Three government decrees have been promulgated in issue no. 74 of the official gazette Magyar Közlöny, published on 8 July 2024, introducing changes and new tax obligations regarding the rules of taxation, the social contribution tax and excess profit taxes. In this article, we summarise the main rules introduced by the three decrees and provide help with their interpretation.
Changes to the rules of taxation
From 1 August 2024, the maximum amount of the default penalty for a number of defaults will increase significantly:
- in general, natural persons will be subject to a default penalty of up to HUF 400,000 instead of HUF 200,000, and non-natural persons up to HUF 1 million instead of the earlier HUF 500,000;
- taxpayers who employ(ed) unregistered employees will be subject to a default penalty of up to HUF 2 million instead of HUF 1 million;
- taxpayers may also be subject to a default penalty of up to HUF
2 million instead of HUF 1 million in case of
- failing to issue an invoice, simplified invoice or receipt, or the invoice, simplified invoice or receipt issued is not for the actual consideration, or
- failing to fulfil their obligation to retain records.
Changes concerning social contribution tax
The possibility of claiming the social contribution tax allowance for employees newly entering the labour market will be reduced for employment relationships established after 1 August 2024:
For the purposes of the social contribution tax allowance, only such citizens of Hungary and non-EEA countries bordering Hungary can be considered as employees newly entering the labour market who worked for a maximum of 92 days in an employment relationship, or as sole traders or members of a company, with an insurance obligation under the Social Insurance Contribution Act, within the 365 days (previously only 275 days) before the month in which their employment started.
The period for which the social contribution tax allowance is valid will be significantly shortened:
- instead of the first two years, only the first year of employment will be eligible for a tax allowance up to 13% of the gross salary, but not more than 13% of the minimum wage;
- instead of the third year of employment, only 50% of 13% of the minimum wage may be claimed as a tax allowance in the 6 months following the first year of employment.
Changes concerning the special tax on credit institutions and financial undertakings
The new rules partly clarify and partly limit the way in which credit institutions and financial undertakings can reduce their special tax payable until 10 December 2024 in case the average daily stock of government securities held by them increases in relation to the average daily stock of government securities they held between 1 January 2023 and 30 April 2023 and between 1 January and 30 November 2024.
The special tax rate of 13% on the part of the tax base not exceeding HUF 20 billion and 30% on the part exceeding this limit remains unchanged. The tax base is also unchanged: the pre-tax profit determined on the basis of the annual accounts for the tax year 2022,
minus the following amounts accounted for the tax year 2022:
- dividends received;
- profits from the supply of goods or services not in the ordinary course of business;
plus the amount recognised as expenses in the tax year 2022:
- special tax on financial institutions;
- financial transaction tax;
- special tax on credit institutions and financial undertakings.
It has been clarified that the nominal value (rather than the cost value, daily market value, etc.) of government securities is to be taken into account for the calculation of the daily average stock of government securities.
Further restrictions have been introduced in terms of the ways of acquisition of government securities that cannot be taken into account when calculating the item reducing the special tax. In addition to the existing repurchase and buy-sell-back transactions, the list of exceptions has been extended to include securities lending transactions and securities financing transactions.
The special tax for credit institutions and financial undertakings for 2024 may be reduced by 10% of the increase in the nominal value of the portfolio of government securities, up to a maximum of 50% of the amount of tax payable for the tax year, calculated without taking this reduction into account.
Changes affecting the special tax on the producer of petroleum products (MOL)
As of 1 August 2024, MOL's special tax liability on the amount of crude oil purchased from the Russian Federation in the current month, measured in barrels, will increase by the HUF equivalent of USD 2.5, as the reduction applied in calculating the world oil price difference will be changed from USD 7.5 to USD 5.
Changes concerning the financial transaction tax
As of 1 August 2024, the base for the financial transaction tax pursuant to Act CXVI of 2012 on the Financial Transaction Tax (FTT Act) will be reduced in two cases:
- in the case of cash payments initiated through an institution operating a Postal Settlement Centre, the part of the amount paid in excess of HUF 50,000 (currently HUF 20,000);
- in the case of a transfer from a payment account of a private individual (except from the account of a sole trader), the part of the amount paid in excess of HUF 50,000 per transfer (currently HUF 20,000).
From 1 August 2024, the financial transaction tax rate will increase:
- As a general rule, the tax rate will increase from 0.3% to 0.45% and the maximum amount per transaction will increase from HUF 10,000 to HUF 20,000.
- The tax rate will increase from 0.6% to 0.9% for cash withdrawals from a payment account and cash withdrawals by means of a cash substitute payment instrument.
Rules concerning the securities transaction tax from 1 August 2024:
- The tax for investment service providers will increase from 0.3% to 0.45%, with the maximum amount per purchase also increasing from HUF 10,000 to HUF 20,000.
- The purchase of financial instruments for the benefit of a private individual (except in the capacity of a sole proprietor) with a value not exceeding HUF 50,000 per purchase (currently HUF 20,000) will be exempt from the securities transaction tax.
Supplementary financial transaction tax
Supplementary financial transaction tax rules will be introduced from 1 October 2024 for the following entities:
- payment service providers having their seat or a branch in Hungary, financial institutions providing credit and money lending services that are not payment service providers, credit institutions authorised to carry out money exchange activities, and prime intermediaries authorised to act as money exchange intermediaries;
- entities having a foreign seat or branch and providing payment service, credit and money lending, money exchange and money exchange intermediation activities in Hungary as a cross-border service;
- investment firms and credit institutions authorised to provide investment services in Hungary;
- foreign entities established or having a branch providing investment service activities in Hungary as a cross-border service.
The new rules do not apply to the Central Bank of Hungary (MNB).
The supplementary financial transaction tax is payable on the following transactions involving conversion between different currencies:
a) payment transactions under Section 3(1) to (3) of the Financial Transaction Tax Act (FTT Act), as well as payment transactions under Section 3(4), point a) of the FTT Act and – with the exception of payment transactions effected by a payment service provider on a payment account held for another domestic or foreign credit institution or for a central contracting party – payment transactions under Section 3(4), point e) of the FTT Act;
b) the purchase of financial instruments pursuant to Section 8/A (1) of the FTT Act;
c) transactions executed by investment service providers for the exchange of securities for the benefit of clients and – with the exception of credit institutions – for the benefit of other domestic or foreign payment service providers, financial institutions, investment firms, investment fund managers and investment funds.
Where an obligation to pay supplementary financial transaction tax would arise in respect of more than one transaction, the obligation is to be satisfied only on the basis of point c) above. The liability to pay the supplementary financial transaction tax arises, in case of points a) and b) on the date of performance of the transaction, and in the case of point c) on the value date of the spot transaction where the exchange transaction consists of one spot and one forward transaction, and on the value date of the first forward transaction where the exchange transaction consists of several forward transactions. For the conversion into Hungarian forint, the official exchange rate published by the MNB for the given date is to be used.
No supplementary financial transaction tax is due for the following:
- a payments initiated by the payer through the payee; and
- transactions within the meaning of Section 3 (4) of the FTT Act.
The basis for the supplementary financial transaction tax is:
- as a general rule, the taxable amount pursuant to Section 6(1), points a) to g), as well as point i) of the FTT Act;
- in the case of the purchase of a financial instrument, the taxable amount pursuant to Section 8/A (2) of the FTT Act;
- in the case of an exchange transaction, the amount to which the order for the exchange transaction relates.
The rate of the supplementary financial transaction tax is 0.45%, but not more than HUF 20,000 per payment transaction.
The supplementary financial transaction tax is to be assessed, declared and paid in the same way as the financial transaction tax.
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This summary 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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.