.
The tax bases are linked to income bands, which are to be understood by registered offices / establishments:
- between HUF 0 – 12 million incomes, the tax base will be HUF 2.5 million,
- between HUF 12 – 18 million incomes, the tax base will be HUF 6 million,
- between HUF 18 – 25 million incomes, the tax base will be HUF 8.5 million.
A retail trader whose turnover does not exceed HUF 120 million can only opt for a tax base of HUF 8.5 million.
The simplified tax base assessment shall be reported to the Hungarian municipalities:
- in a tax return until the last day of the 5th month following the financial year concerned in the case of an enterprise that is operating or starting a taxable activity without a legal predecessor,
- or on a data declaration/change notification form in the case of a business starting its activities (opting for fixed-rate tax of low tax-bracket enterprises or starting a taxable activity in a new establishment during the year).
Businesses whose tax for the tax year concerned is equal to or less than their advance tax and which do not claim back any overpayment do not have to file a tax return.
However, those who choose this method cannot benefit from the various tax exemptions and tax reliefs, so it’s advisable to consider beforehand whether it’s worth opting for it.
If a business opts out of this form of taxation, it cannot choose it for 2 years.
The 0% tax rate being in force so far will remain in force until 31 December 2023. Neither the advertiser nor the taxable person ordering the advertisement is liable to pay advertising tax.
Company car tax
The company car tax increased from 1 July 2022 will continue to apply not only until 31 December 2022 (as published in the summer amendments), but also in 2023.
Value added tax
New real estate (officially known as new real estate under construction or new real estate built) includes real estate created by
- a change of function, i.e. a change of use, or
- a change in the number of units of use.
The sale of a new real estate is always subject to VAT and direct taxation.
The 5% VAT rate on residential property will remain in force for a further 2 years for sales of new and semi-finished dwellings completed before 1 January 2025.
Transitional provision: for the sale of new and semi-finished dwellings, the 5% VAT rate will apply to invoices to be paid between 1 January 2022 and 31 December 2028 if a final building permit has already been issued or a simple notification has been made until 31 December 2024.
Foreign currency invoices
On invoices issued for the supply of goods or services performed in Hungary, the output tax shall also be expressed in HUF at the exchange rate determined in accordance with the rules if the other data are in foreign currency.
Personal income tax (PIT), social security and labor law
Reimbursement of certain expenses related to teleworking:
During the period of the emergency caused by COVID-19 pandemic, Government Decree 487/2020. (XI. 11.) allowed the employers and the employees to derogate from the provisions of Section 196 of the Hungarian Labor Code and thus the activity performed in the framework of home working could be considered as teleworking.
In this context, according to the PIT Act, the amount of the expense reimbursement paid in respect of teleworking, specified in advance by the parties, but not exceeding 10% of the minimum wage per month, is considered as an item eligible as an expense without a certificate.
After the end of the state of emergency (from 1 June 2022), the rules related to teleworking have been incorporated into the relevant laws (Labor Code, Occupational Safety and Health Act, PIT Act), so the amounts paid as expense reimbursement as per above can still be eligible without a certificate.
Teleworking can take place only on the basis of an agreement between the employer and the employee: the agreement shall be included in an employment contract or an amendment to an employment contract.
The following amendment, which have not yet been adopted, will be discussed in early December 2022:
The adoption of the work-life balance directive in Hungarian national law will double the number of days of paternity leave, i.e. the number of working days that men can take off after the birth of their children.
Parents with young children can ask for changes to their place of work or working hours, teleworking or part-time work up to the age of eight of their children to ensure more flexible working conditions.
Informing the employees
Employees should be fully informed of the basic working conditions in a timely manner and in writing that is easily accessible to the employees.
The working conditions shall be communicated to the employees in writing no later than the seventh calendar day after the first working day following the entry into force of the amendment to the Labor Code
- Employers will have to provide more detailed information with shorter deadlines. For example, they shall provide the information on the terms and conditions of employment within 7 days instead of the current 15 and notify the employees of any change no later than the day of the change.
- Working hours can only be changed by collective agreement 48 hours before the start of work at the latest.