In our newsletter, we have summarized the key changes in the autumn tax package. 

 

PERSONAL INCOME TAX

Starting from next year, the family tax allowance for children will be increased in two phases: on July 1, 2025, it will rise to 1.5 times the current amount, and on January 1, 2026, it will double, including the additional allowance for children with long-term illnesses or severe disabilities.

From 2025 onward, among the tax allowances mentioned, further tax allowances for first-time married couples and those under 25 will only be applicable for individuals from EEA countries and non-EEA countries that share a border with Hungary.

Starting from January 1, 2025, the regulations regarding the place of income was earned will be supplemented by provisions concerning interest income that is not classified as interest under the Personal Income Tax Act (PIT Act). According to these provisions:

• If a Hungarian tax resident individual receives income that is classified as interest income (i.e., income subject to separate taxation) but not as interest from a non-convention country, this income will be considered foreign-sourced under the PIT Act, and an inclusion may be applied against this income;
• If a Hungarian payer (e.g., a financial institution, insurance company) provides interest income (which is not classified as interest) under the PIT Act to a foreign tax resident individual from a country with which Hungary has no tax treaty, the place of income was earned will be Hungary, and thus Hungary can impose tax on this income.

As part of the support for start-up companies, there will be no tax liability for the individual (original rights holder) who creates the intellectual product when transferring this intellectual product to a business entity as a non-cash contribution (in-kind contribution), based on the value of the intellectual product specified in the instrument of constitution.

From January 1, 2025, the timing of revenue recognition for the services used must be determined according to modified rules, some of which have already been applied earlier. 

• Accordingly, for services provided by the entity itself, the date on which the service provider incurs a tax payment obligation on the date of performance according to the VAT Act.
• For purchased services, given that the service provider is not the same as the service grantor, the relevant date is when the invoice for the service is made available to the payer. 

From January 1, 2025, instead of the previous TESZOR code, the activities eligible for the 80% cost percentage for flat-rate taxation of sole proprietors will be determined based on the ÖVTJ (Register of Independent Entrepreneurs’ Activities) codes. 

From January 1, 2025, in certain cases, the flat-rate tax payable by individuals engaged in paid hospitality activities will increase to 3.9 times the current rate. The annual amount of the flat-rate tax payable per living room will rise to HUF 150,000 in municipalities where the number of guest nights exceeded 2 million in the second year preceding the relevant year. The list of these municipalities will be published by the Hungarian Tax Authority based on Central Statistical Office’s records by January 31 each year, with the first publication occurring on January 15, 2025, under a transitional provision. In municipalities where the number of guest nights was below 2 million in the second year preceding the relevant year, the annual tax amount will remain HUF 38,400. 

Additionally, starting next year, the definition of private accommodation will expand to include “economic buildings suitable for human habitation” alongside the current terms “apartment” and “holiday home.” This section of the Personal Income Tax Act will also include the definition of living room, and it has been established that the tax must be paid for at least one living room per property.

From 2025, the scope of fringe benefits and specific defined benefits will be expanded:

• The SZÉP card will be expanded with an Active Hungarians sub-account: employers can provide HUF 120,000 annually for their employees under this scheme, which can be used for activities related to sports and an active lifestyle.
• Up to 50% of the employer’s allowance recorded on the SZÉP card as of January 1, 2025, can also be used for home renovation expenses in 2025.
• Employees under 35 may receive a fringe benefit in the form of housing allowance for paying rent or repaying housing loans. The maximum amount that can be provided monthly is HUF 150,000 (HUF 1,800,000 annually). Detailed conditions for this benefit will be regulated by a separate decree.
• From 2025, beyond the employer, unions (for vacation services, up to the amount of the minimum wage) and cooperatives (non-cash benefits provided from the community fund, up to 50% of the monthly minimum wage) can also provide fringe benefits within certain limits.

The scope of tax-free benefits will also expand with additional elements. Without claiming completeness, services provided by the employer through the free or discounted use of sports facilities they maintain (e.g., company gym) will become tax-exempt; likewise, zoo or wildlife park tickets or passes provided to employees will also be tax-free.

SOCIAL CONTRIBUTION TAX, SOCIAL SECURITY CONTRIBUTIONS

A social security payment obligation will be linked to the interest income from Long-Term Investment accounts (hereinafter: LTI account) starting from 2025, in the event of an early withdrawal from the LTI account. In this case, for amounts withdrawn from the LTI account, a 13% social contribution tax will be due if withdrawn before 3 years, and an 8% social contribution tax will be payable for LTI holdings of 3 to 5 years, in addition to personal income tax. For holdings exceeding 5 years, tax exemption will continue to apply.

Tax allowance available on entrants to the labour market, which have so far existed at the regulatory level, will be incorporated into the Social Contribution Tax Act: the inactive period qualifying for the allowance will increase from 6 months to 9 months, the opportunity to claim the allowance at a 100% rate will shorten from 2 years to 1 year, and in the following 6 months, it will decrease to a 50% rate. 

In the case of training own employees, the tax benefit for specialized training and dual education can be claimed by the same employer for the same employee for a maximum of 12 months, and the allowance is conditional upon examination requirements.

In accordance with the rules governing personal income tax effective from January 1, 2024, starting from January 1, 2025, the reporting and payment obligation regarding social contribution tax will also become quarterly for fringe benefits and certain specified benefits.

The adopted law contains only a few technical modifications and legal clarifications regarding the Act on Social Security Contributions.

CORPORATE INCOME TAX

The special provisions of the CIT Act on tax evasion have been modified to the extent that the restrictive measures introduced in 2020 regarding certain costs and expenditures that arise from the different legal qualification of the same fact pattern between the states involved have been supplemented effective from 29 November 2024: in line with the tax law amendment, in certain cases, the relevant cost and expenditure will be tax deductible in order to promote the avoidance of double taxation between the states.

From 2025, Appendix nr. 3 of the CIT Act will have a new provision based on which payments made by taxpayers to professional sports associations engaged in popular team sports, subject to certain conditions, may qualify as allowable costs and expenses for corporate income tax purposes. Among these conditions, the said professional sports association engaged in the relevant popular team sports as listed by the law, will only be entitled to receive such payment from the taxpayers, if at least 75% of its annual sales revenue is realized from sports activity. The present tax law amendment provides with a non-exhaustive list of examples of what is meant under sports activity: organizing sports activity, setting out the conditions to do sports activity, sales of sports equipment, sales of tickets, season tickets to sports events, advertising services in connection with sports activities. The tax law amendment also adds further conditions such as the contributing party can only treat its payments made to professional sports associations as tax deductible costs and expenses as long as its total contributions in the tax year do not exceed 1% of its sales revenue in the given tax year (if exceeded, the costs and expenses above the 1% threshold are non-deductible for corporate income tax purposes). 

In the framework of supporting popular team sports the taxpayer can make payments to the national association of popular sports in support of the maintenance costs of real estate serving a sports purpose. This provision is applicable and available in the case of sports development programs already in process at the time of the entry into force of this tax law amendment.

 

Further amendment in relation to popular team sports subsidies is that no subsidies can be granted on the title introduced by the Hungarian Government in late 2020 in connection with the health emergency generated by the breakout of COVID-19. The aforementioned provision terminates 31 days following the publication of the tax law amendment. 

A new subsection was added to the CIT Act (Appendix nr. 1, point 5) pursuant to which the ordinary depreciation as determined by the Act on Accounting (including lump sum depreciation) regarding a land, plot used for the storage of hazardous waste can be considered as an allowable expense for corporate income tax purposes (the accounted depreciation decreases the tax base). The taxpayer, at its discretion, can first apply the new rule for its 2024 tax year.

Based on the original rule, the taxpayer could first apply the research and development tax credit (R&D tax credit which became effective on 31 December 2023) regarding its eligible costs arisen in the 2024 tax year. Due to the present amendment, the relevant R&D tax credit can only be applied to the eligible costs of R&D projects started on or after 1 January 2024.

From 2024 a new ’de minimis’ EU Committee decree came into force for the period 2024-2030. The change compared to the old ’de minimis’ decree is that the available budget is EUR 300,000/3 years for the very same enterprise and a special budget is no longer available (previously it was available in connection with commercial freight transportation activity) and the examined period is 3×365 days instead of 3 financial years.

The so-called Crisis Communication of the European Commission included the special national rules to reflect on the Russian-Ukrainian military conflict. The benefits that were originally eligible as ’de minimis’ subsidy could be used based on the Crisis Communication until 30 June 2024.

Starting from 2025, the CIT Act will apply the TEÁOR’25 classification system pursuant to which the provision on the tax base of the regulated real estate investment company changes as follows: among the exceptions from tax exemptions the ’management of building construction projects’ as main activity was included and it has been replaced by real estate development activity. 

From 2025, a favorable development to the taxpayers of a corporate tax group is that the statutory deadline for filing extraordinary tax returns in relation to annual taxes, taking into account other legislative conditions as well, is no longer 30 days starting from the event triggering the obligation of filing the extraordinary tax return to 90 days.

LOCAL TAXES 

The tax law amendment supplements and clarifies Sections 13 d) and e) of the Act on Local Taxes about the exemptions from building tax liability. The amendment introduces new exemption rules regarding building tax and those relate to monuments, buildings registered in the real estate registry as being used for the purposes of animal husbandry and crop production. Furthermore, it includes special taxation rules as well which will become effective when the special economic zones cease to exist. 

The definition of property right is also amended, it is supplemented by the building right, so according to the new definition, the building right, operating right, holding right, sustainable land use, usufruct, right to use – it includes the right of non-domestic persons to the use of real estate -, the use of land and apartment rental.

From 1 January 2024 the rules entered into force based on which companies engaged in air passenger transportation must register a permanent establishment and are subject to local business tax in the relevant municipality the airport is located at and its flights depart from (which flights comply with the rules of the Act on Air Transportation as well). In the future, these rules will only apply to the foreign companies having a registered seat in a jurisdiction that is not a member of the Chicago Convention on international civil aviation.

GLOBAL MINIMUM TAXATION 

The domestic group member or an appointed local group member who has the mandate to file on behalf of all domestic group entities will have to file a notification form with the Hungarian Tax Authority within 12 months from the first day of its tax year relevant for global minimum tax purposes. The notification should be made by filing the GLOBE form in which the relevant domestic entity will have to provide information about the multinational group or large domestic group as requested by the law. The filing requirement should be met for the first time in relation to the tax year started in 2024.

The domestic group member or an appointed local group member acting on behalf of the other domestic group member(s) must assess the amount of qualified domestic top-up tax advance payment (its amount is equal with the anticipated amount of qualified domestic top-up tax) and report it via the relevant form regarding the tax year subject to tax liability until the 20th day of the 11th month starting from the last day of the relevant tax year.

The tax return on the qualified domestic top-up tax advance will have to include the identification information about the domestic group member and the qualified domestic top-up tax advance liability of the domestic group member.

In case of default of the taxpayer’s aforementioned liabilities, the Tax Authority cannot levy late payment penalty, tax penalty and default penalty if the relevant domestic group member acted in such a manner that is acceptable in the given situation. 

Other than the above, conceptual clarifications were made in line with the tax law amendment.

VALUE ADDED TAX

The 5% reduced VAT rate on the sale of new residential property will apply until the end of 2030, under transitory measures. For this purpose, the residential property should either be supplied under a sales and purchase agreement or under a work contract and the total useful floor area of the property may not exceed 150 square metres in case of a flat and 300 square metres in case of a detached house. The new residential property must be handed over by 31 December 2030, at least in a structurally complete condition. The deadlines set by the legislator for the finalisation of the building permit or equivalent administrative acts in order to apply the 5% VAT are also extended: for a construction subject to a building permit, the building permit must become final by 31 December 2026. For a construction subject to simple notification, the 5% VAT is only applicable if the notification is made by 30 September 2024. For construction projects to be referred to the national, county or municipal architectural councils, the official certificate of acknowledgement of the construction must be issued by 31 December 2026. The supply of new residential properties built on a “brownfield site” with a total useful floor area of less than 150 square metres, will remain under the 5% reduced VAT rate, without time limit. Remember that the property should be classified as “new” and “residential” under the Hungarian VAT law, whereas the total useful floor area is to be calculated in accordance with the construction rules.

An important change is that from 1 January 2025, data on the domestic purchase lists (The “M” sheets of the VAT return) must be provided in HUF (while the data on the VAT return are still to be provided in kHUF).

Following the European Court of Justice’s judgment in the Hungarian-related case C-248/23 Novo Nordisk A/S, the Hungarian VAT promotion scheme will also cover the case where the supplier of the goods makes statutory payments to a person other than the customer, with respect to the supply. These payments will constitute ‘discounts’ for VAT purposes and reduce the taxable amount accordingly. The amendment allows distributors of pharmaceutical products to reduce their VAT base by the proportion of turnover payable to the National Health Insurance Fund of Hungary, commonly known as the “medicine tax”. Based on the transitory rule, the reduction of the VAT base may be applied retroactively to payment obligations made after 31 December 2023, provided that the taxpayer has not submitted a claim for a refund by reference to the judgement. 

Under the current rules, the after-sales discount may only reduce the VAT base where an invoice was raised on the supply. The amendment provides for the possibility to apply the successive VAT base reduction also in cases where a receipt was issued on the underlying supply. The VAT base reduction is conditional on the receipt’s correction. The new rule will apply to transactions where both the transaction and the granting of the discount took place on or before 1 July 2025.

From 1 March 2025, the right VAT of deduction may be assigned to the indirect customs representative under stricter conditions. In addition to the current conditions (the importer must have the right to fully recover the import VAT and should inform the indirect customs representative of this fact), the law will also require that the importer files a monthly VAT return, and the assignment will also be conditional on the taxpayer qualification of both the importer and the representative. In this respect, the legislator imposes a control obligation on the representative: if he cannot verify the importer’s reliable taxpayer status in the tax authority’s public database, he will have to carry out a partner risk assessment and will be obliged to refuse representation if the importer is found to be risky. The representative must also have a reliable taxpayer status himself, unless he has an AEO status.

The scope of transactions subject to domestic reverse charge is extended to supply of natural gas between taxable dealers. The reverse charge will apply to transactions carried out on or after 1 January 2025, with the proviso that if the special reverse charge VAT due date falls before 1 January 2025, the VAT is still chargeable. Where an advance payment is made for such a transaction before 1 January 2025, the supplier will still pay the VAT on the advance payment and the customer will only be liable to account for VAT on a reverse charge basis on the remaining amount. Both the supplier and the purchaser will be required to provide information on these reverse charge transactions in their VAT return.

SMALL BUSINESS TAX

As of November 29, 2024, a modification has come into effect that allows for the repeated choice of small business tax (KIVA) membership if the tax status ends due to a merger or demerger, provided that no revaluation of assets occurs. In this case, KIVA membership is established on the date of the merger or demerger (not just the following date). The repeated choice of KIVA membership must be reported to the tax authority (NAV) within 15 days, provided that the conditions for small business tax eligibility are still met.

In alignment with changes regarding social contribution tax benefits for new labor market entrants, the regulations governing the benefits applicable under KIVA are also modified.

ADVERTISING TAX

The advertising tax will be suspended for another year, with the tax rate remaining at 0% in 2025.

EXTRA-PROFIT TAXES

Several extra profit taxes will be eliminated from 2025, including:

• Special tax on net revenues of petroleum product producers,
• Special tax on renewable energy producers,
• Special tax on balancing regulation service providers,
• Extra profit and special tax on pharmaceutical manufacturers,
• Payment obligations of pharmaceutical and medical device distributors,
• Income tax payment obligations of energy suppliers in the manufacturing industry,
• Telecommunication surcharge,
• Mining surtax paid by mining companies in the absence of a contract,
• Airlines’ contribution.

The extra profit taxes that will remain in effect in 2025 are:

• Special tax on credit institutions and financial companies under certain conditions,
• Surcharge on insurers,
• Modified tax rates for retail taxes,
• 95% special tax on petroleum product producers,
• 41% income tax on energy suppliers,
• Special rules for retail fuel distributors.

FINANCIAL TRANSACTION FEES

Provisions regarding financial and supplementary financial transaction fees, previously regulated by government decrees, will be raised to a statutory level, including the transaction fee rates that were previously increased.

RETAIL TAX

Starting January 1, 2025, the retail tax will apply to both domestic and foreign organizations operating online platforms that provide a space for retailers to conduct retail activities.

According to the new regulation, the tax liability will rest with the platform operator, based on the total net revenue from sales conducted through their platform, including the shipping charges invoiced by the retailer. Therefore, the platform operators, rather than individual retailers, become the taxpayers. However, if the platform operator fails to meet their tax obligations, and the tax debt cannot be collected from them, the tax authority will require the retailer selling through the platform to pay the tax, in proportion to their share of the platform’s sales.

VEHICLE-RELATED TAXES

Registration Tax:

Starting January 1, 2025, the zero tax rate and tax incentives for hybrid and plug-in hybrid vehicles will be abolished.

From 2026, the registration tax will be adjusted annually based on the inflation rate of the previous July.

Vehicle Tax and Company Car Tax:

Starting January 1, 2025, the vehicle tax will be adjusted annually based on the inflation rate for July of the previous year.

The company car tax rates will increase by approximately 20% in 2025, and from 2026, they will be adjusted annually based on the previous year’s July inflation rate.

Hybrid and plug-in hybrid vehicles with class codes 5P and 5N, registered by the end of 2024, will be exempt from vehicle and company car tax until December 31, 2026.

DUTIES

The transfer tax on the ownership of vehicles and trailers will increase annually based on inflation starting in 2025.

Starting in 2025, inheritance tax will be exempt on national heritage buildings, including residential buildings classified as national heritage, and apartments located within such buildings.

Changes will also be made to the fee regulations for first-instance civil litigation: while fees will decrease for cases with a subject matter value under 10 million HUF, fees will increase for cases with higher subject matter values, and the upper limit for fees will be abolished.

TAXATION SYSTEM, TAX PROCEDURE

With the tightening of money laundering rules, the activity of providing HQ services can only be carried out after registration with a supervisory body. As a result, it is no longer sufficient to notify your intention to do so. In line with this, Act on Tax Procedure (hereinafter AoTP) will also follow the line that the NTCA will simply check the registration of the HQ service provider.

If the dissolved taxpayer settles its tax debts, it can be reassigned a tax number for its excuse request. 

However, the tax authority will cancel the tax number of a taxpayer who fails to comply with the deadline of 90 days for filing a VAT recapitulative statement, VAT return or monthly tax and contribution declaration, despite a warning from the authorities.

The employer may also apply for a tax number for third-country employees, which is communicated directly to the employer by the tax authority either. NTCA also registers the accommodation of the staff. 

In general, the penalty for failure to comply with the procedure for clarifying the status of insured persons is also tightened, to HUF 100,000 per failure to report after 15 days of failure to submit a request for a declaration of deficiency. The doubling of fines has been raised to the statutory level: the maximum amount of the default fine is HUF 400,000 for natural persons and HUF 1 million for others, while the maximum fine for hiring of undeclared employees, the infringement of the rules on the issuing of invoices and receipts and the keeping of documents is HUF 2 million. In certain circumstances, the closure of a business may be replaced by a fine of up to tenfold, or in some cases up to twenty times, of the maximum fine.

If a group CIT taxpayer ceases to be a part of the CIT-group, it must file an extraordinary return within 90 days instead of the former 30 days.   

A new generation of cash registers will be available next year. The e-cash register will not only provide the data required by current cash registers but can also offer consumer-related extras (e.g. guarantee card or purchase reminder) through applications downloaded by customers. The AoTP amendment now introduces provisions on the use of e-tills for online data provision, their authorisation, customer application approvals (more detailed rules will be set out later, by lower- level provisions.)

The obligation for local bank accounts to be opened by domestic branches of foreign companies is prescribed in the supplement to Art 114. Existing branches must do so by 31 January 2025. 

The “data reconciliation procedure” is introduced as a new form of contact with the tax authorities, which can remedy data discrepancies identified by risk analysis of the NTCA more quickly than before. (If the taxpayer is uncooperative, it may be fined by HUF 300,000.) The tax authority may also send an information letter to the taxpayer if it has reasonable grounds to suspect that the taxpayer is involved in a series of tax avoidance transactions; and the employee may also receive such a notice if his or her employment is not properly run to the tax authority’s knowledge.

As of 2025, one of the newer cases of the compliance audit (which does not create a period closed by an audit) is the audit of transfer pricing records, the reliability and authenticity of the data used, for a period of 60 days.

The time limit for judging APA applications will be extended from 60 days to 90 days, even for ongoing cases at the end of the present year.

The rules for the calculation of the late payment penalty are also changed: if the penalty exceeds HUF 5,000 for the calendar year, it can be calculated on a monthly basis, and already for debts outstanding on 1 January 2025. First new amounts for the period January-March 2025 will be published in April 2025. 

The biggest innovation of AoTP is that the in-person interview can be replaced by an online interview. In this case, the individual is present at another tax authority but is in constant visual and audio contact with the intervener and the authority ordering the hearing, and the minutes of the hearing will include these circumstances. 

Following the decision of the European Court of Justice in May this year, the Hungarian legal system also provides for a legal remedy against VAT refund requests by foreign businesses. In contrast to the general prohibition, it is possible to rely on new facts and circumstances in the appeal procedure.