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Innovation contribution changes from 01.01.2019

In the following we briefly inform you about the regulation that are in effect from 1st January 2019 related to innovation contribution payment obligation.

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As a consequence of these changes, the scope of companies subject to innovation contribution payment is going to expand significantly.

Companies are obliged to innovation contribution payment if they are not considered as micro- or small enterprises according to the regulations of Act on SME (Act on Small and Medium-sized Enterprises and the Support Provided to Such Enterprises).

Pursuant to the regulations come into force from next year, companies are not classified only by their own independent index-numbers, but the data of partner- and linked enterprises has to be taken into consideration as well when determining the size of a company (micro-, small-, medium-sized enterprises).

The Act on SME accurately determines, which enterprises are considered as partner- and linked enterprises. With regard to knowledge of it is indispensable for determination of innovation contribution payment obligation, please let us inform you about the related regulations below in details.

Linked enterprises are enterprises which have any of the following relationships with each other:

  • an enterprise has a majority of the shares (stocks) or shareholders' or members' voting rights in another enterprise
  • an enterprise has the right to appoint or remove a majority of the executive officers or members of the supervisory body of another enterprise
  • an enterprise has the right to exercise a dominant influence or control over another enterprise pursuant to a contract entered into with the owners (shareholders) of that enterprise or to a provision in its memorandum or articles of association, irrespective of ownership share, voting rights or the right to appoint or remove officers
  • an enterprise controls alone, pursuant to an agreement with other shareholders in or members of that enterprise, a majority of shareholders' or members' voting rights in that enterprise.

Furthermore, enterprises are also considered as linked:

  • enterprises and investors defined in the Act on SME having any of the relationships decribed above through one or more other enterprises
  • enterprises which have one or other of the relationships defined above through a natural person or group of natural persons acting jointly, if they engage in their activity or in part of their activity in the same relevant market or in adjacent markets.

Partner enterprises shall include such enterprises:

  • which are not classified as linked enterprises, and
  • which are linked in a way where one enterprise holds, either solely or jointly with one or more linked enterprises at least 25 per cent of the capital or voting rights of another enterprise.

Upon determination of the size of a company the following index-numbers have to be examined:

  • annual net turnover
  • balance sheet total
  • total number of employees

Innovation contribution payment obligation does not arise if the own index-numbers of the company and index-numbers of partner- or linked enterprises aggregately do not reach the following value limits:  

  • total number of employees is less than 50, and
  • annual net turnover or balance sheet total is maximum the amount of HUF equivalent of 10 million EUR.

Upon determination of the index-numbers the data of the below-mentioned years have to be taken into account:

  • The last consolidated report, or in the absence of this, the annual report or simplified annual report. Therefore, when determining the status of the company on the 1st of January 2019 – in case of financial year equivalent of calendar year – the data of annual report(s) prepared about year 2017 have to be taken into account.
  • If the company exceeds the above-mentioned value limits or remains below it, its previous classification is lost and new classification is gained only when it exceeds the given value limit or remains below it in two consecutive reporting periods. Therefore, if according to the data of annual report(s) of year 2017 the aggregated index-numbers of the company exceed the above-mentioned value limits, the data of year 2016 (if necessary the data of year 2015) has to examined as well in order to determine if there is innovation contribution payment obligation.

The basis of the innovation contribution: The sum determined as basis of local business tax, reduced with the part of business tax basis of permises established abroad

The degree of the innovation contribution: 0,3%

If companies will have innovation contribution payment obligation from the 1st of January 2019, the following tax reporting and tax payment obligations arise:

  • Until 20th April 2019 innovation contribution advance reporting and payment obligation regarding the period 01.01.2019-31.03.2019 (2019. I. quarter)
  • Until 20th July 2019 innovation contribution advance reporting and payment obligation regarding the period 01.04.2019-30.06.2019 (2019. II. quarter)
  • Until 31st May 2019 innovation contribution advance reporting obligation regarding the period 01.07.2019-30.06.2020

After this the company fulfils its innovation contribution reporting and payment obligation according to the general regulations.

Our information letter due to its general nature cannot be considered as consultancy on which a decision to be made. With regard to this, please contact our colleagues about any occurring unique questions in connection with our current information letter.

Budapest, 28th November 2018

Dr. Boros Anikó Emese tax advisor
Gubicza Krisztina chartered tax expert



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