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Tax reliefs adopted in Hungary: corporate income tax payable in a foreign currency
Payment of corporate income tax in euros and US dollars
During the state of emergency declared in view of the armed conflict in a neighbouring country, companies can now choose to pay their corporate income tax in euros or US dollars. Companies that typically earn their revenues in one of these currencies should take advantage of this option. The relevant rules are:
- Taxpayers whose financial year is the same as the calendar year, should notify their election to the Hungarian Tax Administration (‘NAV’) by 1 December 2022 if they wish to exercise the option from 2023. Companies that start their activities during the year should make the notification at the same time as they register.
- Taxpayers with a financial year, other than the calendar year may notify their election for the first time for their tax year, starting after 30 September 2022. The notification deadline is similar to the above: the first day of the month preceding the first day of the tax year.
- The notification is valid for the whole tax year (e.g. 2023 for calendar year taxpayers).
- The notification can be amended (either to the other optional currency or back to HUF) until the last day of the tax year (for calendar year taxpayers: 31 December 2023). The amendment will take effect from the next tax year (in the example above: 1 January 2024).
- The above deadlines are time-barred and late notifications will be rejected ex officio by the NAV.
- The corporate income tax advances and annual payment obligation assessed and declared for the tax year concerned by the notification (in the example above: 2023) should be paid in the chosen currency to the dedicated foreign currency account of the Hungarian State Treasury.
- The foreign currency amount is credited to the taxpayer’s tax account in HUF at the National Bank of Hungary exchange rate on the day that the taxpayer’s bank account is debited. If the National Bank has not published an exchange rate for that day, then its latest published exchange rate should be used for the conversion.
- The date of payment for the tax, is the date in which the payment is credited to the State Treasury account.
- The taxpayer’s tax account will show the foreign currency amount of the payment made, the currency of denomination, the exchange rate used and the HUF amount cleared.
The abolition of the simplified tax contribution (‘ekho’) for paying agents
From 1 September 2022, for the period of the state of emergency declared due to the armed conflict in a neighbouring country, the simplified tax contribution (the ‘Ekho’) of 13% due on paying agents will be abolished . The Ekho will only be payable by the individual concerned, still at the rate of 15%.
This form of taxation is mainly appropriate for performers and sportspersons, but can also be used by writers, journalists and people working in the performing arts (e.g. sound engineers, set designers, extras, make-up artists, costume designers etc).
Simplified tax contribution can be opted for if the individual earns income from employment, private entrepreneur activities, or remuneration for working in a personal capacity for a company of which they are shareholders, and the taxes for this income are paid according to the general rules, or if the individual is retired. In any case, their activity should be an occupation in the scope of the Ekho Act and they should declare in writing to the paying agent that they have opted for the application of the provisions of the Ekho Law to the whole or part of the income paid to them.
Administrative simplification for the companies that were under the Fixed-Rate Tax of Low Tax-Bracket Enterprises (KATA)
To help the KATA companies make the transition to other taxation schemes, the government decree provides for the following:
- Removes the audit requirement for the former KATA companies. General partnerships, limited partnerships, individual entrepreneurs and law firms will be brought under the Accounting Act when they leave the KATA scheme but will be exempt from the requirement to have their opening balance sheets audited. This will simplify administration and save the cost of auditing.
- If a limited partnership or a general partnership taxable under the KATA notifies the NAV by 30 September 2022 (time-barred deadline) of its dissolution by way of simplified winding-up, the entrepreneur can be immediately entered into the register of individual entrepreneurs. If the simplified winding-up of the company ends without the company being dissolved, the individual entrepreneur will be deleted from the register.
- Between 1 September 2022 and 31 December 2022, the lump-sum personal income tax threshold is HUF8 million for entrepreneurs who were under the KATA scheme on 31 August and who will be subject to the lump-sum personal income tax from 1 September (the tax-exempt threshold is not affected by the changes and does not need to be pro-rated, i.e. it is tax-exempt up to HUF2 million for a 40% cost ratio).
For more information, please contact:
Krisztina Csákics, Business Manager
VGD Hungary, Hungary
E: krisztina.csakics@vgd.hu
W: https://hu.vgd.eu/
