As we informed our clients in our Summer Tax Package newsletters, starting from 2020 the small business tax (SBT) rate will decrease from the current 13% to 12%. SBT is a simplified tax which substitutes for the following three taxes: corporate income tax (9%), social contribution tax (17.5%) and vocational training contribution (1.5%).
The tax rate cut makes the SBT scheme even more attractive for a wide range of companies being eligible for it. The major eligibility criteria are the annual sales revenue and balance sheet total both capped at 1 billion HUF (to be considered on a group level), the annual average headcount capped at 50 employees (also to be considered on a group level) and 31 December balance sheet date.
Generally, it can be stated that the SBT scheme is recommended if a company’s payroll expenses exceed its profit before tax, and if a company is planning on internally financed investments. Since opting for the SBT scheme triggers an obligation for extraordinary preparation of annual accounts, in order to minimize additional administrative burden, it is advisable to schedule the transition for 1 January as the 1st day of a financial year.
Consequently, the period before the year end is the most appropriate for assessing whether or not it is worth opting for the SBT scheme. Our experts would be pleased to assess the tax savings available under the SBT scheme and assist you in making the decision.
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!