Business tax rebate for micro, small and medium-sized enterprises

Dear Clients! Dear Readers!

Under a government decree, small and medium-sized enterprises (SMEs) can reduce their 2021 business tax liability with regard to the corona virus. We review the detailed rules of this in our newsletter.

How much is the discount rate?

The government decree sets a uniform rate of 1% for municipalities applying a tax rate higher than 1%, so

• 50% discount for a local government with a 2% tax rate,
• a lower discount for municipalities with lower tax rates

is enforceable from the annual tax liability.

What are the conditions for using the discount?

1. Compliance with SME thresholds

Together with partner and related businesses

• • Number of persons under 250, and
  • HUF 4 billion net turnover or balance sheet total (i.e. turnover of up to EUR 50 million or balance sheet total of up to EUR 43 million originally included in the SME Act is limited) and
  • 25% state or municipal ownership.

Undertakings with a direct or indirect majority voting, appointing authority or a decisive management right shall be understood to mean undertakings directly or indirectly, including undertakings operating in the same or a neighbouring market which are indirectly linked by the same natural person (s) having those rights.

In addition, partner enterprises are undertakings which, jointly or with other undertakings, hold a minimum of 25% of the subscribed capital or voting rights of a particular undertaking.

The thresholds must be examined on the basis of the last (consolidated) report, but the company will only lose its SME status if it does not meet the conditions for two consecutive years.

2. Stable management

Those companies should not benefit from the reduction which

• • are considered to be a ‘firm in difficulty’, i.e.

o at least half of their subscribed capital has been lost through a loss, or

o against them, creditors have opened or could open insolvency proceedings, and

• • are subject to insolvency proceedings, or they are in the process of rescuing or restructuring aid

Therefore, if these proceedings have not yet been initiated, the "firm in difficulty" may also be entitled to the benefit.

3. Declared HIPA site

Only those who have declared all their HIPA sites to the tax authority prior to the declaration can use the benefit.

 How to indicate that the company wants to take advantage of the discount?

To take advantage of the discount, until February 25 2021, the No. 21NYHIPA electronic declaration must be submitted, which is available from the NAV form filling programs.

In addition to the company details, the form contains only one declaration of compliance with the above conditions, which must be marked with an “X”.

What does the statement entitle you to?

According to the statement, only 50% of the tax advances due in 2021 will have to be paid.

The liability for the full business year ending in 2021 shall be determined at the reduced tax rate (i.e. the discount shall be applicable to all different business years starting in 2020 and ending in 2021).

What happens if someone misses the February 25 deadline?

The reduced tax rate can be enforced in the annual return regardless of the above declaration. As it is still possible to reduce the tax advance before the due date, a reduction of the advance can be requested in the usual way, with reference to the reduced tax rate in the Regulation. (In this case, of course, in the case of a tax rate lower than 2%, only a discount of less than 50% can actually be claimed.)

Kind regards,

ABT Treuhand Group