Tax changes in the second half of 2023 and in 2024

Dear Clients, Dear Readers,

The Hungarian Parliament has adopted the tax changes that will come into force at mid-year and the beginning of next year, which are summarized in this newsletter.

Social contribution tax

As of 1 July 2023, interest income, including income from securities (bonds), is subject to a social contribution tax of 13%, which applies to deposits and securities purchased after 1 July 2023.

Some forms of savings are not affected by the higher tax, so only 15% personal income tax will continue to be levied on the following income:

• yields and interest paid on units of real estate funds
• income from controlled capital market transactions (e.g. in case of sale at a profit)
• dividends (on shares, participations)

Interest on residential government bonds, housing savings deposits and baby bonds is not considered as income and will remain fully tax exempt in the future.

In order to ensure equal opportunities, as of 1 August 2023, a partial reduction may be granted for the employment of workers in receipt of disability allowance or personal allowance for the blind who do not have a complex qualification certifying a changed capacity for work.

As of 1 November 2023, the law stipulates that the social contribution tax credit for labour market entrants does not apply to guest workers.

Excise duty

Excise duty on fuel will rise in 2024. For petrol, the excise duty will rise from 120 HUF to 152.55 HUF per litre above the world price of 50 USD per barrel, and to 125 HUF to 157.55 HUF per litre below the price of 50 USD, while for diesel, the excise duty will rise from 110.35 HUF to 142.9 HUF per litre above the world price of 50 USD per barrel, and to 120.35 HUF to 152.9 HUF per litre below the price of 50 USD. The increase in fuel prices for final consumers is likely to be higher than this, as the excise duty is included in the VAT base.

EPR - Extended producer responsibility scheme

The new waste management rules introduced as of 1 July 2023 were explained in detail in our May newsletter. New rules have also been introduced in addition to the previous ones:

• possibility to pay the liability fee at the time of taking into stock instead of placing on the market
• the invoice must indicate that the liability fee has been paid, except in the case of retail distribution
• reusable packaging will be introduced, which may in certain cases exempt reusable packaging from the payment of the fee
• completed and sent data can be amended retrospectively until 31 March of the year following the year in question.

VAT

The change in the product fee system also affects the VAT Act. As of 2024, the new redemption fee system will come into force, so going forward, the VAT base for non-reusable products with a mandatory redemption fee (e.g. PET bottles) will not include the redemption fee by default. However, it is considered a supply of goods if the goods with such a redemption fee are not returned and sales tax is payable thereafter. The tax base is then the redemption fee itself (e.g. for products with a volume of less than 6l, the planned redemption fee is HUF 50). For these products, the redemption fee is deemed to have already included VAT. In the case of products not redeemed for VAT, the taxpayer operating the deposit refund system is obliged, and the date of determination of the VAT liability is the last day of the calendar year.

As of 1 January 2024, the VAT rate for publications (newspapers) published at least four times a week will be reduced from 5% to 0%.

A change has already come into force that VAT charged on the purchase of real estate can still not be claimed in a foreign VAT refund application, unless the property in question is acquired by a taxable person established in another Member State of the Community.

The VAT Act introduces the concepts of e-receipt and e-cash register, which anticipate the use of these electronic solutions.

Corporate income tax

Accrued losses incurred up to the last day of the tax year starting in 2014 would be available for use indefinitely. Under current rules, such losses still available can be claimed no later than the tax year ending 31 December 2030.

A development tax credit may be claimed for investments of strategic importance for the transition to a net zero emission economy. The relief is available for investments in the production of batteries, solar panels, wind turbines, heat pumps, electrolysers, carbon capture and storage equipment or direct components thereof, or the production or recovery of raw materials for the production of such components.

Local business tax

An air passenger transport business is a business that derives at least 75% of its turnover from air passenger transport and related services. In the case of such businesses, the local business tax establishment is not only the area of the municipality where the head office or office is located, but also the area of the municipality where the flights depart from the airport, and therefore local business tax is payable on the share of these establishments. In addition, the local business tax base of foreign-based air passenger transport companies includes the consideration for their flights from Hungary and the services provided in connection with these flights.

Innovation contribution

The innovation contribution base will be aligned with the local business tax base, so that any transfer pricing adjustments will be taken into account not only in corporate income tax and local business tax, but also in the payment of the innovation contribution. In the case of a tax base adjustment, it is not sufficient to adjust to the lower or upper value of the normal market price band, but the median value of the price band is used as the basis for the adjustment.

Contribution from airlines

From August, the tax on airlines, previously regulated by government regulation, will continue to exist as a kind of green tax. It will remain the responsibility of the entity providing ground handling services. The specific amount of the contribution depends on whether the destination of the journey is in Europe or outside Europe and, to reinforce the green tax, on the carbon dioxide emissions per seat. The aircraft operating company must report the emissions value to the ground handling organisation by the 5th day following the end of the reference month. The contribution must be declared and paid monthly by self-assessment by the 20th day following the month to which the contribution relates.

Changes to the binding-ruling fee

As a result of the amendment, it will also be possible to submit a binding-ruling application to the Minister of Finance for a fee of HUF 10 million for model contracts. In other cases, the fee for a binding-ruling will increase from HUF 5 million to HUF 8 million, and from HUF 8 million to HUF 12 million in the case of an emergency assessment.

Kind regards,

ABT Treuhand Group

The above summary is provided for information purposes only. We recommend that you consult our experts before making any decision based on this information. For more information about our services, please visit our website: www.abt.hu