Group taxation registration

As per legislative changes adopted this summer, companies qualifying as micro- or small-size enterprises will continue to be exempt from the innovation contribution. Nevertheless, as from 1 January 2019, whether SMEs qualify for innovation contribution purposes or not will not be based solely upon the financials of the individual company, but also through consideration of the financial figures of so-called partner and related companies (as defined by the law) as well, and the resultant aggregated figures should be compared to the respective thresholds for qualifying as an SME.

Based on the relevant act, a small-sized enterprise is defined as an enterprise which employs less than 50 employees and whose annual net sales revenue or total assets (i.e. annual balance sheet total ) does not exceed the HUF equivalent of EUR 10 million. Micro enterprise is defined as an enterprise which employs less than 10 persons and whose annual net sales revenue or total assets (annual balance sheet total) does not exceed the HUF equivalent of EUR 2 million.

Taxpayers who become liable for the innovation contribution for the first time in the tax year have to declare and pay advances for the first two advance payment periods (i.e. first and second quarters of the business year). For taxpayers having a tax year equal to the calendar year, this means 20 April and 20 July, respectively. The amount of advance payment is proportionate to the expected annual amount of the innovation contribution. (The base of the innovation contribution is the same as the local business tax base. The rate of the innovation contribution is 0.3%).

Furthermore, until the last day of the fifth month of the tax year, taxpayers have to determine and declare the amount of the advance payments from Q3 onwards. Such advances shall be established on the basis of the financial figures of the preceding tax year.

Based on the information above, there may be cases when a taxpayer which has been exempted from innovation contribution between 2015 and 2018 will be required to pay the contribution and submit tax returns from 2019 onwards, due to the fact that the respective indicators will now be examined at a group level. Consequently, it is recommended to Hungarian entities that are part of an enterprise group and were exempted from the innovation contribution in 2018 to review the innovation contribution obligation from 2019 onwards and take the aforementioned administrative steps if necessary.

Naturally, specialists from KPMG’s Tax Department will happily assist their clients regarding this question.