2023 Tax Changes: Fall Package Submitted
Mónika Józsa, senior manager, Andersen
Though it modifies several tax provisions, the fall package does not bring fundamental changes. If adopted, the simplified tax administration for small entrepreneurs, stricter transfer tax rules for related party real estate transactions, and a reporting obligation for large companies regarding corporate income tax information are expected to be introduced next year. The reintroduction of the advertising tax, however, would be postponed.
These are some of the most significant changes in the draft bill submitted to Parliament on October 18.
Corporate income taxation
By amending the Accounting Act, Hungary would implement the provisions of an EU directive obliging certain businesses to prepare and disclose a report containing corporate tax information. This should be published and deposited simultaneously with the annual (consolidated) statement and displayed on the company’s website. An auditor would be required to declare the fulfillment of the disclosure obligation.
Corporate income tax law amendments would clarify the provisions concerning the termination of corporate tax groups, define new utilization rules for accrued but not used tax losses incurred in 2014 or before, and provide additional benefits for trusts and asset management foundations. Tax allowance rules related to installing electric charging stations would also change.
For smaller enterprises, each municipality’s local business tax base would be determined as a fixed amount, differentiated into bands, depending on income. Concerning transfer pricing (TP) adjustments, a new rule would make it possible for the party that did not account for the consideration of a related party transaction as an item belonging to the local business tax base and thus did not have to increase its tax base with it when making TP adjustments (e.g., as a service purchased), to still issue a TP declaration necessary to reduce its partner’s tax base.
From 2023, flat rate taxation of entrepreneurs could be chosen regardless of the amount of revenue earned in the tax year preceding the year in question. In addition, if the right to flat-rate taxation ceases, the period after which the regime can be chosen again would be reduced from four years to 12 months. Flat rate taxpayers’ obligations to report monthly social security contributions would be replaced by a duty to report quarterly.
New real estate would not only be created by it first being put into use but also when the function and purpose of the property changes. This means that the sale of real estate would be subject to VAT when its function and purpose changes, if two years have not yet passed since the issuance of the official certificate confirming this.
Application of the preferential 5% VAT rate for the sale of new residential property will be extended until December 31, 2024 (if certain conditions are met, until December 31, 2028).
Construction and installation services would be subject to reverse taxation not only if a construction permit or asimple notification of the construction authority is required for the work but also if the project is subject to other official permits or notifications.
As a further step in whitening the economy and also taking into consideration aspects of environmental awareness, the proposal would prepare the introduction of e-receipts by extending the obligation to report receipt data to cases where the receipt is issued (even electronically) by using a technical solution approved by the relevant authority other than a cash register.
Ad tax, Transfer Tax
The bill would extend the deadline for applying the 0% advertising tax rate until December 31, 2023. Practically no advertising tax will have to be paid until this date.
Stricter requirements would be imposed for the tax-free real estate transfer between affiliated companies. Such transfers would only be tax-free if at least 50% of the net sales revenue of the previous tax year of the acquirer came from the leasing or operation of its own or leased real estate or from the sale of its real estate. The acquirer should declare this before the transfer tax payment order becomes final. Non-fulfillment of the conditions should be reported to the tax authority; in such cases, 150% of unpaid transfer tax would be levied. If the acquirer does not comply with the reporting obligation, the tax authority will impose double the unpaid tax.
This article was first published in the Budapest Business Journal print issue of November 7, 2022.
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