Special retail tax in Hungary

Dear Clients! Dear Readers!

In this newsletter the detailed rules of the special retail tax are described.

Pursuant to a Government Decree that entered into force on 1 May 2020 retailers during the emergency period are liable to pay a special retail tax. After the end of the emergency period the special retail tax will remain, the repealed Government Decree will be replaced by a law in force as of 11 June 2020.

Who is it for?

The tax applies to both resident and non-resident retailers,that is, foreign entrepreneurs engaged in distance selling are also considered taxable persons (e.g. webshops).

What sectors does it cover?

The legislation lists the sectors concerned in detail on the basis of TEÁOR numbers:

• 47.1-47.9. retail sale of food and miscellaneous goods (including retail sale of fuel and technical, household, clothing, cultural and leisure goods either in shops or as mail orders)
• 45.1, or 45.32 Retail trade of motor vehicles and motor vehicle spare parts
• 45.40 Retail trade of motor vehicles and spare parts (except repair)

What is the tax base?

• For resident entrepreneurs, the total turnover of the retail activity in the tax year
• For non-resident entrepreneurs, the sales revenue in the tax year for the sale of products transferred in Hungary

How high is the tax rate?

Tax brackets:

• Up to HUF 500 million 0%,
• Above HUF 500 million up to HUF 30 billion 0.1%
• Above HUF 30 billion up to HUF 100 billion 0.4%
• Above 100 billion 2.5%.

The tax bases of affiliated companies must be totted up and the common tax, which was calculated in this way, shall be apportioned among the affiliated businesses in proportion to the turnover, if the related business relationship was established after the Government Decree entered into force, unless the related businesses prove that the transaction giving rise to the related relationship was not intended to avoid special tax.

The deadline for submitting the tax return is the last day of the 5th month following the tax year. If no tax liability arises, no tax or advance tax return is required to be submitted.

Tax payable in the first tax year

Different rules apply to the first tax year than to subsequent tax years:

• For the months of May and June, the tax advance shall be paid according to the rules of the Government Decree. For the first tax year, the advance shall be paid on the basis of the average monthly turnover calculated on the basis of the very last closed accounts (or, if there is none, estimated for the current tax year) for May and June. (The advance had to be declared by 31 May).
• For the remaining months of 2020, the tax advance shall be paid from July in accordance with the provisions of the current law but in the same amount defined by the rules of the Government Decree. The deadline for declaring the advance for the first tax year is August 20. If an advance declaration has already been submitted in accordance with the rules of the Government Decree, it is no longer necessary to submit a separate declaration.
• The tax advance shall be paid in two equal instalments by 20 August and 20 October, respectively. The amount of any advance paid under the Government Decree may be deducted from the amount of the first instalment to be paid.
• The provisions of the law already apply to the actual tax payable for the first tax year: the amount of tax on the total turnover of the first tax year shall be calculated according to the applicable tax rates, however, only the proportional tax for the period from 1 May to the end of the year (66.6% for calendar years) is payable.

Tax for subsequent tax years

In the tax years following the first tax year, the tax advance shall be paid in two equal instalments by the last day of the fifth and the tenth month of the tax year (by 20 July or 20 October for a normal business year). The deadline for declaring the tax advances is the last day of the fifth month of the tax year, and the deadline for declaring the annual tax return is the last day of the fifth month following the tax year.

Our staff will be happy to help you with the calculation and submission of the tax returns.

Best regards:
ABT Treuhand Group