Tax changes 2022
Presentation of the “extra profit taxes”
Please be informed that the Government of Hungary has adopted a tax decree, levying windfall taxes, so-called “extra profit taxes” affecting several sectors. Government Decree no. 197/2022 (VI.4.) on extra profit taxes will hereinafter be referred to as “Government Decree”. Please see below the major tax changes.
Budapest, 2022. június 10.
- Changes affecting the retail sector
- Changes affecting the aviation sector
- Changes affecting the financial sector
- Changes affecting the telecommunications sector
- Changes affecting the energy sector
- Changes affecting the pharmaceutical sector
- Other changes affecting excise duty
- Changes affecting motor vehicle tax
- Changes affecting simplified employment
- Changes affecting advertising tax
Changes affecting the retail sector
Public health product tax
The Government Decree amends the public health product tax in several
The customs tariff codes to be taken into account for the VTSZ code are
those in the text of the Combined Nomenclature in force on 15 May 2022 instead
of the previous situation on 1 January 2018.
For syrups, a significant change is that they can be subject to the
public health product tax even if they are made exclusively or partially with
The main changes to the product tax are set out below.
- Soft drinks: the scope of the exemptions is changed, for example, the law requires a minimum of 50% fruit or vegetable content. The classification of syrups will become more gradual. Depending on the recipe, the tax rate for soft drinks can vary between 8 and 310 HUF/litre, depending on the sugar content or if the product contains sweeteners.
- Energy drinks: under the amendment, if an energy drink contains any amount of caffeine (methylxanthine) and taurine, it will immediately fall into the already higher tax bracket, which has been increased to 390 HUF/litre with the change. An important change is that this applies even if the product does not contain taurine but ginseng, L-arginine or a combination of these. The tax rate for drinks containing no such additives but containing at least 15 mg of caffeine per 100 ml will change from 50 to 65 HUF/litre.
- Pre-packaged product with added sugar: the amendment has extended the previous sub-categories of the relevant law, for which the tax rate ranges from 40 HUF/kg to 210 HUF/kg.
- Salted snacks: the amendment brings under the scope of the product charge the previously exempted products, roasted or puffed, above certain salt and fat contents.
- Seasoning: the rate has been increased from 300 HUF/kg or /litre to 390 HUF/kg or /litre.
- Flavoured beer and alcoholic refreshments: the amendment introduces two rates, with a lower rate of 10 HUF/litre for products containing sweeteners or sugar content not exceeding 5 grams of sugar per 100 millilitres. For products with a sugar content higher than this, the previous rate of 25 HUF/litre will be changed to 33 HUF/litre.
- Marmalade: the amendment introduces a similar breakdown to that for flavoured beer and alcoholic refreshments, with rates of 780 HUF/kg and 260 HUF/kg.
- Snacks, pre-packaged sweet and savoury pastry: the amendment introduces new categories with tax rates of 65 HUF/kg and 210 HUF/kg.
The above changes enter into force on 1 July 2022.
Retail sales tax
According to the Government Decree, the taxpayers concerned will be assessed and required to pay in the tax year beginning 1 July 2022 a one-off retail sales surcharge until 30 November 2022, equal to 80 percent of the retail sales tax for the tax year beginning in 2021.
The retail sales tax rate, for the tax year beginning in 2023, is as follows:
- 0% for the part of the tax base not exceeding HUF 500 million,
- 0.15% (instead of 0.1%) for the part of the tax base exceeding HUF 500 million but not exceeding HUF 30 billion,
- 1% (instead of 0.4%) for the part of the tax base exceeding HUF 30 billion but not exceeding HUF 100 billion,
- 4.1% (instead of 2.7%) for the part of the tax base exceeding HUF 100 billion.
For the purpose of assessing the tax advance for the tax year starting in 2023 the new tax rates apply.
As a result of the significantly increasing tax burden (rising rates and additional tax), taxpayers may wish to review the way in which they conduct their taxable activities. Given that sales through the same distribution channel constitute a taxable amount, regardless of whether they are made to individuals or to taxable persons, significant savings can be achieved by properly separating retail and wholesale activities. The application of discounts received should also be reconsidered, given that they are also subject to tax.
In general, due to the succinct nature of the legislation, individual transactions should be reviewed for the calculation of retail tax to ensure that tax is only paid on correct and justified income and discounts.
Changes affecting the aviation sector
The Government Decree introduces a contribution of airlines, the subject of which is the activity of air passenger transport under Act XCVII of 1995 on Air Transport (hereinafter: AT Act).
However, the obligation to declare and pay the contribution is imposed on the economic operator providing ground handling services within the meaning of the Act. The regulation thus ensures that foreign airlines are also liable to pay the contribution.
The contribution will be based on the number of domestic passengers (excluding transit passengers) of the aircraft served by the groundhandling entity.
The amount of the contribution depends on the final destination and is either HUF 3,900 or HUF 9,750. The lower rate applies in principle to EU destinations, with a few additional countries. For destinations not falling into this category, the higher rate applies.
The contribution is payable from 1 July 2022 as indicated above. The first declaration and payment must be made by 20 August 2022, and thereafter by the 20th day of the month following the month to which the contribution relates. The state tax authority is responsible for the administrative tasks related to the contribution.
Changes affecting the financial sector
Special Tax on Banking
Under the Government Decree, credit institutions and financial companies
will be subject to a new special banking tax for the tax years 2022 and 2023.
The tax is based on the revenue determined for the purposes of local business
tax, but this will be determined on the basis of the accounts of the tax year
preceding the tax year in question. The rate applied will be 10% for the tax year 2022 and 8% for the tax year 2023. In determining the tax base, the accounting standard or accounting policy used by individual credit institutions and financial undertakings to account for, inter alia, their interest income, which may have a significant impact on the special tax base, is of particular importance.
The special tax for 2022 must be declared by 10 October 2022 and paid in two equal instalments by 10 October 2022 and 10 December 2022. The deadline for the 2023 return will be 10 June 2023 and the tax for this tax year will be payable in three equal instalments by 10 June, 10 October and 10 December 2023.
Transaction levy and financial transaction levy
In addition to the special bank tax, a transaction tax would be imposed on investment firms and credit institutions for certain financial instruments (transferable securities with ISIN ID numbers issued by Keler Zrt., financial instruments and securities issued by collective investment undertakings) after transfer of such instruments to a client account or own account. The tax is based on the value of the financial instrument credited to the account and the tax rate applied is 0.3%, up to a maximum of HUF 10,000 per transaction. The tax is to be declared and paid by the twentieth day of the month following the current month, for the first time for August 2022, by 20 September 2022.
In addition to the above tax, the rules on the financial transaction tax
will also change, and from 1 July 2022, persons providing cross-border payment
services, lending and borrowing, currency exchange and currency exchange
intermediation activities in Hungary will be subject to the tax. For the
purposes of the rule, services qualify as cross-border when not provided in the
country where the supplier is established or has a branch and the customer
using the service is not established or resident in that country. Foreign service providers subject to the rule (who also provide a service subject to a tax in Hungary) must register with the state tax authority by 1 September 2022 and assess their tax liability under the general rules. In addition to the above, the upper limit for the financial transaction tax liability per payment transaction will increase to HUF 10,000 from the current HUF 6,000.
In addition, for the tax years 2022 and 2023, insurers will also be liable to pay a surtax on their premium income, which would vary progressively from year to year. For the purposes of the tax, premiums from life insurance services would
receive more favourable tax treatment compared to other taxable insurance premiums. Under the Government Decree, the liability to pay the tax for the tax year 2022 (1 July 2022 to 31 December 2022) is as follows:
The tax rate applicable to premium income from casco insurance, property
and casualty insurance and compulsory motor vehicle liability insurance:
- 4% (up to HUF 1 billion tax base),
- 8% (for the part of the tax base exceeding HUF 1 billion but not exceeding HUF 18 billion), and
- 14% (on the tax base exceeding HUF 18 billion).
For life insurance, the tax rate for 2022:
- 2% (up to HUF 1 billion tax base),
- 3% (for the part of the tax base exceeding HUF 1 billion but not exceeding HUF 18 billion), and
- 6% (on the tax base exceeding HUF 18 billion).
The thresholds for the full tax year 2023 will be doubled, while the
applicable tax rates will be halved. Accordingly, the tax rate on premium
income from casco insurance, property and casualty insurance and compulsory
motor insurance will be applied in 2023:
- 2% (up to HUF 2 billion tax base),
- 4% (for the part of the tax base exceeding HUF 2 billion but not exceeding HUF 36 billion), and
- 7% (on the tax base exceeding HUF 36 billion).
For life insurance, the tax rate for 2023:
- 1% (up to HUF 2 billion tax base),
- 1.5% (for the part of the tax base exceeding HUF 2 billion up to HUF 36 billion), and
- 3% (on the tax base exceeding HUF 36 billion).
Changes affecting the telecommunications sector
Under the regulation, effective from 1 July 2022, organisations providing electronic communications services are liable to pay a special tax for the 2022 and 2023 tax years, in addition to their tax liability under the Telecommunications Tax Act. The basis for the tax is the net revenue from electronic communications activities for the year in question, as defined in the Act on Local Taxes. The tax liability has been set progressively, with a tax rate of
- 0% for the part of the tax base below HUF 1 billion,
- 1 % for the part of the tax base between HUF 1 billion and 50 billion,
- 3% for the part of the tax base between HUF 50 billion and 100 billion,
- 7% for the part of the tax base exceeding HUF 100 billion.
In the case of associated enterprises, the tax bases are aggregated and the individual tax liability has to be apportioned on the basis of the share of the
associated enterprise in the consolidated tax base. In addition, for tax years of less than 12 months, the amount of the tax liability must be prorated.
The taxpayer is liable to pay the additional advance tax calculated on the basis of the progressive rates on the basis of the turnover data for the previous year until 30 November 2022 for the tax year 2022 and until 31 May 2023 for the tax year 2023.
It is important to underline that the additional tax is not an unprecedented measure, as the scheme is very similar to the special tax on telecommunications in 2010-12, which was also a progressive tax on the sector, based on turnover. Interestingly, the issue of the special tax was eventually referred to the Court of Justice of the European Union, where the plaintiff argued that the special tax discriminated unduly against foreign-owned companies in relation to their domestic competitors (since the vast majority of the taxes paid were by foreign-owned companies), therefore being in breach of EU law. However, the Court of Justice ruled in its 2020 judgment that the special tax was not illegal – although it is true that foreign-owned businesses paid significantly more, this was the result of market structure (foreign players are large, domestic players are small) and not of deliberate legislative discrimination.
Changes affecting the energy sector
Special tax affecting the energy sector
Several special taxes are introduced in the energy sector. The first of
these is a specific tax on producers of petroleum products. The special tax is
based on the global market price difference of crude oil originating in the
Russian Federation multiplied by the quantity in barrels of crude oil
originating in the Russian Federation purchased during the month in question.
The world market price difference for crude oil is understood as the price
difference between Brent (Crude Oil) and crude oil originating in the Russian
Federation. The tax rate is 25%. Some domestic producers of petroleum products
are in a position to obtain crude oil from Russia at a lower price than the
world market price and to resell it at a relatively favourable price (all this
is tempered by the officially fixed fuel price). The special tax is aimed on
part of the profit from this activity.
Special energy tax
The second energy sector specific tax concerns the beneficiaries under
the KÁT and METÁR Regulations. The tax is payable by producers eligible for compulsory purchase under the KÁT and METÁR Regulations and producers eligible for green premium support under the METÁR Regulation, provided that their contracts for membership of the balance group under the KÁT Regulation, for the premium support or for the green premium support under the METÁR Regulation expire by 2022 or 2023, or if they commence their commercial operation in the tax year 2022 or 2023 but do not conclude a contract for membership of the balance group, premium support or green premium under the KÁT Regulation. The tax is based on the revenue from the amount of electricity fed into the grid less the amount of electricity fed into the grid multiplied by the compulsory purchase or subsidised price set by the MEKH. The tax rate is 65%.
„Robin Hood” tax
The third tax change affecting the energy sector is that the income tax on energy suppliers (commonly known as the "Robin Hood" tax) will be extended to so-called manufacturing producers in 2022 and 2023. Previously, the Robin Hood tax was basically payable by various energy licensed production and trading companies (e.g. petroleum product producer, electricity trading licensee, universal service provider). This list will now be extended to include manufacturing producers. According to the Government Decree, producers of bioethanol, producers of starch and starch products and producers of sunflower oil are considered to be manufacturing producers. The tax is based on the pre-tax profit of the producer, adjusted for the items in the law, in accordance with the original law establishing the Robin Hood tax. The tax rate is 31%. The tax change seeks to cover those areas and products where there have been significant recent increases in consumer prices (e.g. sunflower oil). From a practical point of view, there will be questions as to whether certain operators fall within the types of producers defined in the legislation.
The above three regulations affecting the energy sector enter into force on 1 July 2022.
The rate of the mining fee for mineral resources extracted under an
official permit in 2022 and 2023 will change, as well as the way the tax is
In 2022 and 2023, the mining operator must extract at least the same quantity of hydrocarbons as in 2021. Exemption from this new obligation is only possible if there is a technical or geological obstacle to extraction or in case of force majeure. The existence of such an obstacle or force majeure must be requested from the Mining Authority, together with the reasons on which the request is based. If, in the absence of such an excuse, the mining operator fails to comply with the required extraction volume, the mining authority will apply sanctions, with the provision that a warning shall not be used as a sanction. The amount of the fine imposed for the infringement may not be less than the amount of the mining fee calculated on the basis of the quantity of hydrocarbons not extracted.
The Government Decree excludes the provision of the relevant Mining Act that would increase the mining fee in the event of an increase in the monthly average of the Brent crude oil price on the stock exchange.
The regulation enters into force on 1 August 2022.
Changes affecting the pharmaceutical sector
In addition to the special taxes of the energy and financial sectors, the pharmaceutical industry is also subject to a sector specific tax burden since 2007, which precedes the introduction of the commonly known sectoral taxes from 2010.
Under the general rules, distributors have been liable to pay 20% pharma
tax on the part of social security subsidies proportional to the producer price of their social security financed medicinal products. The Government Decree in fact affects this tax liability of distributors. As per the Government Decree, the 20% pharma tax rate will only apply to medicines with a producer price of less than HUF 10,000, while the tax rate will increase to 28% for medicines with a producer price exceeding this HUF 10,000 threshold.
The increased rate will apply for the years 2022 and 2023. The new rules should be applied for the first time upon the assessment of the pharma tax due on 20 July 2022. Given that the liability must be declared and paid by the 20th day of the third month following the current month, the new rules should be applied to the April 2022 turnover data.
The other special payment obligations for the pharmaceutical distributors (such as the so called ‘Spanish tax’ or the representation fee) remain unchanged. In addition, the pharma tax treatment of the dietary supplements sold in pharmacies will remain unchanged and the 10% tax rate will continue to apply. The applicability of certain tax base reduction items and tax incentives (such as the incentives of the R&D activity or the payments made under price-volume agreements) is also unchanged.
Other changes affecting excise duty
The Government Decree increases tax rates in a comprehensive way. For example, the tax rates for the following items will change from 1 July 2022:
- Fuel oil for supply, sale or use as a heating fuel; LPG for supply, sale or use for other motor purposes; natural gas for supply, sale or use as fuel for road vehicles.
- Beer produced in a small brewery; sparkling wine; other still fermented beverages; contract distilled spirits.
- The excise duty on cigarettes will be modified in two stages, from 1 July 2022 to 31 December 2022 and from 1 January 2023. Likewise, the tax on other items such as cigars, cigarillos, smoking tobacco, liquid filler, smokeless tobacco products, etc. will increase.
Changes affecting motor vehicle tax
The Government Decree temporarily changes the monthly rate of company car tax between 1 July 2022 and 31 December 2022. Tax rates before 1 July 2022 (marked in yellow), which have not been changed since 2011, will be temporarily increased by an average of around 80%. Environmentally friendly vehicles are not affected by the change in legislation.
Changes affecting simplified employment
Less favourable rules are to be expected for simplified employment relationships
established from July 2022. All activities in simplified employment will be subject to higher public charges, in most cases double the previous rate, and there will be an increase in the basis for calculating pension benefits as well.
There are no changes to the rest of the regulatory framework. It is therefore important to keep in mind that a simplified employment relationship can only be established by means of an employment registration carried out in accordance with the related legislation. The legislation is very strict and even administrative failures can lead to an undeclared worker status. Such a qualification can lead to a number of negative legal consequences for the employer. These may include, for example, classification as a high risk taxpayer, loss of entitlement to certain state benefits or even the obligation to repay them.
Changes affecting advertising tax
Although not amended by the Government Decree, it is important to say a few words about the advertising tax.
This sectoral tax, which deducts part of the revenue from advertising, was introduced in 2014. The rate was increased to 7.5% in 2019, but its application was suspended that year, with the rate temporarily reduced to 0% from 1 July 2019 to 31 December 2022.
From 1 January 2023, however, the advertising tax will again be applicable under the rules already in force.
On this basis, the advertising tax must be declared and paid annually by
the advertising intermediary by the last day of the fifth month following the
end of the tax year. Taxpayers subject to advance tax are required to pay the advance tax twice a year and are also required to make a top-up payment by the 20th day of the last month of the tax year. The amount of the advance tax is determined differently depending on whether the tax year preceding the tax year was 12 months or less, whether the taxpayer started its activity without a predecessor or whether there has been a transformation, merger or division in the meantime, for example.
In view of the above, it is therefore advisable to start preparing as soon as possible to revise the rules on advertising tax, in particular the rules on advance payment and filing obligations, in order to meet the advance tax payment obligations that may arise as early as 2023 and for which the 2022 tax year will need to be revised.
Please note that, in certain cases, the person who orders the advertising publication may also become subject to the advertising tax. For this reason, the exemption rules (e.g. whether the advertiser is included in the relevant register) should be reviewed again to reassure the customer.