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Hungary allowed to raise VAT exemption threshold

A derogation approved by EU finance ministers at a meeting in Luxembourg on Tuesday allows Hungary to raise the annual revenue threshold for VAT exemption for small businesses from HUF 8 million to HUF 12 mln from next year, Minister of Finance Mihály Varga said Tuesday, as reported by national news agency MTI.

More than 600,000 businesses would benefit from the measure, Varga said. He noted that the government had raised the annual revenue threshold for the itemized tax for small businesses, known by its Hungarian acronym of "KATA," from HUF 6 mln to HUF 12 mln from the start of 2017.

Businesses that opt for KATA pay a flat monthly HUF 50,000, instead of corporate or payroll tax.

The derogation decided on at the EU’s Ecofin meeting authorizes Hungary to exempt from VAT taxable persons whose annual turnover is no higher than the equivalent in national currency of EUR 48,000 at the conversion rate of its accession.

Ecofin also decided at the meeting on a derogation authorizing Hungary to limit to 50% the right to deduct VAT on expenditure related to passenger cars not wholly used for business purposes.