Act CLI of 2021 on amending the Act XLVI of 2008 on the food chain and its official supervision Act XLV of 2020 on the Retail Tax was published in the Hungarian Gazette on 22 December 2021. The legislation introduces food rescue rules for the highest-turnover food retailers and (partly to these company groups) raises the retail tax rate in the top band of the mentioned tax type. In this current, second part of our two-part newsletter, we present the changes in the rules of retail tax.

The only change is that the rate of the retail tax will increase from the current 2.5% to 2.7% after the part of the tax base exceeding HUF 100 billion (approx. EUR 274 million). The tax rates of the other bands remain unchanged.

The following table summarizes the current, furthermore the future Hungarian retail tax rates (the change shall be applied only after 1 February 2022):

In connection to the change, the amendment also stipulates how the companies affected, i.e. with a turnover above HUF 100 billion (approx. EUR 274 million), must calculate their payable retail tax.

If a company’s payable retail tax base in the tax year including the effective date of the above-mentioned change (1 February 2022) is more than HUF 100 billion (approx. EUR 274 million), then the company concerned may determine its payable retail tax, using one of two possible methods of its choice.

This means, on the one hand, that the change only applies to companies with a retail tax base of above HUF 100 billion (approx. EUR 274 million), and on the other hand, not only to those companies, that are affected by the new food rescue rules presented in the first part of our newsletter.

When using the first calculation method, as a starting point, it should be determined how many calendar days have elapsed in the given company’s tax year until 31 January 2022 (i.e. the last day on which the “old” tax rate is still applicable).

These calendar days must first be divided by 365 (i.e. proportionating; neither 2021 nor 2022 is a leap year) and then the quotient obtained must be multiplied by the annual tax determined according to the tax table in force until that day (the table above shows that for the part above HUF 100 billion, or ca. EUR 274 million, the tax rate is 2.5% until 31 January).

Thereafter, the company must also divide (proportionate) the remaining days of its tax year, not taken into account in the calculation, by 365 and multiply the resulting quotient by the annual tax rates determined on the basis of the new tax table. In this case, for the part above HUF 100 billion (approx. EUR 274 million), the payable retail tax must be calculated with 2.7%.

Under the second method, the taxpayer shall apply the increased, 2.7% tax rate only to the difference between its tax base accruing in its whole tax year and its tax base accruing up to 31 January 2022, provided that the latter is supported by an accounting closure.

As can be seen, the change only applies to companies with a turnover of over HUF 100 billion (approx. EUR 274 million), therefore only a few – almost without exception – multinational companies and company groups are affected.

Should you have any further questions regarding the contents of this newsletter, Grant Thornton’s tax experts are gladly at your disposal.

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.