OUR FEATURED NEWS
1. Introduction of the eVAT system
From 1 January 2024, the so-called e VAT system developed by the Tax Authority will become operational. The system will allow the Tax Authority to prepare draft VAT returns for taxpayers on the basis of the data available to it, thus making it possible to simplify administration considerably, especially for smaller taxpayers. Through the eVAT system, taxpayers can access the data available to the Tax Administration on their VAT returns, in particular invoices received and issued, online cash register data and data on product imports, and they can also produce VAT analyses. The system performs a more extensive check than the ÁNYK software, helping taxpayers to identify and correct potential problems. It is important to note that it is always the taxpayer's responsibility to supplement the draft return with information that is not available to the Tax Administration for whatever reason.
The draft return does not automatically become a tax return, it must be accepted by the taxpayer via the web interface. It is also possible to upload files directly to the eVAT system, if the taxpayer wishes to run system checks on a return prepared with certain accounting software. Before acceptance, it is also possible to review, modify or complete the data in the return. Changes and additions can also be made by a person with secondary user rights in the Tax Authority's system, but only the primary user can accept them.
For the time being, the eVAT system is made available on a voluntary basis, and taxpayers can continue to submit their returns using the traditional form-based system. If a taxpayer submits a return in more than one of the possible ways, the tax return submitted first will be considered the valid return.
Self-assessment of tax returns submitted via the eVAT system is currently only possible by submitting a form in the traditional way, but from 1 July 2024 self-assessment can be submitted via the eVAT interface.
An additional advantage of using the eVAT scheme is that those who declare their deductible tax via the eVAT scheme will be exempt from the obligation to provide information about their incoming invoices to the tax authorities (M pages).
2. Changes due to the abolition of the US double tax treaty
From 1 January 2024, the Hungarian tax legislation introduced a number of simplifications in order to minimize the damage to taxpayers from the expiry of the Hungarian-US double tax treaty on 1 January 2024.
Thus, in the absence of the Convention, the other income rules will not apply to income from securities issued by an OECD resident and interest paid by an OECD resident. Thus, interest income from the US will continue to be exempt from social contribution tax.
For capital income (e.g. dividends, interest, capital gains) earned by a Hungarian resident individual from abroad, there is a possibility to offset the tax paid abroad, while for the same type of income but earned domestically, there is no possibility for such offsetting. Therefore, US withholding tax can be offset against the tax payable in Hungary, but the Hungarian tax payable cannot be less than 5 percent of the tax base.
Transactions concluded with the assistance of a US financial service provider will continue to be considered controlled capital market transactions, so that the transaction loss can be offset against the transaction gain for the year.
3. Introduction of a global minimum tax
From 1 January 2024, the rules of the global minimum tax also entered into force in Hungary, affecting only the largest multinational groups of companies with group-wide revenues exceeding EUR 750 million, including large domestic groups and Hungarian subsidiaries and branches. If the effective tax rate in a given country for a group with such income is below 15% - i.e. the group member is considered to have a low tax burden in that country - then an additional tax will be payable in order to bring the effective tax burden of the group up to 15%. In Hungary, not only the 9% corporate tax, but also the local business tax, the innovation tax and the income tax of energy suppliers are taken into account for the calculation of the effective tax rate, and there are also a number of temporary exemption rules. The first global minimum tax return for the taxpayers affected will be due on 30 June 2026. Given the extensive scope of the global minimum tax regime, it is strongly recommended that taxpayers seek detailed tax advice on the specific circumstances of their tax liability.
OUR DETAILED NEWS
I. Changes to employment-related taxes
In 2024, employers will be allowed to give their employees a small gift three times a year (in previous years this was only possible once). The maximum value of a small gift is 10% of the minimum wage per occasion, which is HUF 26,680 in 2024.
The frequency of declaration of fringe benefits and certain defined benefits will change from month to quarter.
Shares in a start-up company acquired free of charge or at a discount by an employee or a manager in the form of securities are not considered as income at the time of acquisition and are therefore not taxable. The exemption is conditional on the shares not being sold within 3 years of acquisition. A start-up is defined as a micro or small unlisted enterprise registered for five years or less, which has not yet distributed profits and which has not been formed by merger or division.
From 2024, the social contribution tax benefit for labour market entrants will be available only for the employment of Hungarian nationals, EEA nationals and Ukrainian and Serbian nationals.
For simplified employment, the existing flat tax rates will be replaced by tax rates set as a percentage of the minimum wage.
II. Changes related to corporate income tax
In the context of the global minimum tax, a new R&D tax benefit is introduced from 2024, which cannot be used in conjunction with any other type of R&D tax benefit - whether in corporate tax, social contribution tax or business tax - but can be used in the order preceding the other benefits. The new benefit is at the rate of 10 % of the eligible costs, up to 100 % of the tax liability in the year of deduction and for the following 3 tax years. The new tax benefit is applicable at the earliest to eligible costs incurred in 2024, and is narrower in scope than other R&D related tax benefits.
If a shareholding of a company was not a declared shareholding on 31 December 2023, the company may, at its option, declare its shareholding by way of aone-time exception until the 2023 corporate tax return deadline, so that the corporate tax exemption would apply to the disposal of such shareholdings in the future.
The tax benefit for energy efficiency investments and renovations has been reformed, increasing the maximum tax relief to EUR 30 million, but the legal conditions for so-called "alternative investments and renovations" will have to be taken into account when determining the amount of the relief. As a general condition, the investment or renovation covered by the benefit must result in an energy efficiency improvement of at least 20 percent.
From 2024, the statutory scope of unrecognised costs will be extended, while the scope of recognised costs will be narrowed.
The rules applicable from 2024 have broaden the definition of affiliated companies, so that in certain cases a 25 percent ownership stake between sister companies will be sufficient to establish an affiliation.
III. Changes related to VAT taxation
From 1 January 2025, the place of supply of services for participation in virtual cultural, artistic and scientific events will be the country of establishment or residence of the recipient, whether or not the recipient is subject to VAT.
In the case of building works and other services connected with immovable property, subject to an official authorization or declaration, where the authorization or declaration relates to the activity of the supplier of the service, the reverse charge declaration must be made by the supplier to the recipient of the service.