Tax Changes 2019/2020
Value Added Tax
- The VAT rate for commercial accommodation services is reduced from 18% to 5%.
- Rules applying to customer inventory will be modified. The essence of customer inventory is that the seller of the goods can maintain an inventory in another Member State and serve the local customer without registering as a taxable entity and charging the local VAT. The relevant rules have been unified by the Directive 2018/1910 of the Council, and at the same time the Hungarian rules are also clarified:
o goods cannot be held in the customer inventory for longer than 12 months (until then the selling in the EU has to be reported, and after that it will only be possible to sell the goods to the customer charging the Hungarian VAT).
o During the 12 month period the goods can also be sent back or the customer can also be replaced by another customer.
- In the case of chain transactions in accordance with the law the general rule is that goods supplies with shipping are deemed goods supplies to the intermediate entity.
- The new regulations define that this presumption can only be rebutted if the intermediate entity informs their seller on the tax number that they were given in the Member State of origin.
- The seller can subsequently reduce the tax base in case the receivables of the invoice are considered non-collectable as follows:
o during the liquidation or execution process which has been going on for at least two years there has been no demonstrated collateral or
o the creditor released the claim in the context of settlement agreement.
The provision applies only to unrelated parties for transactions performed at least one year prior to the subsequent VAT reduction (but after 31st December 2015). Further conditions:
o at present the seller and the buyer upon the completion of transaction do not fall within bankruptcy, liquidation or forced cancellation,
o at the time of the original delivery the customer was not listed in the database of entities having large delinquent taxes or tax debts or in the list of those whose tax number was abolished, and the tax authority did not highlight the presumptive tax evasion behaviour of the customer,
o the buyer shall be informed on the tax deduction,
It is absolutely necessary for the product sale in the EU under tax exemption that the buyer should have their community tax number in the country of destination and the seller should include the transaction into the recapitulative statement correctly.
- A special tax refund can be requested from the tax authority not later than half a year before the limitation period is over, provided in no other way can the VAT in the purchase be refunded (for instance the wrongly charged VAT cannot be corrected by the seller because of cessation), and the VAT was originally budgeted.
Personal Income Tax, Contributions
- As of 1st January 2020 the benefit for mothers of four or more children, which provides lifelong exemption from personal income tax on their working income will be introduced. A mother of four or more children is a woman, who is entitled to family allowance as a parent of blood or adoptive parent at present too, or her right to family allowance previously existed for at least 12 years.
Beside wage income and other than self-employment income the tax exemption relates to the following:
o income from self-employment, entrepreneurial dividend base
o income from primary agricultural production
o income from appointed auditing activity
o income from European Parliamentary representation, councillor in local government
o income earned under a contract for work, where the contract was not concluded by the individual as a self-employed entrepreneur
The benefit for mothers of four is enforceable before any other tax base allowance based on the statement of compliance with the terms and conditions. (On this basis the benefit can also be taken into account during the year when the advance tax is deducted).
- The rate of the social security contribution will be decreased to 17.5% from 1st July 2019.
- HUF 7,710/month (HUF 257/day) shall be paid as health service contribution by non-insured private individuals from 1st January 2020 instead of HUF 7,500/month (HUF 250/day) at present.
- The replenishment obligation due until 20 of the last month of the fiscal year will be ceased (yet who would apply it as tax offering can do so, provided it is separately announced, but top-up is not compulsory for the fiscal year starting in 2019).
- The rules concerning the group corporate tax status will be clarified:
o the law clarifies that the direct and indirect voting right of close relatives shall be added together when the 75% voting right is counted (e.g. if only the husband owns one company and only the wife owns the other, both companies may join the group);
o members of the group need not provide data directly to the Hungarian Tax Authority but only to the group’s representative, who will transmit it to the Hungarian Tax Authority under the corporate income tax returns (the representative of the group will make a statement about the expected taxes on behalf of the group member);
o newly founded companies can become group members with the permission of the Hungarian Tax Authority;
o the tasks related to the corporate tax offers will be settled if the membership is ceased as well as the way of penalty repayment of benefits related to development reserves and intangible assets if the company which joined the group fails to meet the conditions.
- The tax benefit limits for investment by small and medium-sized companies will be decreased.
- The asset management foundations as new legal forms will appear as taxable entities in the act on corporate tax.
- Following the Directive of the Council of Europe aimed at preventing evasion the law introduces among others the concept of structured arrangement, hybrid entity and permanent establishment of tax-payer other than self-employed, and special provisions will be applied related to capital withdrawal.
- In case of contributions in kind the transfer pricing rules shall be applied not only to the member who has a majority interest but also to the member who acquires a majority interest through the contribution in kind.
Special Tax Payment Forms
- EVA (Simplified Entrepreneurial Tax) is to be discontinued from 2020,
- The rate of KIVA (Tax on small enterprises) will be decreased from 13% to 12% from 2020. This form of taxation can still evoke the social contribution tax, the vocational contribution and the corporate tax. The tax base will not be changed: on the one hand it is the wage, on the other hand the owners’ profit.
Other Tax Types
- The rate of advertisement tax will be uniformly decreased to 0% from 1st July 2019 until 31st December 2022 (during this period neither the announcement nor the declaration obligation shall be fulfilled). Only half of the advance tax for 2019 has to be paid until 20th July or 20th October.
- In relation to local business tax
o the obligation of supplementary advance tax payment (replenishment) will still be liable,
o in case of failure the returns electronically submitted to the Hungarian Tax Authority will not be transmitted to the municipality by the Hungarian Tax Authority from 1st January 2020, but the taxable entity shall be called on to make a correction,
o the announcement obligation will be ceased in case the taxpayer has announced the information on the local business tax establishment as well as the fiscal representation. In this case the Hungarian Tax Authority will automatically transmit this information to the proper local government.
- The obligation of replenishment will also be ceased in relation to innovation contribution. The advance paid until 20th of the month following the quarter shall be supplemented to the amount of the annual tax until the last day of the fifth month of the next tax year (and the refund of the surplus can be required from this time). This rule can be applied to the fiscal year starting in 2019.
- The excise tax of cigarettes as of 2020 or 2021, respectively will be gradually increased to the level of the EU minimum tax. Simultaneously the excise tax on tobacco consumption will also be increased.