Changes of taxes 2023

VAT (value added tax)

Changes relating to real estate transactions

1. Definition of a property under construction or new property already built-up

Built-up property (part of a property) already in use but with a change of use (with a change in the use of the property or in the number of units) and the parts of land belonging to them are also taxable if there is not more than 2 years between the issue of the official certificate and the sale.
In line with this, the sale of such change of use property within two years by an otherwise non-taxable person will also give rise to tax liability, provided that if it is carried out in series.

2. Sale of residential property - 5% VAT

The reduced rate of 5% VAT applicable to the supply of new residential property, as defined in a previous government decree, will remain applicable until 31 December 2024, but will also apply until 31 December 2028, under the transitional rule, to construction work that is delayed, where the building permit has become final on 31 December 2024 or the construction work subject to simple notification has been notified by 31 December 2024.

3. Reverse taxation

As a result of the amendment, all construction, installation and other assembly work for the construction, conversion, change of use, etc. of property that is subject to a public permit or notification (the 'construction' element has been removed from the rule) will be subject to reverse charge, so services that do not require a building permit but that require some other public permit or notification (e.g. heritage protection permit) will also be subject to reverse charge.

4. Invoice data content - VAT in HUF

In the case of invoices issued in a currency other than HUF, the amount of VAT passed on must also be shown in HUF on invoices for domestic sales only.

The above amendment clarifies that, when using the OSS system, it is not necessary to indicate the amount of VAT passed on in HUF for transactions issued in other Member States with place of supply under the registration rules, using the exchange rate defined in Section 80 of the VAT Act. Even under the rules in force, it is not reasonable to expect the HUF amount to be shown, given that the above invoices do not contain the VAT amount passed on under the VAT Act and that, where the one-stop-shop system is used, the VAT Act requires the use of a different exchange rate from that provided for in Article 80 for the conversion into HUF for the purposes of the tax return, so that the inclusion of this information on the invoice is irrelevant where the one-stop-shop system is used.

CORPORATE TAX

1. Group tax liability

From 1 January 2023 on the termination of the group corporate taxpayer, the members' advance tax returns must be made within 30 days from the date of the event giving rise to termination and not from the date of the termination.

The cases of termination of group membership are extended with the dissolution, liquidation and forced winding-up of the group corporate taxpayer. In these cases, the group taxpayer ceases to be a taxable person on the day before the day on which the procedure begins.

2. Accrued losses

A new transitional rule will be introduced for losses incurred in or before the 2014 tax year and not yet applied to the tax base, under which taxpayers may deduct the amount of such losses up to 50% of the tax base excluding the use of the loss and adjustments related to the interest deduction limitation as a reduction of pre-tax profit. This rule may be applied for the first time in tax year 2022, at the option of the taxpayer.

3. E-charging stations - "de minimis" support

As from 1 January 2023, the rules on the use and administration of tax base relief for the installation of electric charging stations will change. Under the amendment, for tax years covered by tax returns filed after 31 January 2022 and for subsequent tax years, this benefit will be considered as de minimis support. The rules on income tax for energy suppliers are also consequently changed.

“De minimis” support is state support of a small amount, the amount of which is maximized, i.e. the total amount of the support received under this entitlement in any three consecutive years may not exceed 200 000 EUR equivalent HUF.

4. Exchange of beneficiary shares

Due to the loss of value accounted for the share acquired based on the beneficiary's share exchange, the tax base must be increased in the year of accounting for the loss of value, but not in the year of the write-off. Accordingly, the definition of the income (profit) minimum is also modified.

LOCAL BUSINESS TAX

Small business relief - simplified tax assessment

The most significant change is the simplified method of assessment of business tax (the three current methods will be replaced by a single method of assessment - the simplified assessment of business tax for those with a net turnover of less than HUF 8 million, the flat-rate tax for those with a small turnover and the simplified assessment of flat-rate tax for flat-rate taxpayers will be abolished).
An entrepreneur whose income for the tax year - calculated on an annual basis, i.e. annualised on the basis of the calendar days of operation in the case of tax years shorter than 12 months - does not exceed HUF 25 million (HUF 120 million for traders opting for the flat-rate tax under the Personal Income Tax Act), are entitled to a simplified assessment of the business tax base (they are called 'small entrepreneurs' under the HIPA Act.)
The main rule of the simplified assessment is that a small entrepreneur does not have to establish his local business tax base and does not have to file a tax return.
The small entrepreneur only has to pay an advance tax once a year and, if his income does not exceed the top of the relevant income bracket in the tax year, he does not have to pay any additional tax on the advance tax paid for the tax year.

Within the HUF 25 million income limit, the amendment sets three income bands and a related tax base. Here as well, the income ranges are to be examined on an annual basis, so that for tax years shorter than 12 months, a daily pro rata calculation is required, which will result in a lower income range. Tax base per municipality for the head office and establishment(s) of the entrepreneur

2.5 million HUF if the small entrepreneur's income does not exceed 12 million HUF,
6 million HUF if the income of the small entrepreneur exceeds 12 million HUF but does not exceed 18 million HUF,
8,5 million HUF if the small entrepreneur's income exceeds 18 million HUF but does not exceed 25 million HUF (120 million HUF).

The small entrepreneur must notify his choice of tax base method by the last day of the fifth month of the tax year in which he intends to use this method for the first time. The notification can be made on the tax return form for the previous tax year (i.e. in 2023 on the tax return form for the tax year 2022).

According to the relevant transitional provisions, if a taxpayer does not want to apply the banded simplified tax base from 1 January 2023, it must notify the tax authority of this decision by 31 May 2023 at the latest in the 22HIPAK return or on THE registration, change notification form.

It is important to know that if a taxpayer uses the banded simplified tax base, he is not entitled to any tax exemption, tax relief or other tax deduction in the local business tax.

DUES

1. Gift dues

The exemption from gift dues has been extended, so that it is exempt from gift dues if:

the acceptance of a gift for which the giver or the recipients is liable to pay personal income tax or social contribution tax,
securities acquired under the Employee Securities Benefit Plan, securities, shares and membership interests acquired under the Employee Share Ownership Plan,
a benefit paid to a Qualified Employee Stock Ownership Plan organization or to a trust administering such an organization, which benefit is paid to the trustee in accordance with the provisions of Schedule 3, Part B, item 26 of Schedule 3 to the Corporation Tax Act,
shares acquired from a partnership as an employee share in the form of an employee share or an employee share not subject to personal income tax.

2. The possibility of paying the procedural fee by means of a stamp dues is abolished

As of 1 January 2024, the possibility of paying the procedural fee with a stamp dues (documentary stamp) will be abolished. The value of stamps not used by 31 December 2023 will be refunded for a further 5 years, until 31 December 2029.

3. Acquisition for consideration of real estate between related enterprises

The exemption from dues on the acquisition of immovable property by related companies is tightened. No reverse property transfer dues will be payable on the transfer of real estate or of a deposit in a company with domestic real estate assets between associated enterprises within the meaning of the Corporate Tax Act. The exemption from the levy on the transfer of immovable property is applicable if at least 50% of the net turnover of the transferor in the previous tax year was derived from the rental, operation or sale of immovable property owned or leased by him.

A statement of the distribution of net turnover (or the expected distribution of net turnover if the tax liability arises before 1 June of the tax year and the previous year's accounts are not available) must be provided by the beneficiary. And the beneficiary who starts his activity in the tax year in which the declaration is made must undertake to comply with the exemption requirement based on his net turnover for the first tax year. If the declaration or the undertaking is not fulfilled, the beneficiary must notify the Tax Authority by 15 June of the tax year, which will impose an additional 50% of the unpaid tax on the beneficiary. If the beneficiary fails to comply with this obligation and the Tax Authority establishes, during a tax audit, that the declaration or undertaking has not been fulfilled, the beneficiary will be charged twice the amount of the unpaid tax.

OTHER TAXES

1. Advertising tax

The advertising tax allowance has been extended, so that the advertising tax rate is 0% of the tax base until 31 December 2023.

2. Tourism development contribution

For the period from 1 October 2022 to 31 March 2023, no tourism development contribution is to be assessed, declared and paid. Thereafter, the tourism development contribution shall be 4%.

3. Special tax on pharmaceutical manufacturers

For the tax years 2022 and 2023, pharmaceutical manufacturers will have to pay the special band tax as follows:

The tax rate is based on the net turnover determined based on the annual accounts for the tax year

of the net profit for the tax year of 50 billion HUF or less is 1%,
3% on the part of the net sales exceeding HUF 50 billion HUF but not exceeding 150 billion HUF,
8% on the part of the net income exceeding 150 billion HUF.

The new special tax applies to pharmaceutical companies operating in the sectors TEÁOR 2120 (Manufacture of basic pharmaceutical products) and TEÁOR 2110 (Manufacture of basic pharmaceutical products).
The pharmaceutical manufacturer shall establish, declare and pay the special tax for the tax year 2022 by 20 May 2023 on a separate form.
The pharmaceutical manufacturer is obliged to establish, declare and pay an advance payment of the special tax for the tax year 2023. The pharmaceutical manufacturer shall determine the advance tax payable for the tax year 2023 on the basis of the tax expected to be payable for the tax year 2023 by self-assessment, which shall be declared and paid by 20 November 2023 on a separate form provided by the Tax Authority.
The pharmaceutical manufacturer shall establish and declare the special tax for the tax year 2023 by 20 May 2024 on a separate form and pay the special tax not yet paid as an advance tax.

4. Payment obligation of pharmaceutical distributors

The 20% contribution payable by distributors will temporarily increase to 28% in 2022 and 2023 for medicines with a producer price above HUF 10,000.

The payment obligation is imposed on the marketing authorization holder, if he does not carry out distribution activities in Hungary, on the basis of an agreement concluded with the distributor and approved by the Tax authority, depending on the production price of the medicinal product, on the distributor for the proportion of the social security contribution based on the prescription data, up to the production price of the medicinal product of 10.000 HUF and above this amount, as an additional payment obligation of 20% and 28% respectively.

5. Special tax on insurance companies

From 2023 onwards, insurers will have to pay a special tax of 12% (previously 7%) on the part of their premium income exceeding 36 billion HUF, and 5% (previously 3%) for life insurance.

6. Additional retail trade tax

For the financial year starting in 2023, the band limits of the previously introduced progressive band system will remain unchanged, but the tax rates will be higher.

0% on the part of the tax base not exceeding 500 million HUF,
0.15% for the part of the tax base exceeding 500 million HUF but not exceeding 30 billion HUF
1% for the part of the tax base exceeding 30 billion HUF but not exceeding 100 billion HUF,
4.1% for the part of the tax base exceeding 100 billion HUF

The Additional retail trade tax obligation is not the same as the retail trade tax payment obligation of retail taxpayers under the Retail Trade Tax Act.

Due to the general nature of the information above, this can’t be considered as a decision-justifying consultation. Regarding this, please be so kind as to contact our colleagues with your specific questions in connection with this information, our colleagues will be happy to assist you.

Budapest, 4 January 2023

Krisztina Gubicza, tax expert, managing director