Following the Government decree 298/2022 on the payment of corporate income tax in foreign currency published in August, taxpayers will also have the option to pay local business tax and tax advances in foreign currency from 2023, according to the Government decree 366/2022 published last month, representing further simplification for companies whose income is largely generated in foreign currency.
Considering the recent movements in EUR and USD exchange rates, these modifications can help to reduce the exchange losses.
It is true for both the corporate income tax and the local business tax that taxpayers can fulfill their tax and tax advance obligation in euros or US dollars, furthermore, the original amount paid, the currency, the conversion rate and the HUF amount will be indicated on the taxpayer’s tax account. In addition, both decrees will expire when the state of war ends.
However, in addition to the above similarities, several important differences can be discovered between the two legislations:
In the case of corporate income tax, taxpayers must notify the Hungarian Tax Authority (HTCA) on their choice by the specified deadline. The notification can be made by submitting the usual change notification form until the first day of the month preceding the first day of the tax year. Once the choice has been made, it will remain in effect at least until the end of the tax year. The taxpayers could opt to transfer corporate income tax in foreign currency for the tax year starting after September 30, 2022, at the earliest. In the case of calendar year taxpayers, this means that if they want to use this option from their 2023 business year, they must file the ‘T201’ form to HTCA by December 1, 2022, at the latest.
Concerning local business tax, only the tax advance and tax liability due from January 1, 2023, can be paid in foreign currency at the earliest, and -as opposed to prescriptions for corporate income tax – no prior notification requested for local business tax purposes.
While the corporate income tax or tax advance paid in foreign currency will be credited to the taxpayer’s tax account in HUF converted at the Hungarian National Bank exchange rate of the day the taxpayer’s bank account will be debited, in the case of local business tax, the amount transferred by the taxpayer will be converted into HUF at the Hungarian National Bank exchange rate at the time of crediting the Hungarian State Treasury’s bank account and transferred to the competent municipality.
Considering that the date of payment of local business tax is the day of crediting the municipality’s bank account, it is recommended to time the transfer taking this process into account.
If you have any further questions related to the above, please do not hesitate to contact us.
Krisztián Vadkerti, partner
Katalin Volpert, senior tax advisor
Franciska Magyarné Schilling, junior tax advisor