HUNGARY | Mid-year tax updates 2017/2018
Personal Income Tax
- Based on the rules valid from 2018, the employer can provide a total of 5 years of tax-exempt housing allowance for a worker whose residence is at least 60 kilometers away from the workplace or travels for three hours or more. In the first 24 months of employment, allowance may be 60 percent of the minimum wage, and 40 percent in the next 24 months and 20 percent in the last 12 months.
- There are already three properties to choose for a regular flat-rate short-term activity next year. A license is required for the activity and can be provided for the same private individual up to 90 days. The flat tax is HUF 38,400 per room and per year.
- Next quarter the notified share will not have a minimum shareholding, so any low ratio of shares of a domestic and foreign company could be qualified as notified share, which disposal is not subject to the capital gain tax if it is reported to the tax authorities within 75 days from the date of acquisition and kept for at least 12 months . Furthermore, ther shareholding in controlled foreign companies are still not able to be qualified as notified share.
- A foreign company qualified as the controlled foreign company of the Hungarian company if the Hungarian company has at least 50% stake in the foreign company or its profit share is more than 50%. A foreign company will only be controlled by a foreign company in that year, in which the tax on profit paid in home country is less than the corporate income tax that it would have to pay if it had its seat in Hungary. However, the company or foreign establishment which has the necessary staff, equipments and office to carry out its activity is not considered a controlled foreign company, so it can be proved that it is a substantive economic activity. The new rules will apply from January 18, 2017.
- StartUp tax allowance – an mid-year change that does not require a research and development employee to apply for an early-stage business, so that its investor can benefit from tax relief. The tax advantage entitles holders of shares acquired in a company registered as early stage companies. Three times the price of the share (but maximum HUF 20 million, in the year of acquisition and the following 3 tax years) can be deducted from the tax base.
- Real estate renatl income is not subject to health contribution (14%) from 2018. So far, 14 percent of health contributions had to be paid if property rental income exceeded 1 million forints.
Changes in the tax regime
- The account number of foreign bank accounts of Hungarian companies must be reported to the tax office by 31 January 2018. The default penalty amount is 600 000 HUF.
- Taxpayers deemed to be risky have to pay a tax payment, which the NAV will hold for 12 months on its custody account and then refund, deducting the actual tax debts from it.
- The NAV publishes on its website the names of companies that failed to submit at least 2 VAT returns (monthly, quarterly or yearly).
- Registered address services agreement created before 2017, must be notified to the tax authority by 29 September 2017.