Local business tax is an issue arising every year that we have to deal with during the preparatory and closing work preceding annual reporting. Act C of 1990 on Local Taxes, which in accordance with the tax type in question is often commonly “just” referred to as the local business tax act, includes the requirements regarding local business tax among others.
Local business tax
- for a permanent business activity, the annual rate of local business tax is a maximum 2%
- for a temporary business activity, the local business tax is a maximum HUF 5,000 per calendar day.
With due consideration of these limits, local authorities can decide what rate of tax they intend to apply in the given year for the given municipality. Accordingly, local business tax varies depending on where you are.
In the case of an enterprise with several places of business, it can take a lot of time to collect together all the local decrees and track the changes. The “Information on rules for local taxes” published in Hungarian on the website of the Hungarian State Treasury at https://hakka.allamkincstar.gov.hu/ provides a lot of help in this respect. The information on individual municipalities can even be downloaded in table format.
However, it should be borne in mind that theoretically the most up-to-date data is available on the website in 2017, so the local business tax for 2016 may differ from the information on the website. You should always check the latest information on the local authorities’ own website.
Local business tax rate in “KATA” and “EVA” systems
The above tax rates are applicable for payers of both the flat-rate tax for small taxpayers (KATA) and the simplified entrepreneurial tax (EVA), but special rules apply to the calculation of the tax base.
Local business tax in Budapest
For Budapest, the local business tax is the highest possible rate, i.e. 2% and in the case of temporary business activity, HUF 5,000 per day.
However, the tax exemptions and tax allowances provided by local authorities should not be ignored. For example, local business tax will be HUF 0 in Budapest if the enterprise-level tax base does not exceed HUF 1,000,000.
Tax exemptions, tax allowances provided by local authorities
Local authorities may provide tax exemptions and tax allowances for entrepreneurs in a decree. These only apply to entrepreneurs whose enterprise-level tax base does not exceed the amount specified by the local authorities, but no more than HUF 2,500,000, and in the case of general practitioners and health visitors, HUF 20 million. The https://hakka.allamkincstar.gov.hu/ website contains related information on the individual local authorities. The local business tax act sets forth the tax exemptions and allowances in respect of which local authorities have no decision-making authority.