Issue of Government Decree Amending Extra-Profit Taxes

On 21 November 2024, Government Decree 356/2024 (XI. 21.) amending the Government Decree 197/2022 (VI. 4.) on Extra-profit Taxes (“the Decree”) was published. Below, we provide a brief overview of the main changes.

Under the Decree, credit institutions and financial enterprises will continue to be subject to the extra-profit tax on credit institutions and financial enterprises in the tax year of 2025.

The Decree sets out the following tax base adjustments for the tax year of 2025:

• The tax base should be determined on the basis of the pre-tax profit included in the financial statement for the tax year 2023. This amount should be adjusted with the following decreasing items:
  • the amount recognized as dividend or dividend equivalent in the tax year of 2023, provided that the company paying the dividend does not treat the amount of dividend paid as an expense decreasing the pre-tax profit; and
  • profits from the sale of goods or services not arisen in the ordinary course of business, determined on the basis of the annual accounts for the tax year of 2023.
• As an increasing item, the surtax on financial institutions (bank tax), the financial transaction tax and the extra-profit tax accounted for in the pre-tax profit for 2023 should be taken into consideration.

In 2025, the tax rate will be 7% on the part of the tax base not exceeding HUF 20 billion, and 18% on the above amount.

The Decree contains detailed rules for reducing the amount of the tax liability in the case of purchasing government bonds.

The Decree extends the additional insurance premium tax to 2025. Based on the amendment, tax rates on the tax base generated between 1 January 2025 and 31 December 2025 will be as follows:

• For the part of the tax base not exceeding HUF 48 billion:
  • 3% for non-life insurance premiums,
  • 2% for life insurance premiums.
• For the part of the tax base exceeding HUF 48 billion:
  • 14% for non-life insurance premiums,
  • 6% for life insurance premiums.

Insurance companies should determine, pay and declare their insurance surtax for 2025 in two instalments – by 31 January and 31 July 2026 – taking into account the tax base and the newly determined tax rates, with the insurance surtax advance already having to be determined, paid and declared by 10 December 2025. Notwithstanding the previous tax years – but similar to the extra-profit tax on credit institutions and financial enterprises –, insurance companies can reduce their 2025 insurance surtax liability through the purchase of government bonds.

According to the Decree, the income tax rate of energy suppliers remains at 41% in 2025.

The Decree extends the retail tax regulations adopted for the tax year of 2024 to 2025.

The 95% special tax rate regarding the Brent-Ural spread of petroleum product suppliers remains in force for the tax year of 2025.

According to the Decree, as of 1 January 2025 the following are to be phased out:

• the special tax on petroleum product suppliers’ net sales revenue,
• the special tax on energy producers utilising renewable energy sources,
• the special tax on the provision of balancing control capacity,
• the extra-profit tax of pharmaceutical companies,
• the special tax of pharmaceutical companies,
• the special tax of pharmaceutical distributors,
• the Robin Hood tax liability of manufacturers in processing industry,
• the extra-profit tax on telecommunication and
• the extra mining fee.

We hope that the above summary will be helpful as you prepare for the tax year of 2025. We are gladly at your disposal should any questions arise regarding the abovementioned Decree.