- Services
- Accounting and Tax automation
-
-
InvoiceProxy
Seamlessly switch from paper to electronic
We offer you the experience of fully data-driven electronic invoicing, with the security of the infrastructure provided by the National Tax and Customs Administration (NAV).
More…
-
TaxConsole
Automate your Invoices with TaxConsole
Our TaxConsole application allows access to NAV’s digital services directly from your computer.
More…
-
-
- Accounting and Tax automation
On 3 March 2020, the European Court of Justice (ECJ) decided in three cases having Hungarian aspects which may, among other things, influence the long-term tax policy of Hungary.
The taxpayers initiating the cases disputed the appropriateness of two Hungarian special sectoral taxes (for store retail trade and for telecommunication services), as well as the sanctions related to advertising tax. In line with the opinion of the advocate general, the ECJ found in favour of the National Tax and Customs Authority in connection with the special taxes, and for Google Ireland Ltd. in the case related to the advertising tax.
In the cases of Tesco-Globál Áruházak Zrt (C-323/18) and Vodafone Magyarország Mobil Távközlési Zrt. (C-75/18), the ECJ found that the different treatment arising from the use of progressive tax rates and the resulting higher taxation of economically stronger undertakings does not constitute an infringement of the freedom of establishment. The ruling in case C-323/18 also established that progressive taxation in the retail sector does not result in a selective advantage; in other words, it cannot be regarded as state aid provided for lower-turnover undertakings. It should also be noted that, on the basis of the ruling in case C-75/18, the special telecommunications tax is not a turnover tax, and its application is not contrary to EU law.
In the case of Google Ireland Ltd. (C-482/18), the ECJ found that the disproportionate fine imposed for failure to register for tax purposes and the limited legal redress result in a restriction of the freedom to provide services.
As a result of the rulings concerning the special sectoral taxes mentioned above, legislators in the Member States, including the Hungarian decision-makers, may consider the widening of the practice of imposing revenue-based progressive taxes.
In our newsletter, we summarized those changes in legislation passed last year that may have an effect from 1 January 2020 on the preparation of transfer pricing documentations, as well as other related obligations and procedures.
- In connection with the special provisions pertaining to tax avoidance practices, the definition of associated enterprises has been refined.
- Pursuant to the transposition of Council Directive (EU) 2016/1164 of 12 July 2016, there is a tax payment obligation on transfers of assets and business, as defined in Act LXXXI of 1996 on corporate income tax and dividend tax (CIT Act). In the course of such exit transactions, the basis of the tax liability is the difference between the market value and the calculated book value of the transferred assets and business, provided that the CIT Act does not otherwise impose an obligation to adjust the tax base for reasons giving rise to the exit.
- In case of non-cash contributions, the transfer pricing rules must be applied also in case of members (shareholders) gaining majority control as a result of the non-cash contribution.
- Such cases of share capital withdrawal where the taxpayer decides to transfer a business share acquired by it for consideration to is members free of charge, within one year, in proportion to their existing business shares, or to withdraw a business share with the application of the rules of share capital reduction, shall also be subject to transfer pricing documentation requirements.
- The retention period for documents related to the determination of tax liabilities on income or assets subject to treaties on the avoidance of double taxation will be increased to ten years.
- The information exchange between Hungary and the United Kingdom (CbCR – Country-by-country report) will remain in place after the exit of the latter from the EU.
In connection with case no. Kfv. I.35.550/2018/12 of the Curia, we call the attention of our clients using cash pooling that the Curia ordered the first-instance tax authority to conduct new proceedings in the case, and simultaneously also repealed the first-instance decision providing that the parent company could not collect deposits, and therefore, it could not earn interests after deposits in connection with such amounts, only loan interests. The press release of the Curia can be found at the following link:
https://kuria-birosag.hu/hu/sajto/kuria-hatarozata-szerint-transzferarazas-kerdese-az-alapul-szolgalo-tenyallas-fuggvenyeben
We hope that you found our summary useful. If you have any further questions in connection with this topic, we are at your disposal.
On 11 December 2019 the Parliament enacted the social security related tax law amendments. In our present newsletter we provide a summary overview of these amendments, and discuss the most important changes. Please contact our experts in case you need further information about the details, the entering into effect, or the transitional rules.
SOCIAL SECURITY CONTRIBUTIONS
The Act on Social Security Contributions has been amended in such a way that the new act is drawn up incorporating the current Act on Social Security Contribution and its implementing decree, supplemented with new, modifying rules. The new act will enter into force on 1 July 2020, in such a way that incomes earned until 10 July 2020 and constituting the base of contributions for June 2020 will still be governed by the rules in effect on 30 June 2019.
The general rules applicable to the payment of benefits will be amended in accordance with the following:
- The earlier pension, health insurance and labour market contributions have been combined under a single 18.5% social insurance contribution, thereby reducing the administrative burdens. A further advantage of the combination of the contributions is that the family benefit allowance will now cover the 1.5% labour market contribution as well.
- Apart from the social insurance contribution, only the pension contribution will be specifically prescribed, which is to be paid after certain benefits (childcare benefit, childcare assistance fee, child raising support, jobseeker’s allowance, etc.), the rate of which will remain 10%.
- The monthly amount of the healthcare services contribution will increase to HUF 7,710 (i.e. HUF 257 per day).
- The income generating activities of pensioners in their own right will be now fully exempted from social insurance and contribution payment obligations (earlier only their employment income was exempt). In addition, the income payer is also exempted from its obligation to pay the social contribution tax when paying independent or non-independent remuneration to such pensioners.
The lower limit of the contribution payment has been redefined, and the base of the income serving as the basis of contributions has been changed.
- From 1 July 2020, in case of employment income, the lower limit of the contribution payment defined as 30% of the minimum wage will be the income constituting the minimum contribution base, on which the social insurance contribution must be paid, with any derogations from this rule only permitted in the cases listed in the law. This provision has a disadvantageous effect for employees who are not pensioners, work less than 12 hours per week in positions not requiring vocational qualifications and do not receive benefits such as GYES or GYED, and are not in full-time education or in vocational training programmes. The scope of the provision does not cover cases where the legal relationship started or ended during the month, or where the insurance coverage did not exist for the whole month, or when – in the given month – the private individual received sick leave / accident sick pay / took an unpaid leave for taking care of a sick child aged under 12 years.
- A favourable change for both incorporated and self-employed (non-incorporated) entrepreneurs is that the social insurance contribution must be paid, in a unified manner, at least on the amount of the minimum wage (guaranteed wage minimum). Currently, the minimum wage (guaranteed wage minimum) constitutes a minimal contribution base only in case of the pension contribution, while in case of the health insurance and labour market contributions, this amount is one and a half times the amount of the minimum wage (guaranteed wage minimum). Simultaneously with the above change, the use of the expression “lower limit of contribution payment” will be discontinued in case of both incorporated and self-employed (non-incorporated) entrepreneurs.
It will be an administrative simplification in the rules governing family contribution allowances that private individuals do not have to recalculate and repay family contribution allowances applied during the year if they assess in their annual tax return that they still have a personal income tax payment liability. In such a case, only the personal income tax needs to be paid.
The rate of the pension contribution to be paid on the basis of agreements pertaining to pension benefits (agreements concluded with the purpose of accumulating service time for retirement purposes and making pension contributions, as well as agreements for accumulating service time) will be reduced from 24% to 22%.
In the system of healthcare services contribution, the following changes have been made:
- the scope of those required to pay the healthcare service contribution will be changed;
- after 1 July 2020, if a person required to pay healthcare service contribution fails to perform his or her payment obligation, and the amount of the arrears exceeds three times the amount of the contribution, the TAJ (social security number) will be invalidated, and as a result the person concerned cannot use the healthcare services supported by Social Security free of charge. The latter does not apply if the person paid up the contribution debts before using the healthcare services;
- persons insured in another member state of the EEA can use healthcare services in Hungary with their European health insurance cards. The amendment makes it clear that in case a person does not proceed in accordance with the above, but pays a healthcare service contribution (even though he or she is not required to do so) and uses healthcare services in Hungary on the basis of the above, then such person will be required to reimburse the costs of the healthcare services charged to the Health Insurance Fund.
The provisions concerning the application of the social security agreements and of the coordination decrees, earlier regulated in a government decree, have been enacted into statutes, without any change in their content. The minimum requirements pertaining to the certificates and documentation accepted by social security agencies as proof of certain facts and statements have been moved from the government decree into the annex to the act.
SOCIAL CONTRIBUTION TAX
From 1 July 2020, there will be no social contribution tax payable on the income generating activities of pensioners in their own right.
In accordance with the lower limit of contribution payment introduced in case of the social insurance contribution, the Act on Social Contribution Tax has also been amended with the requirement that from 1 July 2020, the social contribution tax must be paid by the employer after at least 30% of the minimum wage even in case the income earned is lower than that.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!
Several tax bills submitted in November were passed into law by Parliament on 3 December 2019. In our present newsletter, we provide a summary overview of the amendments, and discuss the most important changes. Further tax bills concerning the social security contributions are still before Parliament. We will keep informed our clients on these amendmends, too. Please contact our experts in case you need further information about the details, the entering into effect, or the transitional rules.
VALUE ADDED TAX (VAT)
The most important change in the VAT Act is that from 1 July 2020, the data supply obligation related to invoices will be extended in several steps.
- As a first step, from 1 July 2020, it will be not only in case of invoices issued to Hungarian taxpayers and having a VAT amount of HUF 100 thousand or more on which data must be supplied, but on all transactions where the place of performance is within Hungary, if provided for Hungarian taxpayers (with the exception of intra-Community supplies of goods). At the same time the value limit will also be eliminated on the side of the party accepting the invoice. This means that taxpayers accepting invoices are obliged to report on sheet “M” of the VAT tax return form all invoices with respect to which they exercise their right to deduct VAT. Related to these measures, also from 1 July 2020, all invoices must indicate the first eight digits of the Hungarian tax number of domestic partners.
- Then, from 1 January 2021, the scope of the data supply obligation will be extended further, to include all invoices issued by taxpayers in accordance with the Hungarian rules. As a result, this obligation will also apply to invoices issued to persons that are non-VAT taxable persons (however, in such a case, no data is to be supplied on the name and address of the buyer), as well as to the tax-exempt intra-Community supply of goods and to the export of goods. The only exceptions will be invoices issued for the distance selling of goods or supply of services (transactions realized in the framework of a one-stop-shop system), as well as transactions where the place of performance is another EU member state.
From 1 July 2020, invoices will have to be issued within 8 days, as opposed to the current 15-day time limit.
The effective version of the VAT Act does not prescribe the issuance of invoices in connection with certain VAT-exempt transactions, provided that the taxpayer issues some other accounting note. After 1 July 2020, however, it will be mandatory to issue invoices for the following:
- other education activities;
- the VAT-exempt sale of real estate property;
- the provision of human health services;
- the provision of dental and dental technician’s services;
- certain services provided by a cooperative community for its members.
Therefore, even though the transactions mentioned above will remain tax-exempt, after the amendment enters into force, an invoice will have to be issued on the performance of these transactions.
In addition, the VAT Act defines the scope of tax-exempt other education and training activities in line with the new Act on Vocational Education and Training and the amended Adult Training Act. “Other education activities” will include:
- vocational education and training organized on the basis of the new Act on Vocational Education and Training, as well as the related examinations;
- education or training programmes organized on the basis of a notification/permit as defined in the Act on Adult Training, as well as the related examinations;
- language teaching programmes, as well as state or internationally accredited language examinations; and
- the organization of academic and talent management competitions.
With respect to trainings organized in accordance with the earlier rules of the Act on Adult Training, the VAT-exemption must be determined on the basis of the provisions of the VAT Act in effect on 31 August 2019.
After the promulgation of the act, the scope of the cases where taxpayers can amend their choice of the mode of taxation by way of an application for correction was extended. Thus, the application for correction can be used, for example, with respect to the choice of the mode of taxation for distance selling of goods or supply of services, as well as for the tax assessment in HUF for the use of the medium exchange rate of the Central Bank of Hungary (MNB).
PERSONAL INCOME TAX
From 2020, private individuals as beneficiaries may open long-term investment contract (“TBSZ”) accounts also with fiduciary trusts and private trusts. . The yields generated will be subject to tax in accordance with the rules applicable to TBSZ accounts, with the provision that tax liabilities that may arise in connection with the yield are to be paid by the trust manager from the assets of the trust, and the obligation to file tax returns will also bind the trust manager.
In line with the above change, the yields of assets held in TBSZ accounts opened by fiduciary trusts and private trusts will be subject to tax under the rules applicable to TBSZ accounts and not as dividend income
The new rule was introduced as part of the autumn tax package last year related to the changing of the cafeteria system. According to this rule, from 2020 tax credits that private individuals are entitled to must be first applied by the income payer against the taxes and contributions on wage incomes, and only afterwards should they be applied against the taxes and contributions on cafeteria benefits (the cafeteria benefits being taxed as wage income from 2019). This new rule will not enter into effect. It has been determined that this provision would make the application of the law more cumbersome, and therefore, the provision will not enter into effect.
SOCIAL CONTRIBUTION TAX
The amendment grants an exemption from the social contribution tax to companies paying the simplified entrepreneurial tax (EVA) after dividendspaid to their members and to income withdrawn from the enterprise, retroactively from 1 January 2019 (in order to restore the situation before 1 January 2019).
CORPORATE INCOME TAX
- The possibility to apply for an exemption in connection with the late payment of the tax advance was restored.
- The tax exemption for fiduciary trusts established by natural persons (if only managing assets for the benefit of the natural person) will be supplemented in such a way that not only the possession of assets granted, but also their receipt will be tax-exempt.
- In connection with spectator team sports, the meaning of the term “general training” has also been modified in accordance with EU law, and the term “joint training” has been introduced.
- In connection with the passing of the new Act on Vocational Training, the tax base reducing item available for vocational students was also modified. As a result of this change, the 24% per person of the minimum wage, for each fraction of a month, in effect on the first day of the tax year, may be used as tax base reducing item after students participating in vocational training in places of dual training, and the reducing item that could be applied on the basis of a cooperation agreement concluded with the school (12% of the minimum wage/month/student) will no longer be applicable.
LOCAL TAXES
The amendment removes from taxpayers of local taxes institutes of higher education maintained by trust foundations established by the state and operating as publicly useful organizations.
In addition, the amendment also sets forth that the tax revenue from the local business tax must be primarily used – in case of the Municipal Government of Budapest, pursuant to a separate act – for the purposes of performing the municipal tasks related to public transportation, and any remaining tax revenue must be used, in particular, for the financing of social benefits subject to the scope of competence of the municipal councils.
STAMP DUTIES AND FEES
It is a significant change that Act on Stamp Duties and Fees has been amended with new provisions, aimed at eliminating speculation with the inclusion into the developed area of settlements of real properties previously outside such developed area. Pursuant to these provisions, the seller of such newly included properties (as the beneficiary of gain) will be required to pay a 90% property transfer fee after such real properties or the business quota of companies holding such property. The base of the fee is the difference between the market value of the property at the time it was acquired and when it was resold. In case of business quota, this difference is to be taken into consideration in the proportion of the business quota sold to all business quotas in the company.
In connection with the new provision, the new concept of “company holding real property included in the developed area of settlements” is added to the Act on Stamp Duties and Fees. This denotes a business entity that is the – direct or indirect – owner of real property located in a recently developed area of a settlement.
The amendment excludes the use of fee reductions or exemptions in case of such transactions; however, preferential transactions (preferential transformation, preferential share exchanges, preferential transfers of assets), as well as transactions between affiliated enterprises will remain exempt also in the future.
These new provisions will affect real properties included in the developed area of settlements after 31 January 2020. The real properties to which the new provisions apply are those that were included into the developed area of settlements during the term of their ownership or the holding of a related property right by their respective owner (or in case of gifts, their donor), but not earlier than 10 years before the transfer. Excluded from the scope of such properties, however, are those sold in the 6th year after their acquisition or thereafter, as well as properties acquired by way of inheritance.
The tax authority determines the amount of the property transfer fee to be paid by way of assessment, on the basis of the seller’s notification.
A further change is that the provisions concerning asset management trusts have also been introduced in the Act on Stamp Duties and Fees. Asset management trustswere introduced in the Hungarian legal system in March 2019. They constitute a kind of a blend of private funds and fiduciary trusts, but at the same time also have some unique features of their own. On the basis of the amendment, the rules of the Act on Stamp Duties and Fees applicable to fiduciary trusts must be applied to the acquisition of assets by asset management trusts, their founders and their beneficiaries. A fee exemption is available for the acquisition of assets by asset management trusts within the scope of their asset management activities.
THE ACT ON THE RULES OF TAXATION
- A taxpayer starting its activities during the year may submit an application to join a corporate income tax group at the time when registering with the tax authority.
- In line with the provisions of the VAT Act applicable to the reduction of the tax base due to irrecoverable claims, from 1 January 2015, the tax authority has been continuously making available, via a query interface, the list of taxpayers with high tax arrears and tax debts.
- From 1 January 2020, independently from the existence of assumption, the tax authority may notify the parties concerned only if the breach of law has been established in a binding decision. Pursuant to a new related requirement, the tax authority will notify private individuals in the form of an information letter concerning the failure of their employers to pay the taxes and contributions related to their employment.
- With a view to the time needed for IT developments, the rules applicable to changes made after the closing of an EKAER number will be first applicable to notifications made after 1 March 2020.
ACCOUNTING RULES
The limit of acquisition or manufacturing value subject to immediate depreciation write-off has been changed from HUF 100 thousand to 200 thousand.
A further change in the Act on Accounting follows the amendment of the Act on Transformations, which narrows the scope of the cases where the draft balance statements and inventories of assets have to be audited by an auditor. (The Act on Transformations, however, continues to require, also after this amendment, that the final balance statements, as well as the final inventories of assets supporting them, must be audited by an auditor in all cases.) It has been clarified that, in addition to the balance of assets, the supporting inventory of assets will also be considered as supporting accountingdocument of transformations.
The Civil Code provides that additional capital contributions made that were not necessary to make up for losses should be repaid to the shareholders; however, the Civil Code does not prohibit waiving the claim to such repayments. Previously, the Act on Accounting did not contain accounting rules for such waived claims. According to the new rules, such amounts are to be transferred from the fixed reserve to the retained earnings reserve, on the date of the waiver. The new rule must be applied for annual reports for business years starting in 2020; however, it may already be applied for the annual report for business years starting in 2019.
In line with the amendment of the Act on Public Company Information, the Act on Accounting has been also amended with the provision that changes in the company data must be recorded in the accounting records with the date of the change if such date is different from the date of the recording in the Company Register.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!
It is estimated that a typical organisation loses 5% of revenues a year as a result of fraud, but the impact of fraud runs deeper than direct losses and the costs of investigation and recovery. Fraud damages staff morale and raises questions regarding the competence of management, damages business reputation, and at its most extreme provides a direct threat to the longevity of any organisation. Today, the threat of fraud comes from a wide range of sources, often with an international element, and requires a proactive approach to identifying and addressing fraud risk.
Grant Thornton helps dynamic and growing businesses achieve their objectives by identifying and implementing an appropriate counter-fraud strategy, embedding zero-tolerance policies, assurance and monitoring solutions. But, if problems arise, we are experienced in undertaking robust investigations with the support of cutting edge digital forensic technology.
We report to a wide range of stakeholders such as in-house counsel, executive and non-executive directors. In each investigation we give consideration and insight as to how losses can be recovered, in order to support asset tracing and recovery, and litigation across the globe. We offer the full range of services to assist organisations in addressing their fraud risk.
Proactive solutions
Governance and risk assessment
Fraud risk comes from a myriad of different sources located inside and outside of organisations and increasingly comes in the form of cyber crime. But where to begin?
Implementation and monitoring
Developing a counter-fraud strategy is important. Ensuring that it is applied, properly understood and allowed to evolve as risks change is essential.
Reactive solutions
Investigation and reporting
Allegations of fraud create profound difficulties for businesses. These challenges can be reduced if response processes are already in place (including having a fraud response plan). Practical and strategic issues will then need to be considered, potentially including regulatory disclosure, the scope of the investigation, legal privilege and access to people and data.
Remediation
Remediation offers the opportunity, not only to recover losses, but also the costs of investigation and wasted management time. Remediation provides a means to mitigate future fraud risk.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!
A few days ago, the Court of Justice of the European Union (ECJ) published its order in case no. C-292/19 of PORR Kft., which makes it clear that member states must allow the decreasing of the VAT base (and thereby also a reducing of the applicable VAT) in case it can be proved that a claim has become finally irrecoverable.
In case of irrecoverable, or bad debts (and subject to compliance with strict conditions), the Hungarian VAT Act will allow the decreasing the VAT tax base from 1 January 2020. Under the transitional provisions, the amendment will be applicable to irrecoverable claims arising from the supply of goods or services in the years 2016 to 2019.
In our present newsletter, we would like to call attention to the fact that the above decision of the ECJ has created an opportunity for businesses to reduce their tax base, in the framework of a separate procedure, and thereby reclaim certain amounts of VAT already paid. This separate procedure may be started within 180 days of the publication of the order; however, it is worth starting the procedure already in 2019, since:
- at the end of 2019, certain earlier periods of tax returns will be subject to statutory limitation;
- until the end of 2019, the reduction of the tax base and thereby of the VAT due is also possible with respect to such claims which were deemed finally irrecoverable (until the end of 2019), but which do not satisfy the strict rules in effect from 2020, for example, by reason of the fact that their performance date was before 2016.
Our experts are at your disposal to answer any questions that may arise in connection with the above, as well as with the professional and quick drafting of the request for the VAT refund.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!