Spring tax package


Spring tax package


5 May 2017

We would like to take this opportunity to inform you that on 2 May 2017 the spring tax package (the ‘Bill’) was brought before Parliament. The Bill contains modifications affecting the remainder of 2017 in addition to 2018. The vote for the acceptance of the Bill will take place between 13 and 16 June 2017.

Please find below a summary of the major changes.

Personal income tax and contributions

Income from real estate rental

One of the most important changes concerning individuals is that the 14 per cent health tax liability on income (exceeding HUF 1 million per year) deriving from real estate rental would be abolished as of 2018.

Housing subsidy to promote mobility

Several favourable amendments would be made to the provisions introduced in 2017 on housing subsidy to promote mobility, including:

  • the amount of the subsidy would increase significantly as of 2018,
  • the tax exemption would also be available to individuals with employment contracts concluded for a definite period. 

Back to top

Accounting Act

Accounting of modified tax authority audit findings

The Bill sets forth that as of 1 January 2018 if findings of a tax authority audit, which had previously been treated as material errors and, as a result, had to be presented in a separate column in the income statement and the balance sheet relating to the previous years, were subsequently modified by an authority or court through a final resolution before the balance sheet preparation date, then the modification must be recorded in the current year.

Release of deferred income from development grants

According to the Bill, as of 1 January 2018 the deferred income recognised in connection with development grants would have to be released when the repayable amount of the grant is recognised as an expenditure, rather than on the date on which the grant is repaid.

Valuation of assets acquired through derivative contracts

The Bill provides that as of 1 January 2018 assets (both financial and non-financial) acquired as part of derivatives with physical delivery would have to be revaluated at fair market value as of the date of acquisition regardless of prior classification even if the company did not apply the fair value assessment in its accounting policy. Such assets must continue to be revaluated against other income and expenses from financial transactions.

The Bill provides the option for the application of the above proposed changes in the rules also to the financial year started in 2017.

IFRS rules

The Bill refines certain details of the tax rules applicable to taxpayers operating under IFRS rules. Information about the modifications to the IFRS related rules will be provided in a subsequent newsletter.

Back to top

Corporate income tax

Participation exemption

The 10% threshold for capital gains participation exemption would be abolished thus substantially extending the scope and applicability of Hungary’s holding regime.

Controlled foreign company

The Bill would include clarifications related to the new CFC rules (that were introduced early 2017).

In particular the conditions related to shareholders of the CFC are considered to be fulfilled, if such shares are held for the majority of the taxpayer's tax year. When calculating a controlled foreign company's profit to be added to the tax base, the amount of profit to be taken into account must be proportional to the ownership share in the controlled foreign company or proportional to the percentage of the after-tax profit to which the taxpayer is entitled. The new rule may be applied by taxpayers at their own discretion for the year 2017.

Rental flats built for employees

The amount recorded as the historical cost of rental flats built for employees, or as an increase in such historical cost, may be deducted from the pre-tax profit in the tax year of the completion of the renovation / construction project. The Bill also lists the requirements for claiming the tax base allowance.

Construction of electric vehicle charging stations

When constructing charging stations for electric vehicles, the historical cost of the charging stations would be deductible from the corporate income tax base. The maximum amount of allowance that may be claimed is set forth in the Bill. The allowance can be claimed in the tax year in which construction is completed and is available for construction projects launched after 30 June 2017.

Tax credit for growth

If a taxpayer defers its tax liability, then it must pay interest at a rate equal to the prime rate of the Hungarian National Bank. The interest payment obligation applies to declarations made after 1 January 2017.

Back to top

Local taxes

In line with the Bill, during the company registration/change registration procedure, data pertaining to the company that are sent by the court of registry to the state tax authority would be forwarded to the municipality of the company's registered office. Thus the company's reporting obligation in respect of the forwarded data toward the municipality would be fulfilled.

As of 1 January 2018, outdoor advertising signs would also be subject to building tax. Similarly to wind farms, solar farms would also qualify as permanent establishments for local business tax purposes.

As of 1 January 2018, IAS 18 Revenue and IAS 11 Construction Contracts would be replaced by IFRS 15 Revenue from Contracts with Customers, and IFRS 9 Financial Instruments would also become effective. For this reason, the rules related to the determination of sales revenue for taxpayers preparing IFRS financial statements must be aligned to these standards.

Back to top


Under the currently effective regulations, twice the amount of the duty allowance available in the case of financial leases is payable if the financial lease contract is not effectuated within the prescribed timeframe. Based on the Bill, if the acquirer has passed away or the entity has been dissolved without succession duty penalty would not be applicable.

Based on the Bill, the category of duty-exempt acquisitions where the acquirer is not required to report the acquisition of property would be expanded to include preferential transformation and acquisition through a preferential exchange of shares, as well as the duty-exempt transformation of law firms.

In addition to the above, the Bill also clarifies the definition of a business organisation, making it clear that foreign persons also qualify as business organisations for the purposes of the Act on Duties. The Bill provides further amendments regarding the rules on the duty liabilities and exemptions of individuals in connection with the exchange of apartments.

Back to top

Value added tax

According to the Bill, the VAT rate applicable to both edible fish and internet services would be reduced to 5%. The modified tax rates would be applicable as of 1 January 2018.

Furthermore, the Bill would amend the definition of internet access services. Network services would not qualify as internet access services, which means that the preferential VAT rate would not be applicable to such services.

According to the Bill, the provision that would reduce the minimum threshold for the submission of domestic sales and purchase lists to HUF 100 thousand would not enter into force on 1 July 2017. The introduction of the real time data provision regarding invoices issued by an invoicing software would also be delayed. A test period is required before the system goes live. Therefore, reporting would be on a voluntary basis for a transitional period of one year.

Back to top

Special taxes concerning the financial sector

The Bill provides that the entities subject to the bank tax would be able to deduct the amount of support provided for preferential purposes (up to 50% of the special tax of financial institutions) from the amount of special tax payable.
The Bill lists the conditions for claiming such allowance, as well as the purposes which may qualify as preferential (e.g. supporting amateur sports organisations and work with youth teams). It is important to note that the provisions on claiming the allowance with respect to the special tax for financial institutions may be applied by the taxpayer in connection with the 2017 tax year at the taxpayer's discretion.

In addition to the above, credit institutions, which are members of voluntary institutional protection fund or a mandatory institutional protection organisation, as defined by the Act on Credit Institutions and Financial Enterprises, may reduce their special tax by the amount paid to such voluntary institutional protection funds or mandatory institutional protection organisations during the tax year, provided that certain criteria are fulfilled.

The scope of exemption from the financial transaction duty would be amended. The payment transactions on a client account or, in connection with investment services, on any other account would not give rise to any financial transaction duty liability if the payment service provider and the party providing investment services were members of the same mandatory institutional protection organisation.

Back to top

Excise tax

According to the Bill, the scope of financial security would be expanded, as a result of which a certificate of coverage would also be acceptable as a form of security in the future.

For the purpose of ensuring harmonization with the relevant EU Directive, the Bill would clarify the scope of controlled energy products. Furthermore, the Bill stipulates that a tax liability arises even if other controlled mineral oils and monitored products are imported for own use.

Back to top

Customs regulations

The amendment to the provisions of the Customs Act would clarify the definition of customs deficiency and would stipulate that the form for customs representation could be filed by electronic means only. In addition, the Bill provides that the customs authority may hand over risk information to entities possessing an AEO certificate which are subject to customs simplifications, provided that the handover of such information does not infringe upon the provisions on confidential customs information.

Back to top

Regulated real estate investment companies

The main goal of the amendment to the Act on Regulated Real Estate Investment Companies is to facilitate the establishment and widespread operation of such entities, which could contribute to the expansion of the real estate market and, due to their presence on the stock exchange, the capital markets.

The Bill includes various amendments to the detailed rules related to the Hungarian REIT regime which is expected to become a well applicable option for publicly traded Hungarian property investments.

Back to top

International cooperation on taxes and other public dues

The Act on the International Cooperation on Taxes and Other Public Dues has been amended. Multinational groups would be required to prepare country-by-country reports if the group's consolidated revenue exceeds EUR 750 million.
As a general rule, the country-by-country report must be prepared by the ultimate parent company of the multinational group and must be filed with the tax authority of the state of which it is a tax resident.

It is important to note that, if certain criteria are fulfilled, the reporting obligation may be passed on to the Hungarian tax resident member of the group. In addition to the reporting obligation, group members which are Hungarian tax residents must report to the Hungarian Tax and Customs Administration (the ‘HTCA’), using a special form, if they are subject to the reporting obligation. If they are not subject to this obligation, then they must specify the group member required to provide information.

The above notification obligations must be filed before the last day of the reporting financial year.
Failure to comply with the reporting and/or notification obligation or incorrect reporting or notification may result in a severe default penalty of up to HUF 20 million.

Back to top

Amendments relating to the rules of taxation

The pre-requisite for an allowance is the lack of a net tax debt

As of 1 January 2018, taxpayer requests for a favourable divergence from the general rules in connection with the payment of tax liabilities (not including payment facilitation and tax reductions), may only be approved if the taxpayer does not have a net tax debt on the date the request is filed.

Reporting of foreign bank accounts

Companies must report all foreign bank accounts existing on 1 January 2018 (the name of the foreign financial institution managing the account and the date of opening and closing the account) in writing to the HTCA prior to 31 January 2018. This must be done by means of a special form. Failure to comply with this reporting obligation or late, incorrect, false or incomplete reporting carries a default penalty of up to HUF 600 thousand.

Reporting of office service providers

Entrepreneurs registered for the purpose of obtaining a tax number prior to 1 January 2017, as well as taxpayers required to register with the company registry, must report the details of their provider of corporate headquarters services to the HTCA prior to 29 September 2017 if they engage a provider of corporate headquarters services and their provider has not changed since 31 December 2016.

Email communication for foreign taxpayers

If a taxpayer who does not have a business registration, domicile or residence in Hungary is otherwise not required to communicate by electronic means, then it may opt for communication by electronic mail at his own discretion. In order to do so, the taxpayer must submit his electronic mail address to the HTCA along with a special declaration.

Introduction of tax deposits

As of 1 January 2018, the HTCA would require taxpayers to make a tax deposit after their tax number is issued if either the person authorised to represent the taxpayer or its member or shareholder possessing more than 50 per cent of the votes or qualified majority control is a former senior officer, member or shareholder of another taxpayer which was terminated without succession during the five years preceding the date of filing of the request for the issue of a tax number and had a net tax debt exceeding HUF 1 million (HUF 2 million in the case of the taxpayers with the highest tax performance), provided that the legal relationship existed on the 360th day preceding the date of liquidation or forced deregistration procedure or any other day thereafter.

Furthermore, the Bill also requires making a tax deposit for persons who join a functioning company and fulfil the above criteria.

The amount of the tax deposit is equal to the tax debt recorded by the HTCA and reduced by any overpayments. If there are several grounds for simultaneously requiring a tax deposit, then the amount of the tax deposit would be the value of the largest tax debt. A tax deposit can be made by transferring one lump sum payment to the HTCA's separate deposit account or by submitting a guarantee certificate issued to the HTCA as the beneficiary, which is valid for 12 months from the date of issue.

The HTCA may, without issuing a request to the taxpayer to pay his tax debt, pass a resolution on using the tax deposit in full or in part. Otherwise, the deposit is retained for 12 months after receipt, and the deposit or its remaining amount is returned to the taxpayer within 30 days after this period has passed.

The obligation to make a tax deposit also applies in cases where, after the final resolution on the deposit is issued, the reason for requiring a tax deposit no longer applies due to a change in the senior officer, member or shareholder. However, the person from whom the tax deposit is required may file a request for exemption. Additionally, the taxpayer has a right to appeal against the resolution requiring a tax deposit and the resolution on the use of such deposit.

Back to top

Did you find this useful?