The first four-day break of 2022, a long weekend that includes 15 March, is approaching. In addition to rest and historical commemoration, there are important tax liabilities related to this date – more precisely, the first working day that follows it, i.e. 16 March –, which we summarize in our current newsletter.

Local Business Tax (LBT)

Taxpayers, whose financial year is equivalent with the calendar year, must pay local business tax advance until 16 March.

The general rules for determining the amount of the LBT advance have not changed: the advance to be paid by 16 March 2022 is based on the last known LBT liability (for the business year 2020): half of the amount of the local business tax paid for the 2020 tax year.

However, as we wrote in our previous newsletter, certain SMEs can apply until 25 February 2022 for a discounted 50% LBT advance payment. We would like to point out again that this deadline is not a preclusive period: in case of missing the deadline, it is possible to apply for a justification, but should the company has LBT liabilities in several settlements, it must submit the justification request separately for each municipality.

On the basis of the applications received, the amount of the LBT advance to be paid will be halved ex officio without a decision, so it is worthwhile for the taxpayers concerned to complete their applications that have not yet been submitted by 16 March.

There is an administrative simplification with the introduction of a new tax form this year (called “22HIPAK”), taxpayers will be able to file their LBT on a batch form for each of the municipalities involved (as opposed to the previous practice of preparing them separately for each municipality).

Vehicle tax

The vehicle tax, still often referred to as “weight tax” in the common language, is levied not only on companies but also on individuals, and its exact rate (in the case of passenger cars) can be determined by the performance and age of the given vehicle.

From 2021, the tax duties related to vehicle tax have been performed by the Hungarian Tax Authority (HTA, or after its Hungarian abbreviation: “NAV”), replacing the municipal tax authorities.

In 2021, the HTA sent a decision on the vehicle tax to the taxpayers involved (i.e. those, who were on the vehicle register on 1 January as an operator or owner). In contrast, in 2022 (if the vehicle tax liability specified in the aforementioned decision has not changed), the HTA will only send a notice to the taxpayer about the annual vehicle tax, not a new decision.

As a general rule, the annual vehicle tax must be paid in two equal instalments, the first one being due on 16 March and the second one on 15 September.

A change compared to last year is that the amount of the vehicle tax must no longer be rounded to thousand forints (kHUF) this year, but to an exact amount, so the regulation criticized by many last year has been remedied.

Building tax and land tax

If the municipality concerned has introduced these tax types, the owner according to the data in force on 1 January must pay the first instalment (half of the annual tax liability) in respect of these taxes by 16 March.

Requests for tax relief and reduction

The recent period has posed a major challenge to all participants of the economy: the latest wave of the COVID-19 pandemic seems to be coming to an end, but the Russian-Ukrainian conflict is already causing a series of economic difficulties. Thus, many otherwise stable companies may be affected by the possibility of extraordinary tax relief or tax reduction.

Under a law released on 17 November last year, taxpayers will be able to take advantage of tax reliefs, that were already available last year, until 30 June 2022. This means, regardless of whether the given taxpayer used these in 2021, the taxpayer will have the opportunity to do so again this year.

It is important to note that although the law describes two types of options, one taxpayer can only use one, only once, and not to an unlimited extent:

• a deferred payment of up to 6 months or a payment of instalments of up to 12 months may be applied for, in both cases up to a maximum of HUF 5 million (EUR 12,500), if the applicant at the same time as submitting the application, renders it probable that the payment difficulty is due to the (COVID) emergency situation; OR
• at the request of the taxpayer, the tax debt may be reduced once, by a maximum of 20%, but not exceeding HUF 5 million (EUR 12,500), provided that the payment of the tax debt would make the applicant’s economic activity impossible for a reason attributable to the emergency on request.

As can be see, currently, only the COVID can be referred to as a difficulty in the application, the question is whether this possibility will be extended in the near future – if so, we will of course inform our readers about it.

Until the local business tax advance is due (16 March), companies can apply for a reduction in the LBT advance to the municipalities concerned, as they are required to pay the LBT advance based on the previous period, but their expected LBT liability will not reach the amount of their tax advance according to their previous period.

It is important that in the application for the reduction of the LBT advance the available information and business plans relevant to the LBT calculation shall be presented and based on them the amount of the expected LBT liability shall be determined.

Should you have any questions regarding the above, or should you wish to have professionals apply for extraordinary tax relief or tax reduction, Grant Thornton’s tax experts will gladly assist you and your company.

This newsletter is written on the basis of the information available on the day of its publication and is for general information purposes only, so it does not in any way constitute or replace personal tax advice.