On 30 November 2023, Act LXXXIII of 2023 on the amendment of certain tax laws and Act LXXXIV of 2023 on additional taxes to ensure a global minimum tax level and amending certain tax laws in this context (hereinafter jointly: the Autumn Tax Package) were promulgated.
The Autumn Tax Package proposes to make comprehensive changes to the Hungarian tax system and introduces a number of new legal institutions. In order to provide a more detailed and comprehensive picture of the changes, the Autumn Tax Package is presented in a series of professional publications, the present, fifth part of which is devoted to changes related to the small business tax, energy suppliers' income tax, public health products tax, public utility lines tax, advertising tax, retail sales tax, local taxes, property transfer tax and the contributions to be paid by airlines (the first part on corporate tax is available here, the second one on tax administration here, the third part on VAT here, and the fourth part on changes in personal income tax, social security tax and social security contributions here).
Small business tax (“KIVA”)
The Autumn Tax Package adds some new cases in which companies cease to be subject to KIVA from 1 December 2023. KIVA taxpayer status will end on the day before the date of the change of form if the private limited company changes its legal form to a public limited company.
According to the basic rule, a company cannot choose KIVA within 24 months after its KIVA taxpayer status ended. However, under the Autumn Tax Package, from 1 December 2023, KIVA may be chosen again if the taxpayer lost its KIVA status earlier due to a merger or de-merger that does not qualify as a preferential transformation as defined in Corporate Income Tax Act (i.e. in case the transformation took place at book value), which the taxpayer notified to National Tax and Customs Administration (hereinafter: “NAV”) within 15 days after the date of the merger or de-merger (and provided that the taxpayer meets the conditions for becoming a KIVA tax subject). In this case, the unused carry-forward of accrued losses (in proportion to the share in the balance of assets) may be carried forward.
Income tax of energy suppliers
For the purpose of legislative harmonisation, the rules on tax relief for investments and renovations for energy efficiency purposes will be amended in the Act on improving the competitiveness of district heating, and a new energy efficiency allowance for buildings will be introduced. The changes to the corporate income tax relief for energy efficiency investments and renovations are discussed in our first professional publication on the Autumn Tax Package, which focuses on corporate income tax.
Public health product tax
The Autumn Tax Package elevates to the level of Act of Parliament the government decree in force during the state of emergency (Government Decree 441/2023 (IX. 27.) on the different application of Act CIII of 2011 on the Public Health Product Tax during a state of emergency). The definitions of recreational and leisure sports, as well as health promotion programmes is amended, the latter of which is defined as activities, programmes, campaigns and investments supported by the work organisation of the minister responsible for the Active Hungary programme from the allocation made for this purpose. NAV transfers the amount offered by taxpayers to finance the Active Hungary programme to the appropriation for the support of these programmes, and informs the minister responsible for Active Hungary of the amount offered.
Tax on public utility lines
From 1 January 2024, the Autumn Tax Package removes communication lines from the scope of the public utility lines tax. Subsequently, from 1 January 2025, Act CLXVIII of 2012 on the tax on public utility lines will be repealed, and thereby this tax type will be abolished.
Advertising tax
The Autumn Tax Package extends the end date for the suspension of the advertising tax by another year. Therefore, until 31 December 2024, the tax rate will remain 0% of the total tax base.
Retail sales tax
The Autumn Tax Package enacts the rules applicable to the assessment of the retail sales tax for tax years shorter than 12 months, which were previously regulated by a government decree. In the case of a fraction of a year, the taxable amount must be annualised, and this annualised amount is to be used to determine the calculated annual taxable amount for 12 months, based on the bands in the scale of rates. The tax payable is a proportion of the annual tax thus calculated in relation to the calendar days of the tax year.
Local taxes – Tourism tax
As of 1 January 2024, the Autumn Tax Package adds to the group of relationships subject to public service obligations the obligation performed under a legal relationship subject to the Act on special status bodies and the status of their employees, as well as employment in public education as defined in the Act on the new career system of teachers. This means that persons employed by special status bodies and those employed in public education are exempted from paying the tourism tax when they are staying in commercial accommodations in territory of a municipality in connection with the performance of their duties.
Local taxes – Local business tax (“HIPA”)
The deposit return system (“DRS”) will enter into force from 1 January 2024, and therefore the definition of manufacturer and distributor were introduced in the legislation on HIPA. In the case of a manufacturer or distributor, under the Accounting Act, the deposit amount will be considered as net sales revenue when the related goods are sold, and the deposit fee is recognised as an increase in the cost of goods sold (“COGS”). The amount of the deposit fee received on the same product will then be deducted from COGS. Given that the deposit fee is charged on the basis of a provision of law, it is appropriate to treat it as a tax-neutral charge in the calculation of HIPA, and therefore the amount of the deposit fee is not to be included in either the net sales revenue or the amount of COGS when determining the tax base.
Property transfer tax
From 1 January 2024, the construction and purchase of new residential units, as well as the purchase or extension of used residential units that was implemented on a small settlement with the use of family housing benefit (hereafter: “CSOK”) will be exempted from the property transfer tax. In case of using a preferential interest rate loan under the CSOK Plus loan programme, the part of the market value of the residential unit below HUF 80 million will be exempted from the tax.
Also from 1 January 2024, the possibility to pay court procedural fees by way of duty stamp will cease. With regard to the abolition of the stamp duty, from 1 January 2024, the Autumn Tax Package will allow parties not obliged to use electronic communication in court proceedings to pay the court procedural fee by way of cash transfer order.
Contributions to be paid by airlines
The Autumn Tax Package elevates to the level of Act of Parliament the rule (previously set out in an emergency government decree) under which Israel and Turkey as flight destinations are subject to a lower contribution rate. Thus, when a passenger's final destination is one of these two countries, the airline concerned will have to pay a lower contribution than for flights to other countries outside of Europe.
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.
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.