Tax changes after the state of emergency

During the state of emergency there were numerous taxation related measures in the form of government decrees to alleviate the economic damage caused by coronavirus epidemic. We informed you about these measures through newsletters week by week. In this newsletter we would like to draw your attention for those measures which were determined in government decrees and now becomes the part of the tax system as a consequence of publishing them as law in unchanged form or with slight modification. In the second part of the newsletter we inform you about the actual changes in online invoicing.

Special retail tax

According to the new legislation published on 9 June, the special retail tax which was introduced by a government decree during the state of emergency and originally planned to be a temporary tax becomes to be permanent. The special retail tax must be paid with a progressively increasing tax rate by domestic or foreign taxpayers who carry out retail activity and their net revenue exceeds HUF 500 million.

The regulation qualifies as retail activity the activities under NACE codes 45.1 (except for wholesale trade in vehicles and trailers), 45.32., 45.40 (with the exception of wholesale trade and repair services of motorcycles) and 47.1 – 47.9. 

The tax liability applies to the retail activity, and covers all transactions where a domestic or a foreign person or entity carries out retail activity in a business-like manner, including the case, where a foreign-registered person sells goods to its customers via channels other than branch office in Hungary.

The base of the special retail tax is the net revenue (defined in the decree) arising from the retail activity. In certain cases, the net revenues of the related companies shall be aggregated, and progressive tax rate should be applied for this sum to calculate the tax amount. As a result, the related taxable persons bear the calculated tax burden in proportion to the taxable income.

The tax rate is determined as follows:

• 0% on a taxable amount not exceeding HUF 500 million
• 0,1% on a taxable amount in excess of HUF 500 million but not exceeding HUF 30 billion
• 0,4 % on a taxable amount in excess of HUF 30 billion but not exceeding HUF 100 billion
• 2,5 % on a taxable amount in excess of HUF 100 billion

Taxpayers must record and pay tax advances. The filing deadline of the yearly tax return is 31 May and the amount of the tax should be paid by this date (if the tax advance paid earlier is more than the amount of the tax, the difference might be recovered from this date). As the legislation entered into force during the year, it contains special rules for the first taxyear. Those taxpayers who are not obliged to pay tax do not have to file tax return.

Other tax changes in line with the government decrees published during the state of emergency

• While maintaining the HUF 10 billion limit per tax year, development reserve might be created up to the whole amount of the pre-tax profit (instead of 50%). This provision is applicable for tax year 2020 according to the main rule, however, taxpayers may apply it regarding tax year 2019. In this latter case the yearly tax return might be self-revised until 30 September 2020
• The rate of social contribution tax is decreased from 17,5% to 15,5% from 1 July 2020
• In line with decreasing the rate of social contribution tax, as of 1 July 2020 if a private person is obliged to pay the social contribution tax after its income (assuming that it is accountable as expense or it is not recoverable), 87% of the determined income should be considered as income
• The rate of simplified contribution to public revenues is 15,5% as of 1 July 2020
• In case of full-time small taxpayers, the base for calculation of the benefits under Act on Social Contribution and Act on Job Assistance and Unemployment Benefits is increased to HUF 102.000, or to HUF 170.000, if paying the higher level of tax. These rules entered into force on 1 July 2020
• In terms of small business tax, the applicable tax rate will be decreased to 11% of the tax base as of 1 January 2021
• Payment obligation regarding tourism development contribution was suspended originally between 1 March – 30 June 2020 according to the government decree. This suspension is prolonged until 31 December 2020
• As originally planned, 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
• Until the 30th day after the end of the state of emergency the tax authority may grant deferred payment or tax reduction with more favorable conditions if the taxpayer verifies and presumes in the request that payment difficulties emerged due to the state of emergency or if the payment of the debt would make it impossible to continue the economic activity of the taxpayer due to reasons attributable to the state of emergency
• Favorable amendment adopted at the same time as raising it to the level of law that there is no need to pay social contribution tax after the amounts that are considered non-wage benefits and transferred to the accounts of Széchenyi Holiday Card until 31 December 2020 (according to the government decree this rule was applicable for the amounts transferred until 30 June 2020)
• It has been specified that taxpayers belong to the group of beneficiaries have no tax advance payment obligation regarding rehabilitation contribution for Q2, Q3 and Q4 2020, furthermore they pay the 2/3 of the amount prescribed by the law as rehabilitation contribution for 2020
• In terms of EKAER, risk guarantee should be provided on the 31 day after the end of the state of emergency and submissions made from this day shall be taken into account when calculating the amount of the guarantee
• In terms of EKAER, request for road section exemption may be submitted until the 90th day after the end of the state of emergency even if it has been expired or less than 90 days has remained of which. Requests that would expire on the last day of the state of emergency will be valid until the 90th day of the state of the emergency, but not more than processing them by the tax authority

Online data supply obligation

As we informed you earlier, after the change in the scope and structure of the data covered by online data supply obligation, as of 1 July 2020 data should be supplied on every invoices which has been issued for domestic taxpayers. 

According to the informative of the Hungarian Tax Authority, default penalty will not be imposed if taxpayers do not fully perform the data supply obligation in terms of incoming and outgoing invoices with VAT content less than HUF 100.000 or supply the necessary data within 5 instead of 4 days in terms of handwritten invoices which VAT content reaches HUF 100.000 but not exceeds HUF 500.000.

The above moratorium regarding invoices which VAT content does not reach HUF 100.000 also applies to those taxpayers who had online data-reporting obligation before 1 July 2020.

Taxpayers who have no had online data-reporting obligation so far in order to be exempted from the sanction must register in NAV Online Invoicing System no later than the date on which the first invoice which is affected by online data-reporting obligation is issued.

In line with the above, the domestic summary report also expands, all incoming invoices issued by domestic taxable persons should be reported if the taxpayer exercises the right of deduction regarding the invoices.

This document can be downloaded in PDF format by clicking on this link: Tax changes after the state of emergency