Autumn tax package proposal

The autumn tax package proposal was submitted on 29 October 2024 and contains several significant amendments compared to the version published for public consultation. Below, we summarize the most significant new changes expected in the tax laws.

An amendment to the Corporate Income Tax Act is the addition of a new item in the exemplary list of costs incurred for business activity. Accordingly, the Act will grant free of charge provisions to certain professional sports organizations as business related, insofar as they are deemed spectator sports.

Professional sports organizations are entities that derive at least 75% of their net sales revenue from sporting activities. The provider is allowed to claim the cost of allowance in its tax base up to 1% of its net sales revenue if it possesses the relevant certificate issued by the professional sports organization.

In the proposal, this provision was indicated as an amendment whose purpose was to help companies understand the Act. However, the restriction of applying the R&D tax credit only for eligible costs of R&D projects that started on 1 January 2024 or later has a significant effect.

According to the proposal, domestic constituent entities or designated domestic entities acting on their behalf shall determine, declare and pay a Qualified Domestic Minimum Top-up Tax (QDMTT) advance as of the tax year starting in 2024. This liability must be paid until the 20^th day of the 11^th month following the last day of the tax year affected by the QDMTT. The advance payment represents the projected QDMTT to be remitted for that tax year.

The proposal extends the scope of use of the SZÉP Card. In 2025, up to half of the amount transferred by the employer within the calendar year, plus the total balance on 1 January 2025, will be available for housing renovation.

The proposal provides tax exemption in 2025 on the use of voluntary pension savings for purchasing or renovating properties.

Flat-rate tax for private individuals carrying out homestay activity will be increased to HUF 150,000 per year in towns, cities and other settlements where the number of overnight stays exceeded two million in the year that falls two years before the relevant year. For the first time, the National Tax and Customs Administration of Hungary will publish the list of relevant settlements  on its website by 15 January 2025. The flat-rate tax for settlements outside this list will remain unchanged at HUF 38,400.

According to the proposal, tax base reduction will be possible where a retrospective repayment of cash has been made as part of a company’s business policy, even if the repayment obligation itself is based on law (not on a contract).

If a receipt is issued in relation to a transaction, then to reduce the tax base the data of the receipt has to be modified.

The application of a reduced VAT rate of 5% to newly constructed residential buildings will be extended for two years, until the end of 2026. Under the transitional provisions, the same rate may apply until 2030, if the authorization of construction is granted up until the 2026 deadline.

Furthermore, the rules concerning the assignment of the right to deduct VAT when importing goods will change. The proposal limits the number of cases where the indirect customs representative may exercise the right to deduct import VAT. The importer needs to hold ‘reliable taxpayer’ status based on the Rules of Taxation Act, and is required to file VAT returns monthly when the VAT deduction right arises. In addition, the indirect customs representative must hold ‘reliable taxpayer’ status when the VAT deduction right is exercised.

The tax allowance applicable to hybrid and plug-in hybrid vehicles is to be abolished. 

Regarding the Extended Producers’ Responsibility (‘EPR’), green tax liability on circular products is to be repealed as of 1 January 2025. Consequently, submitting a green tax return on products falling under the scope of EPR will no longer be required. As per the proposal, batteries, packaging materials, electric appliances and electronic equipment, tires, commercial printing paper and office paper will not be subject to green tax; however, other petroleum products, other plastic products as well as other chemical products will continue to be subject to green tax. Carrier bags will qualify as other plastic products.

The regulations on green tax warehouses are to be modified. The government will add clarifications at a future date.

The obligation to make green tax advance payments is to be repealed. The obligation for fiscal representation for third-country taxpayers will be repealed as well.

The Waste Act is to be modified to allow the authorities and the concession company to share information in order to facilitate the inspection of producers.

As of 1 January 2025, the range of taxpayers will be expanded to include foreign or domestic platform operators who provide online marketplaces to sellers engaged in retail activity.

‘Platform’ is defined as software or an application accessible to users that permits sellers to contact users for the purpose of renting real estates, providing personal services, selling goods or renting vehicles. A software program whose sole function is to process payments, advertise or redirect visitors to another website is not considered a platform.

The operator of the platform will be liable for tax in relation to retail activities conducted through the platform. A platform operator's tax base is the net sales revenue realized by retailers selling through the platform from the sale made through the platform. Where a platform operator is also engaged in retail activity, its total tax base is the sum of tax bases calculated for both type of activities, except — to prevent double taxation — the net sales revenue realized by the platform operator from its own retail sales made through the platform. The tax base of a platform operator also engaged in retail activity shall be adjusted in accordance with the already existing rules in just the same way as a retailer’s tax base is adjusted.

A retailer's tax liability shall be determined based on  its total net sales revenue from domestic and export retail sales. However, the tax calculated based on the total net sales revenue is decreased by the tax attributable to the net sales revenue from the retail activity of fuel, its own sale of goods delivered outside of Hungary, as well as from goods sold via the platform and delivered within Hungary. The latter deduction is designed to avoid double taxation on the same product sold by both the platform operator and the retailer.

The tax payable by a platform operator is decreased by the tax attributable to the net sales revenue from the sale of goods handed over outside of Hungary, both in respect of its own retail activity and the retail activity carried out by others through its platform.

In the case of the tax base aggregation rule, the tax proportionable based on net sales revenue between related parties shall be determined according to the new rules.

Retailers shall indicate in their tax return the net sales revenue from the sale of goods through their platforms separately for each platform by identifying the respective platforms. This information must be declared, even if retailers are not liable to pay tax.

A platform operator shall fulfill its reporting obligation within 15 days of becoming a taxpayer.

Where a platform operator fails to meet its tax payment obligation and the tax liability cannot be collected from it, retailers selling through the platform become liable to pay the tax instead of the platform operator in proportion to their tax base, as per the National Tax and Customs Administration of Hungary’s written notice. The tax payable by a retailer cannot be less than the tax on the net sales revenue from the sale of goods conducted through the platform for products delivered in Hungary. Any platform operator's website that does not meet its tax obligations will have its website blocked by the National Tax and Customs Administration of Hungary.

For taxpayers whose financial year ends on a date other than 31 December, the provisions in force as of 1 January 2025 will be applicable from the tax year starting in 2025.

A further change is that, in the case of foreign retailers, the net sales revenue from the sale of goods delivered not only within Hungary but also outside Hungary shall be considered as net sales revenue.

The contribution of airlines will be repealed as of 1 January 2025. The contribution must be paid until December 2024 according to the current rules by 20 January 2025.

The proposal would incorporate the currently government decree-regulated increased rates of financial transaction tax (effective as of 1 August 2024), as well as a supplementary financial transaction tax (imposed as of 1 October 2024) into law.

According to the submitted proposal, swap transactions will be exempt from supplementary financial transaction tax up to HUF 50,000 in the case of individual clients. Additionally, it is confirmed that the HUF 20,000 limit on supplementary financial transaction tax is applicable to all taxable security purchases and swaps.  

According to the proposal, the suspension of advertisement tax payment obligations will be extended until 31 December 2025.

As of 1 January 2025, the scope of exemptions from transfer tax will be extended. According to the proposal, the termination of ownership or property rights on undivided and jointly owned land resulting from annexation is not qualified as alienation, therefore no transfer tax liability arises in this respect.  

In light of the proposal, the taxing right in respect of special economic zones, including their termination, will be transferred from county municipalities to local municipalities on 31 December 2024; thus, local municipalities will be authorized to assess and collect local business tax liabilities as of 1 January 2025. The affected companies shall fulfill their previous tax liabilities based on the county municipality’s decree according to the rules in force on 31 December 2024.

Where a county municipality has set a fixed-term tax rate, a restriction of tax rate change on the burden of taxpayers would be applicable for the local municipality authorized for taxation until the end of the fixed period, i.e. the local municipality cannot increase the tax rate for the first two years remaining from the fixed period, and cannot increase the tax rate in the third and fourth years unless not doing so would result in a significant loss of revenue for said local municipality. Furthermore, those tax exemptions and tax incentives previously granted for special economic zones cannot be repealed or amended to the disadvantage of taxpayers for at least three years.

The proposal also modifies the definition of ‘place of business’ of entrepreneurs operating passenger air transport services. Consequently, a non-resident entrepreneur does not have a place of business in Hungary if its state of residence is party to the Convention on International Civil Aviation signed on 7 December 1944 in Chicago. The new definition of place of business can be utilized for the tax liability of 2024. 

As of 1 January 2025, certain specific taxes will increase, and an automatic inflation-tracking mechanism will also be introduced.

According to the proposal, tax rates will be adjusted by the change in consumer price index published by the Central Statistical Office for the month of July of the year prior to the current year, compared to the same period of the year before the previous year.

These rates will be made available by the National Tax and Customs Administration of Hungary on its website on or before 15 December 2024. For 2026, the rates will be published on or before 31 October 2025; for 2027, on or before 31 October 2026, and so forth.

The change affects the excise duty on tobacco, alcohol and certain energy products. It also affects vehicle registration tax, vehicle tax, company car tax and transfer tax related to the acquisition of vehicles. The company car tax rates for 2025 are already included in the proposal.