[vc_row][vc_column][vc_column_text]Dear Clients, Dear Readers,

At the beginning of next year several changes affecting companies with international background, too will come into force in Hungary, out of which we would like to highlight the following ones.

1. VAT changes

Vouchers

In accordance with the Council Directive of 2016/1065/EU the Hungarian Act on VAT has also been amended in respect of VAT regulations of vouchers. In this respect Hungary will take over the essence of the international regulation and the concept of single purpose and multi-purpose vouchers will be introduced.

Tax deduction related to motor car rental

Under the new legislation 50% of the motor car rent may be deducted without detailed records if the motor vehicle is essentially used for commercial purposes. However, the commercial purpose is to be kept justified.

Electronically supplied services

As for individuals who established themselves in an other EU Member State, the electronically supplied services will be taxed where the private individual lives. (Unlike in the previous regulation) tax liability will not immediately incur in the member state of a private individual customer in the future but – like in teleshopping – when the sales limit of € 10,000 is exceeded. Of course it is optional for the taxpayer to pay the VAT in the Member State of the customer prior to exceeding the sales limit. This provision has come into force during this year and has been valid since 26 July 2018.

Labour hire

Concerning labour hire the reverse charge will not be generally applicable for every kind of this except for the labour hire related to construction and installation activities. This provision will only come into effect from 2021, in this way the Hungarian law will be harmonized with the EU Directive. Consequently, the service provided by school and pensioner cooperatives of public interest will be taxed directly.

2. Corporate tax

Corporate group taxation

Pursuant to Act on Corporate Income Tax the option of group taxable status will be introduced from 2019. This change provides for a number of tax planning opportunities.

Corporate group taxation may be preferred if

• profitable and loss-making companies are both among the group members, since in this case the profitable companies can also reduce their tax burden, or
• among the group members there are parties eligible for tax allowance, too.

Companies, branches (or establishments of foreign companies without a branch) can become group members,

• which on the basis of at least 75% of the voting rights are each other’s affiliated enterprise,
• their balance sheet date and accounting currency are identical and
• they perform accounting according to identical accounting principles.

For the 2019 tax year the creation of the group shall be requested from the tax authority between 1 and 15 January 2019.

New thin capitalisation rules

The new thin capitalisation rules have also been developed pursuant to the EU Council Directive.

In the future the tax base shall be increased in the event if the net financing cost exceeds 30 % of EBITDA or HUF 939,810,000.

Further exemptions to this rule can also take effect.

3. Personal income tax, payroll taxes

Ascending family tax base allowance for families with two children

The monthly tax allowance per child for families raising two children will increase from HUF 17,500 to HUF 20,000. The allowance rate for families raising one, three or more children will not change.

Discontinuing tax-exempt and non-taxable fringe benefits in 2019.

Due to the transformation of fringe benefits system next year the opportunity will cease when based on the internal rules the employer could give fringe benefits for every employee under the same condition solely after paying taxes.

From 2019 the employees can only be granted the benefits listed in the law and 34.5 % and 40.71% tax shall be paid (for instance SZÉP-card, amounts as targeted services deposited in voluntary insurance funds).

Next year a number of tax-free benefits will be taxable as wages, for instance:

• non-refundable employer subsidies for flats (maximum HUF 5 million once every five years)
• premium of group risk insurance taken out for employees
• contribution to voluntary funds and sponsorship donation
• housing support for mobility
• student loan repayments takeover, etc.

The transformation of fringe benefits system was reported in a separate newsletter, which can be accessed from here.

Favourable employment of pensioners

In the future from the income of old-age pensioners employed only 15% personal income tax shall be deducted, furthermore, the employer will be exempted from paying 19.5 % social contribution tax as well as 1.5 % training contribution.

4. Other changes

Innovation contribution

Due to returning previous regulations the number of those obliged to pay innovation contribution may expand. Pursuant to the amendment companies qualified to be micro or small enterprises by the Act on Small and Medium-sized Companies may again be exempt from paying the innovation contribution. Pursuant to the regulation of SME qualifying shall be carried out in a consolidated way, i.e. the innovation contribution liability may arise because of the foreign parent company, too.

‘Company-gate’ administration

From 1 January 2019 business organizations are required to use their ‘Company-gate’ during the official administration: submission of returns will only be possible through the ‘Company-gate’, and here will be the repository of messages sent by the tax authority and other agencies, too.

Our colleagues will be pleased to help you in interpreting the rules detailed above.

Kind regards,
ABT Treuhand Group[/vc_column_text][/vc_column][/vc_row]