The government decrees published on 21 April 2020 contain numerous other tax relief measures (beyond the rules of employment in reduced working hours) to alleviate the economic effect of coronavirus. Additionally, a new government decree was published on 30 April 2020 which aims at relieving the cap in the Act on Corporate Tax on development reserve set aside in order to encourage investments. In this newsletter we introduce these measures.
Fulfilment of tax obligations
Taxpayers have the possibility to assess, declare and pay corporate income tax, small business tax, energy supplier tax, local business tax and innovation contribution until 30 September 2020 in terms of the mentioned tax burdens due between 22 April 2020 and 30 September 2020.
The same deadline applies for tax advances in terms of the above taxes and contribution (for
which the yearly tax return may be submitted by 30 September) which should be assessed and declared together with the yearly tax return. The amount of the advance shall be assessed based on the advance obligation and the same schedule determined in the last available return (in respect of local business tax this rule may only be applicable if the yearly tax return is not submitted until 15 September 2020) and must pay by the deadline applicable to it.
In case the taxpayer calculates that the amount of the tax or contribution for 2020 will not exceed the amount of the tax or contribution advance, the amount of the advance may be reduced based on the taxpayer’s request which shall be submitted to the tax authority before its due.
Fulfilment of financial reporting obligation
The deadlines for financial statement preparation, publication, filing, disclosure and submission which are due between 22 April 2020 and 30 September 2020 were prolonged until 30 September and the deadline for further obligations based on this financial statement shall be calculated from this day. This rule does not apply for the financial statement of public-interest entities.
Beyond the rules of Act on the Rules of Taxation upon the request of the taxpayer filed no later than the 30th day after the end of the state of emergency the tax authority may grant deferred payment for 6 months (without surcharge) or instalment payment for 12 months (without surcharge) in terms of one tax of no more than HUF 5 million if the taxpayer verifies and presumes in the request that payment difficulties emerged due to the state of emergency. The procedure is duty free and the administration deadline is 15 days of such requests.
Derogated from the Act on the Rules of Taxation tax reduction may be granted for non-natural persons as well. Upon the request of the taxpayer filed no later than the 30th day after the end of the state of emergency the tax authority may reduce the tax debt of the taxpayer once, by no more than 20% and by an amount not exceeding HUF 5 million if the payment of the debt due to reasons attributable to the state of emergency would make it possible to continue the economic activity of the taxpayer. The procedure is duty free and the administration deadline is 15 days for this request as well.
The tax reduction may be requested in terms of only one type of tax and payment facilities according to the above-mentioned rules may not be granted for the remaining amount.
Reliable taxpayer qualification
During the state of emergency and afterward the reliable taxpayer qualification cannot be cancelled upon settlement of tax difference based on failing to fulfil its tax obligations due during the state of emergency and within 30 days thereafter.
Furthermore, in the case of a qualification carried out during this period and afterward the reliable taxpayer status cannot be cancelled with reference to a tax execution procedure started during the state of emergency and within 30 days thereafter, furthermore in case of a net tax debt exceeding HUF 500.000 or a negative tax capacity in the current year.
Publication of taxpayers having substantial tax deficiency or tax debt
During the publication the tax- and customs authority will ignore the amount of the tax deficiency and other sanctions connected to it, determined as a consequence of breach of tax liability during the state of emergency and within 30 days thereafter, furthermore the amount of the tax debt due in this period.
There is no tax payment obligation on guest-nights spent between 22 April 2020 and 31 December 2020, the tax does not have to be collected and paid. However, tax return should be submitted on the assessed, but not collected tax, unless its amount is zero.
Risk guarantee should not be provided during the state of emergency and within 30 days thereafter, furthermore the tax authority ex officio arranges the transfer of the risk guarantee paid before 22 April 2020, and forwards its consent which is necessary to the termination of the guarantee to the bank.
Small taxpayers itemized lumpsum tax (KATA)
KATA taxpayers in full-time employment are still considered insured during the period of such legal status, but the base for calculation of the benefits under Act on Social Contribution and Act on Job Assistance and Unemployment Benefits will be increased to HUF 102.000, or to HUF 170.000, if paying the higher level of tax. These rules enter into force on 1 July 2020.
Small business tax (KIVA)
From 1 January 2021 the applicable tax rate will be decreased to 11% of the tax base.
Encouraging investments by relieving the cap on development reserve
Contrary to the provisions of point f) of Section 7. (1) of the Act on Corporate Income tax, the tax base may be decreased by the amount of the retained earnings that is transferred into tied-up provisions during the tax year and shown as tied up on the last day of the tax year, which exceeds neither the amount of the pre-tax profit, nor 10 billion forints. (According to the former prescriptions of CIT Act, the development reserve could be created at up to 50% of the pre-tax profit).
The new regulation may be used for the tax year including 30 April 2020, but taxpayers can opt for applying the rules for 2019 as well from 15 May 2020. In order to do that, if the annual report prepared for 2019 was already accepted before 1 May 2020, the tied-up reserve shall be created based on the rules of accounting revision. In this case the tied-up created from retained earnings will be shown in the annual report prepared for 2020. If the amount qualifies as significant, it shall be indicated in the middle column of the annual report of 2020.
If the corporate income tax return has been submitted before 1 May 2020 in respect of tax year 2019, but taxpayer would like to apply the preferential option of development reserve for the 2019’s tax year, the tax return shall be self-revised until 30 September 2020.
This document can be downloaded in PDF format by clicking on this link: Economic rescue package 4