Yesterday, Government Decree 62/2023 (II.28.) was promulgated, which modifies the extra profit (or windfall) tax rules with effect from 1 March, but also retroactively in relation to certain provisions. The present issue of our newsletter provides a summary of these changes.

Extra profit tax for pharmaceutical manufacturers

A favourable rules is introduced with retroactive effect for the tax year 2022 whereby companies engaged in the manufacture of basic pharmaceutical products (TEÁOR code 2110) and the manufacture of pharmaceutical preparations (TEÁOR code 2120) will only be required to pay a progressive extra profit tax on their revenue, in bands of 1% to 8%, if their aggregate net revenue from the activities of the under the 2110 and 2120 TEÁOR codes, as calculated on the basis of their latest annual accounts available on the first day of the tax year exceeds 33.33% of their total net revenue. In other words, as a basic rule, for tax year 2022, the data in their annual accounts for the 2020 business year must be used. (Under the earlier rule, even the smallest amount of revenue from the abovementioned activities created an extra profit tax liability for the entire net revenue.)

Contributions to be paid by airlines

On the one hand, the new government decree modifies the minimum and maximum tax rates for contributions to be paid by airlines with effect from 1 March, and on the other hand, it also prescribes a new method of determining the tax base, with retroactive effect from 1 January 2023.

The amount of the contribution for preferential-rate destinations (Albania, Andorra, Bosnia and Herzegovina, Bosnia and Herzegovina, Northern Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, United Kingdom, Norway, San Marino, Switzerland, Serbia, Ukraine and Member States of the European Union):

For all other destinations:

The government decree sets 30 March as the deadline for retroactive reporting by airlines for the month of January, since

• previously, the carbon-dioxide emissions value per seat according to the ACI Airport Carbon and Emissions Reporting Tool had to be used as the basis for calculating the contribution, but this has been replaced

• with retroactive effect to January, and now the average fuel burned during the take-off and landing cycle has to be used, as defined in the Engine Emissions Databank of the International Civil Aviation Organization (ICAO) multiplied by the number of engines and the emissions value (3.16) per seat, as the basis for the contribution to be paid.

In view of the above, as a transitional rule, the entity subject to the contribution payment obligation, i.e. the ground handling company providing passenger and baggage handling services, may revise its January monthly return until 29 April without the obligation to make any additional payment.

Public health product tax (NETA)

With effect from 1 March, in addition to the two previous exemptions, a third one will be introduced (where the buyer sells the goods subject to NETA either directly or after manufacturing its own products in the framework of intra-Community supply or export): from now on, exemption from NETA will also be available for domestic supplies of goods where the goods are used by the buyer to manufacture its product subject to the tax on which it pays NETA. The new exemption will ensure that in case both the raw material and the finished product are products subject to NETA, the product tax liability will arise on the raw material, thereby reducing the cost of production.

It is important to note that the new exemption also requires the seller to submit a declaration in advance and to provide credible evidence that the conditions are fulfilled. (The new government decree sets a uniform time limit of 366 days from the date of the previous declaration for subsequent verification.)

Retail tax

The government decree clarifies that tax subjects whose business year does not coincide with the calendar year must pay the increased retail tax and the advance payment on the special tax for the tax year starting in 2023 if their tax year starts on or after 1 July 2022. In other words, if the balance sheet date of a business engaged in retail activities is 31 August, it will already be liable to pay the higher rate of the special tax for the business year from 1 September 2022 to 31 August 2023.

As a reminder, from 2023, the rate of the retail sales tax will be as follows (depending on the tax base):

• below HUF 500 million: 0% (unchanged),

• between HUF 500 million and HUF 30 billion: 0.15% (previously 0.10%),

• between HUF 30 and 100 billion: 1.00% (previously 0.40%),

• over HUF 100 billion: 4.10% (previously 2.70%).

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If you need further information in connection with the above changes or would like to know how the supplementary taxes will affect your company’s operations, Grant Thornton’s tax experts are at your disposal to assist you and your company.

This newsletter is based on the information available at the date of its publication and is written for general information purposes only; therefore, it does not constitute or replace personalised tax advice in any respect.