Hungary: Amendments to extra profit surtaxes

The government announced amendments to various extra profit surtaxes, generally effective 18 July 2023. 

• The tax rate will decrease to 1% (from 2.8%) for 2024.
• Taxpayers must calculate and file the tax for FY2024 by the last day of the fifth month of the fiscal year. The tax should be paid in three installments, in the sixth, the ninth and the twelfth month of 2024, respectively.

• In 2024, taxpayers will be able to reduce their tax liability by the following means: on one hand with the acquisition cost of tangible assets acquired or produced in Hungary, and on the other hand with the direct cost of basic research, applied research, and experimental development carried out in the tax year within their own scope of activity.
• The reduction in tax is capped at 50% of the total tax payable, excluding the decreasing item itself.

• Taxpayers liable to pay a 40% tax rate in 2023 and 2024 can decrease their tax liability by the amount of the acquisition cost of tangible assets acquired or produced in Hungary, and furthermore by the direct costs of basic research, applied research, and experimental development in the healthcare sector carried out within their scope of activity, as shown in the financial statements (including the consolidated financial statements of consolidated companies) for the tax year preceding the relevant tax year. However, this decrease can only be applied by one taxpayer for the same amount of research and development expenditure of the undertakings included in the consolidation.
• The tax decrease is capped at 50% of the 40% rate calculated without deductions. A further condition is that the payment liability cannot be lower than the liability that would have accrued if the rate had been 20%.

• As of 1 September 2023, the tax rates will be based on the methods of calculating the specific value of mineral raw materials and geothermal energy, as defined in Government Decree 54/2008.
• The amended regulation applies to mining operators extracting hydrocarbons only if they both meet the extraction volume they have committed to in their official contract for the same category of fields for the years 2023 and 2024 and if they exceed the extraction volume they have committed to in 2022. If the mining operator fails to comply with the extraction volume contractually agreed, it is required to pay, in addition to the mining tax paid in the year in question, the difference between the mining tax calculated based on the extraction volume in the year in question (in accordance with the provisions in force on 31 August 2023) and the mining tax already paid in the year in question, as well as the mining tax calculated on the difference between the extraction volume agreed and the volume extracted. In this case, the amount of the mining tax shall be determined by applying the annual or half-yearly average price based on the monthly averages of daily quotation prices of title transfer facility (TTF) natural gas or Brent crude oil on the stock exchange for the second half of 2023.
• If the company does not sign an official contract, it is required to pay the mining tax according to the provisions in force on 31 August 2023. In this case, the mining tax cannot exceed 90% of the turnover calculated based on the monthly average of the quoted price of TTF natural gas, and, in the case of crude oil, based on the monthly average of the quoted price of Brent crude oil.
• A further change is that for those fields identified as crude oil and hydrocarbon natural gas fields, the operator is obliged to produce the same quantity of hydrocarbons in 2023 and 2024 as in 2022, instead of 2021.

Read a July 2023 report prepared by the KPMG member firm in Hungary