Tax also has to be paid when submitting an extension request

The special tax relief implemented in the third wave of the coronavirus will affect the deadline for certain tax returns and annual reports at companies which, through no fault of their own, cannot comply with their obligations by the original deadline, i.e. 31 May, due to the pandemic.

Companies and organisations missing the deadline of 31 May can only be exempt from the default penalty if they submit their extension requests containing pandemic-related reasons to the National Tax and Customs Administration by 30 June. The extension request can exempt you in Hungary from the legal consequences for failing to submit four types of tax return and financial statements as well as to prepare transfer price documentation on time.

Parallel to submitting the extension request, it is important that the missed tax returns must also be submitted and the corporate tax as well as the small business tax, the innovation contribution and the income tax on energy providers must be paid simultaneously, or any payment difficulties must be reported.

Circumstances to be considered

Submitting an extension request does not necessarily mean it will also be accepted, but the National Tax and Customs Administration has promised to assess these requests quickly and fairly, qualifying reasons derived from the coronavirus pandemic as particularly justifiable circumstances. It is worth knowing that since members’ meetings or general meetings can even be convened online in an emergency, without personal attendance, not holding them does not necessarily represent a circumstance that can be taken into consideration.

The relief does not apply to public-interest entities such as listed companies, banks, insurance companies and investment firms.

WTS Klient Hungary is continually trying to keep its clients updated regarding the economic measures taken due to the coronavirus pandemic. If you have any questions on how these measures will impact your business, feel free to contact us.

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With the tax payment relief the Hungarian government wants to mitigate the economic losses of companies hit hardest by the restrictions implemented due to the second, autumn wave of the coronavirus pandemic. The first round of measures ordering restrictions for 30 days and the related tax payment relief were announced in issue 242 of the Hungarian Gazette on 10 November 2020.

Which sectors are impacted by the tax payment relief?

Pursuant to Government Decree 485/2020 (XI.10) on certain economic protection measures during the state of emergency, companies whose actual core activity includes one of the activities below are entitled to receive tax payment relief for November 2020:

• Restaurants and mobile catering
• Event catering
• Beverage service
• Film projections
• Organisation of conventions and trade shows
• Sports and recreation education
• Performing arts
• Support activities for performing arts
• Operation of arts facilities
• Museum activities
• Operation of botanical and zoological gardens and nature reserves
• Operation of sports facilities
• Activities of sport clubs
• Fitness facilities
• Other sport activities
• Activities of amusement parks and theme parks
• Physical well-being services or
• Other amusement and recreation activities n.e.c.

Based on the government decree, an activity is considered an actual core activity if, in the six months prior to the decree taking effect, the payer or small business taxpayer received most of its income, but no less than 30% thereof, from this activity.

What tax types fall under the tax payment relief?

Taxpayers whose core activity is included in the list above do not have to fulfil their social contribution tax payment obligation for the natural persons in their employment in November, and no vocational training contribution arises for them either.

Furthermore, payers operating in the sectors above and obliged to pay the rehabilitation contribution are exempted from paying the monthly amount, and no more advances on the rehabilitation contribution must be paid for 2020.

The fourth part of the tax payment relief impacts those in the KIVA system (small business tax). This is because small-business taxpayers do not have to include staff costs in the small business tax base when determining their small business tax obligation for November.

What other support can companies expect?

Besides the tax payment relief, sectors struck the hardest by the restrictions may receive 50% wage support for November. In accordance with the Government Decree, employers operating in the above-listed sectors can receive support equivalent to 50% of the gross wages of its employees in line with the labour market programme, on the condition that the employee is still employed on the last day of the period for which the support is granted and the wage has been paid out. The claim for support must be submitted to the county government office of the registered office or permanent establishment of the company. The government office has eight days to assess the claim and subsequently transfer the support.

Based on the decree, accommodation providers are entitled to additional support. With regard to accommodation registered at the National Tourism Data Supply Centre, the Hungarian government will reimburse 80% of the net revenue from bookings registered until 8 November, since hotels are not allowed to receive tourists – only guests arriving for business or education purposes – from 11 November when the decree took effect. One of the conditions for the support is for the accommodation provider to maintain the employment of those employed on 11 November all through the month, and pay their wages for November.

Government Decree 485/2020 (XI.10) detailing the tax payment relief introduced as a result of the second wave of the coronavirus pandemic in Hungary took effect on 11 November, a few hours after its announcement.

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New rules for remote work

One day after the tax payment relief announcement, in the evening of Wednesday 11 November Government Decree 487/2020 (XI.11) on the rules applicable for remote work during the state of emergency was published too. The new rules are the following:

• During the state of emergency announced due to the coronavirus pandemic, Section 86/A on remote work of Act XCIII of 1993 on Occupational Health and Safety will not be applicable. Where remote work is ordered, the employer must inform employees about the rules on the conditions necessary for safe and healthy workplaces, and employees must choose their place of work taking these working conditions into account.

• During the state of emergency, an amount previously defined by the parties paid as a reimbursement in connection with remote work under an employment contract may be accounted as a cost without further supporting documents, but no more than 10% each month of the monthly minimum wage valid on the first day of the tax year. If remote work was not prescribed for the entire month, the amount must be defined proportionately. The condition for eligibility as a cost is that the employee must not account any other expenses connected to remote work as defined in the Act on Personal Income Tax (e.g. internet use, rent of workplace, utility costs).

• During the state of emergency, the employer and the employee may deviate from Section 196 on remote work of Act I of 2012 on the Hungarian Labour Code.

The decree on the application of the rules related to remote work during the state of emergency took effect on Thursday 12 November 2020 and will be repealed on 8 February 2021.

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WTS Klient Hungary is doing everything it can to provide up-to-date information on the economic measures of the Hungarian government in relation to the second wave of coronavirus pandemic, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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The main element of the anti-crisis tax package: loss carry-back 

A significant part of the Czech anti-crisis tax package deals with the long-discussed introduction of “loss carry-backs” in the field of income tax. The concept of a tax loss carry-back was brought about Liberating Package II in March 2020, and enables both natural and legal persons to retroactively apply their 2020 tax losses to their 2018 and 2019 tax returns. In other words, both individuals and legal entities are free to amortise their losses incurred in the two previous tax years.

Taxable persons and entities can apply loss carry-backs in their additional tax returns by setting off the 2020 loss against the positive tax bases of 2018 and 2019. The tax authority will refund the excess income tax.

This measure can be applied after the 2020 tax return with a tax loss is filed, i.e. not before the beginning of 2021.

Please note that the deadline for tax assessment for the tax years in which the tax base was reduced by the tax loss shall be extended in the case of a loss carry-back.

Application of reduced VAT rate to selected services 

According to the anti-crisis tax package, selected services subject to the first reduced VAT rate (15%) shall be shifted to the second reduced VAT rate (10%). These include:

• provision of accommodation services;
• admissions to sports and cultural events, museums, botanical gardens and zoos, natural reserves and national parks;
• use of sports facilities for sporting purposes;
• hammam and sauna services and similar selected facilities;
• passenger transport by ski lifts.

The second reduced VAT rate has been applicable in the cases listed above since 1 July 2020.

Road tax

 Another important element of the Czech anti-crisis tax package is the reduction of road tax on trucks. The road tax for trucks with a maximum permissible weight exceeding 3.5 tonnes shall be reduced by 25% with retroactive effect from the beginning of 2020. This measure will manifest itself in a retroactive reduction of advance tax payments to be paid in 2020.

If taxpayers did not take advantage of the “general pardon” to defer the obligation to pay road tax advances, and paid the advance in the original amount, the difference between the old and new amount shall be used to pay the remaining advances in 2020.

Extension of exemption from real estate tax 

Until now, municipalities in the Czech Republic were only able to exempt real estate from real estate tax that was affected by natural disasters (such as flooding, storms, extreme droughts). Henceforth, this exemption is also allowed in the event of a pandemic, an emergency measure under the Crisis Act, or industrial accidents.

This exemption can also be applied with retroactive effect. In fact, municipalities have to define the exempt real estate in generally binding ordinances effective until 31 March of the year following the tax year in which the emergency occurred. The exemption shall be applied in the form of an ordinary or additional tax return.

Should you have any questions or require any further assistance regarding the application of the Czech anti-crisis tax package, please feel free to contact WTS Alfery, the exclusive representative of WTS Global for the Czech Republic.

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What are the main rules?

Content-wise, the special retail tax included in the government decree and the tax in the bill are identical. Rate of the special retail tax, calculated based on annual net sales revenue:

• between HUF 500 million (roughly EUR 1.4 million) and HUF 30 billion (roughly EUR 86 million): 0.1%,
• between HUF 30 billion (roughly EUR 86 million) and HUF 100 billion (roughly EUR 285 million): 0.4%, and
• more than HUF 100 billion (roughly EUR 285 million): 2.5%.

The companies assess and declare the tax by the last day of the fifth month following the end of the fiscal year. Tax advances do not have to be declared in the first fiscal year, since the companies already did so upon submitting their special tax returns prescribed due to the state of emergency, so there is no need for extra administration in this respect. The advances must be paid in two equal instalments.

What activities are affected by the special retail tax?

Taxable retail activity is construed to be market trade as well as parcel delivery and online retail, alongside actual retail in shops, regardless whether some of these are actually non-store retail. It makes no difference either whether the taxpayer has a TEÁOR (activity) classification, and if so then which, nor whether the enterprise conducts the given taxable activity as its core activity or not.

According to the bill, retail activity is taken to mean the sale of products or goods without change to the general public, including mainly – but not exclusively – households. The entire revenue derived from sales available to everyone constitutes the tax base, regardless whether a business entity or business organisation may be the buyer in certain cases. Sales by wholesale manufacturers and resellers to wholesalers, resellers and retailers do not fall into this category if the sale is not made via a sales channel that is easily available to anyone.

The scope of sold goods is limited to consumer goods and does not include products that are not commercially available (cereals, minerals, etc.).

What about foreign companies?

The tax liability also applies to retail activity in which, or as a result of which, a foreign-registered person or entity – irrespective of whether they have a Hungarian branch office or not – sells goods handed over in Hungary to its customers via channels other than a branch office.

According to the government’s announcement, foreign entities conducting online trading activity cannot evade payment of the special retail tax. Based on data received by the National Tax and Customs Administration in Hungary, the tax authority can check whether foreign companies meet their registration and tax payment obligations in Hungary.

Entry into force

The law shall enter into force on the day after its promulgation, given that the special retail tax promulgated with the state-of-emergency government decree is already in force, and the tax proposed by the bill, content-wise, is exactly the same as this existing tax.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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Terms and conditions

The detailed rules governing the competitiveness subsidy that has become necessary on account of the coronavirus pandemic are contained in Decree 7/2020 (IV.16) of the Minister of Foreign Affairs and Trade, which was promulgated on 16 April 2020 in the Hungarian Gazette. Below we summarise the most important points of this decree.

Type of investment subsidy

The competitiveness subsidy is granted as a non-repayable budgetary subsidy.

Eligible activities

The competitiveness subsidy can be granted in any industry and economic area, except for

• steel industry activity,
• shipbuilding activity,
• coal industry activity,
• synthetic fibre industry activity,
• passenger or goods transportation services carried out by air, sea, road, rail and inland water for reward, gain or profit,
• primary agricultural production,
• projects in the fishery and aquaculture sector under the scope of Regulation (EU) 1379/2013/EU,
• energy production and energy service projects,
• commercial activity,
• projects implementing activities subject to a concession,
• tourism activity projects,
• export-related activities, namely in relation to developing and operating sales networks, or other current expenditure arising in association with export activity.

Grounds for exclusion

The competitiveness subsidy cannot be granted

• to applicants who are absent from the database of taxpayers with no public debts when submitting their application, or who do not submit a statement with full probative force that they have no public debts and requesting their inclusion in the database of taxpayers with no public debts,
• to applicants who do not meet the requirement of lawful employment conditions when submitting their application,
• to applicants or to related entities of companies that, in accordance with the European Commission’s resolution previously addressed to Hungary, received aid declared unlawful and incompatible with the common market and therefore were obliged to repay the aid, but did not comply with this repayment obligation,
• if incompatibility rules defined in separate legislation are breached,
• to applicants currently under liquidation, bankruptcy or voluntary liquidation proceedings ordered in a final resolution, or other proceedings defined in law and targeting the applicant’s termination,
• to applicants that provided incorrect, false or misleading data, or made such a statement, that substantively affected the content of the subsidy decision,
• to applicants that do not have the defined level of own funds as required by the subsidy provider or by law, and does not verify such, or does not make a statement on this as provided for by law, or
• to applicants that do not provide the statements or submit the documents specified by law or in this Decree of the Minister of Foreign Affairs and Trade as conditions for entering into the subsidy contract, or that withdraw any statements made.

Who is eligible?

A competitiveness subsidy can be granted to business entities with a registered office, permanent establishment or branch office in Hungary.

Competitiveness subsidies can be used by medium-sized and large companies which

• prove they were not a business in difficulty as of 31 December 2019, but became such as a consequence of the coronavirus pandemic, or have been blighted by other financial or economic difficulties,
• prove their net sales revenue or order volume has fallen by at least 25% on account of the coronavirus pandemic and there is a direct causal link here,
• state they are not responsible for the economic decline and that they acted with due care,
• state that they have no insurance for the accumulated losses, or based on their insurance there is no opportunity to reclaim the losses in full,
• agree to maintain their headcount until the end of the investment period, but at least until 31 December 2020,
• agree to implement at least a EUR 150,000 investment project in Hungary by 30 June 2021,
• state that this investment did not commence prior to the submission of the application.

Level of competitiveness subsidy

The aid content of the competitiveness subsidy together with other aid may not exceed the forint equivalent of EUR 800,000 per company, including the related companies of the enterprise in the given Member State, and the subsidy is aligned to the value of the investment.

If the value of the investment is

• between EUR 150,000 and EUR 300,000, the competitiveness subsidy amounts to 30% of the investment value,
• between EUR 300,001 and EUR 500,000, the competitiveness subsidy amounts to 40% of the investment value,
• is more than EUR 500,000, the competitiveness subsidy amounts to 50% of the investment value.

These amounts are converted into forints using the exchange rate published by the National Bank of Hungary on the last working day of the month before the submission of the application.

Call for applications

The competitiveness subsidy is granted on a tender basis. The call for applications has already been published on the websites of the Ministry of Foreign Affairs and Trade and HIPA Nonprofit Zrt. The signed applications must be submitted to HIPA Nonprofit Zrt.

Deadline

The competitiveness subsidy can be provided to companies until 31 December 2020.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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Tax returns, tax payments, tax advance payments

The decree takes effect on the day after it is promulgated, i.e. on 22 April 2020. So taxpayers have until 30 September 2020 to assess, declare and pay the annual and unscheduled amounts of

• corporate tax,
• small business tax,
• energy supplier income tax,
• local business tax
• and innovation contribution

as well as to assess and declare any corporate tax advances, which will be due in the period between the decree taking effect and 30 September.

Taxpayers may request the reduction of tax and contribution advances before they become due if, according to their calculations, the taxes and contributions for 2020 will not reach the amount of the tax and contribution advances.

Reporting obligation

If they fall within the period between the decree taking effect and 30 September 2020, the deadlines for financial statement preparation, publication, filing and disclosure as well as their submission are postponed until 30 September 2020, and any due dates for further accounting obligations based on these financial statements shall be calculated from this date (this does not apply for public-interest entities).

Payment relief 

Besides the allowances outlined in the Act on Rules of Taxation, the Hungarian tax authority allows taxpayers to defer payment of taxes of no more than HUF 5 million (roughly EUR 14,000) on one occasion for a maximum of 6 months, without any surcharge, or to pay the tax in no more than 12 monthly instalments, without any surcharge, based on a duty-free request submitted by the taxpayer by no later than the 30^th day after the end of the state of emergency, provided that the taxpayer verifies and presumes upon submitting the request that the payment difficulty arose as a result of the state of emergency. The administration deadline for such requests is 15 days.

One important new rule is that if an entity submits a request (exempt from duties too) by the 30^th day after the end of the state of emergency, the tax authority may reduce the taxpayer’s debt once, by no more than 20% but by an amount not exceeding HUF 5 million (roughly EUR 14,000), if paying the tax debt would make it impossible to continue the business activity of the taxpayer for reasons attributable to the state of emergency. A tax reduction may be requested for one tax type only.

Social contribution tax

From 1 July 2020 the social contribution tax rate will be 15.5% of the tax base. 

Further tax relief measures

• The amount payable to employees on their Széchenyi Rest Cards as a fringe benefit is raised to HUF 800,000 (roughly EUR 2,230) (annual allowance) for employers not qualifying as budgetary institutions and such benefits are exempt from social contribution tax (exemption shall be applied from the decree taking effect until 30 June 2020).

• Tourism tax does not have to be paid for guest nights from the 5^th day after the promulgation until 31 December 2020, and businesses obliged to collect the tax do not have to collect or pay the tax, but they have to declare uncollected amounts to the tax authority. Assessed tax does not have to be declared if it amounts to 0.

• No reliable taxpayer ratings shall be downgraded based on ratings carried out during or after the state of emergency with reference to a tax difference determined for the taxpayer as a result of violating a tax payment obligation due in the course of the state of emergency or within 30 days of it ending.

• EKAER: During the state of emergency and until the 30^th day after it ends, taxpayers are exempt from providing risk collateral, and the Hungarian Tax and Customs Administration shall arrange for the repayment to taxpayers of any risk collateral paid into separate escrow accounts before the decree took effect, and for the sending of its approval to the relevant financial institution as is required to cancel any guarantee. Authorisation for exemption from submitting route data shall remain valid throughout the state of emergency, and conditions shall not be checked during this time.

• During the state of emergency, any employee on unpaid leave as a result of the state of emergency is entitled to healthcare services. In such cases the employer shall assess, declare and pay the health service contribution (HUF 7,710 – roughly EUR 21.5 per month) for the employee (at the employer’s request, the employer may be granted permission to pay such health service contribution until the 60^th day after the end of the state of emergency).

• The KIVA rate will be reduced by one percentage point, to 11%, from 2021.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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Measures related to special payment options during state of emergency

One important part of the latest tax relief measures is that companies may ask for their tax to be reduced ­– without being subject to stamp duty – if they have fallen into difficulty because of the pandemic. This can amount to no more than HUF 5 million (roughly EUR 14,000) per company. Furthermore, up to a tax debt of HUF 5 million (roughly EUR 14,000) companies can ask for payment in instalments over 12 months without any extra charge, or a payment deferral for 6 months, again without any extra charge.

Beside these measures, businesses who have drifted into financial instability should not forget about the rules on special payment options which have long been part of tax legislation. Below we will answer some of the most important questions about these rules and in relation to the topic.

What exactly do we mean by special payment options?

By special payment options we mean

• deferring,
• instalment payments of, or
• reducing, and
• forgiving payment obligations at the Hungarian tax authority.

The first two options are defined separately by Hungarian legislation as payment relief.

Who can claim deferred payment and payment in instalments, and how?

Deferred payment and payment in instalments may be permitted at the request of the taxpayer at the tax authority. Payment relief may be permitted if the difficulty in paying

• is caused by reasons not attributable to the company, or if it conducted its business in a way to avoid such difficulty in a manner expected in such a situation, and
• is temporary in nature, and payment of the tax is highly likely later on.

It is important that the Hungarian Tax and Customs Administration (NAV) considers the reasons and conditions of the payment difficulty when assessing the request and determining the conditions. According to our information, for taxpayers who refer to economic hardship caused by the coronavirus pandemic as the reason for their payment difficulty, the NAV will place more emphasis on such circumstances in its considerations as permitted by law.

In which cases might payment relief not be granted?

Payment relief shall not be granted

• for advances on the personal income tax of natural persons and deducted income tax,
• for collected taxes,
• for contributions deducted by the paying agent from the natural person, and
• for VAT taxpayers of a tax group during the period of the tax group.

Can eligible taxpayers expect interest/charges on the payment relief?

The NAV levies the following charges in the event of payment relief:

• if a request is submitted, late payment interest is levied until the decision on the request is finalised; but if the payment relief is authorised, then only until the date of the first-instance decision,
• if the request is granted, a charge at the rate of the central bank’s base interest rate valid on the day of the submission shall be levied for the period of the payment relief from the date of the first-instance decision.

In the case of circumstances requiring special consideration, the NAV may waive the interest/charge payable.

What special rules apply to reliable taxpayers with regard to payment relief?

For reliable taxpayers the NAV may grant payment relief once a year for no more than 12 months without charges or interest for a tax debt (excluding deducted personal income tax, collected tax, contributions deducted from natural persons) registered at the authority, without reviewing the above conditions. For this, the request must be submitted electronically.

The NAV reaches a decision on automatic payment relief within 15 days of receipt of the request, which it sends out electronically. Automatic payment relief may only be granted if the net debt of the applicant does not exceed HUF 1.5 million (roughly EUR 4,300) at the time of the request assessment. If the reliable taxpayer does not meet the requirements for automatic payment relief, then the NAV will assess the submitted request based on the general rules. 

What happens if the taxpayer does not pay the due instalments or is late in paying them under the payment relief scheme? 

In such cases the relief is invalidated and the debt is payable in one lump sum with interest. This rule applies to the automatic payment relief of reliable taxpayers too.

Under what conditions can businesses ask for payment obligations to be reduced or forgiven? 

It is important to note that before the state of emergency the law did not provide grounds for the reduction or forgiving of tax debt in the case of legal persons and other business organisations. Based on this, Government Decree 140/2010 that appeared in the Hungarian Gazette on 21 April 2020 enables companies to submit requests to reduce their tax burden. Under the regulations before the state of emergency, the NAV only permitted the reduction or forgiving of charges or penalty debts after special consideration at the request of the taxpayer if the payment of such debt would make it impossible to continue with the business activity of the entity.

How to submit a request to the tax authority

Taxpayers obliged to communicate electronically may only submit requests electronically (form FAG01 for business organisations), taxpayers not subject to electronic communication can file requests electronically or on paper. 

Is there a fee for payment relief requests by business entities? 

Yes, submitting the request is subject to a fee in general cases. The stamp duty is HUF 10,000 (roughly EUR 28). However, procedures initiated by reliable taxpayers at the Hungarian tax authority for relief in the form of payment in instalments is duty-free. Procedures related to the payment relief and tax reductions defined by Government Decree 140/2020 are also duty-free in light of the state of emergency.

The team of WTS Klient Hungary, who have fully transitioned to working from home, are doing everything they can to provide support with their expertise and knowledge to any clients who find themselves in difficulty due to the coronavirus pandemic, and to help their clients navigate among the daily changes in law. Our experts are still happy to provide assistance, giving specific advice, legal help or contacting relevant authorities as is required. Please feel free to contact us.

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Special tax on credit institutions

• Taxpayer: credit institutions
• Tax assessment, payment: The special tax obligation shall be assessed on a separate form by 10 June 2020 and shall be paid in three equal instalments until 10 June, 10 September and 10 December.
• Tax base: The base of the special tax is the amount exceeding the HUF 50 billion (roughly EUR 143 million) tax base threshold for the 2020 fiscal year assessed according to the 2006 special taxes act.
• Rate:19%

Retail tax

Pursuant to Government Decree 109/2020 introducing the retail tax, any retail activity as well as the sale of goods to a customer in Hungary by a person or organisation resident abroad is taxable. 

Payer of retail tax

The payer of the retail tax is the Hungarian or foreign person or organisation conducting the above taxable activities in a business-like manner.

Base of retail tax

The base of the retail tax is the net sales revenue (sales revenue defined separately in the decree) for the entire fiscal year that includes the period from the regulation taking effect until the end of the state of emergency. The tax base includes the sales revenue stemming from services provided by the taxpayer – in connection with the sale of the acquired goods – to the supplier (manufacturer, distributor) of the goods acquired for retail sale, as well as the amount of any discount granted by the supplier to the taxpayer on the goods acquired for retail sale. For persons or organisations resident abroad and not operating through a branch office in Hungary, any consideration less VAT received for the sale of goods in Hungary is considered sales revenue. The decree specifies special detailed rules for the tax assessment of related companies.

Rate of retail tax

The rate of the tax on retail activities shall be defined as follows:

• 0% on any amount not exceeding the tax base threshold of HUF 500 million (roughly EUR 1.4 million),
• 1% on any amount exceeding the tax base threshold of HUF 500 million (roughly EUR 1.4 million), but not exceeding HUF 30 billion (roughly EUR 86 million),
• 4% on any amount exceeding the tax base threshold of HUF 30 billion (roughly EUR 86 million), but not exceeding HUF 100 billion (roughly EUR 285 million),
• 5% on any amount exceeding the tax base threshold of HUF 100 billion (roughly EUR 285 million).

The tax payable is the amount determined based on the tax assessed with the above rates, Considering the sales revenue of related companies too (but only in certain cases), for the period from when the decree takes effect until the end of the state of emergency, in proportion to the amount this represents in relation to all the calendar days of the entire fiscal year.

Procedural provisions

The retail tax obligation shall be determined and declared on a special form by the 30^th day after the end of the year including the state of emergency, or if the fiscal year ends during the state of emergency, then by the 30^th day after the end of the state of emergency. The monthly amount of the tax advance shall be declared until 31 May 2020. Its calculation shall be based on the provisions of the decree. Any taxpayer not subject to paying the tax is not bound by an obligation to file a tax advance return.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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Agreement facilitating claims for the government subsidy related to employment under shortened working hours during the state of emergency (hereinafter: Subsidy) 

The Subsidy may be claimed if the employee and the employer agree on

• shortened working hours (part-time working hours based on an employment contract modified after the declaration of the state of emergency in which working hours reach at least half of the working hours from the employment contract before the modification in a three-month average, but no more than 70% of the previous working hours – at least 4 hours per day), and
• individual development time (employee is exempted from work obligations for 30% of the time lost due to shortened working hours in order to conduct development activities connected to the employee’s position or the employer’s activities)

Conditions for claiming the Subsidy and exclusion criteria

The Government Decree outlines a complex system of conditions for claiming the Subsidy, according to which the Subsidy may be granted if the conditions below are met:

1. the employee:

• has been employed by the employer since at least 11 March 2020;
• does not receive any other subsidies related to part-time work in connection with the same position;
• is not serving their notice period;

2. the employer:

• has been in operation for at least 6 months;
• is employing the employee – with whom it is jointly submitting the claim – under shortened hours in order to avoid reducing the headcount;
• presents the business conditions justifying the employment under shortened working hours, their direct and close connection to the state of emergency, as well as the measures already taken and planned by the employer to alleviate the economic hardship;
• has used all available options to reschedule work before submitting the claim;
• is not receiving aid for creating or retaining jobs or for employing research and development staff at the time of the submission in respect of the employee with whom the claim is jointly submitted, and
• the cumulative working time has expired or been completed.

The Government Decree prescribes a number of obligations both for the employee and the employer:

1. the employee agrees

• to work under the shortened working hours entailing a loss of income;
• to be available for the employer during the time of individual development;
• that establishing any new employment besides the employment indicated in the request shall not hinder the employee’s return to regular working hours after the Subsidy period.

2. the employer agrees

• not to order any work to be carried out in irregular hours during the Subsidy period;
• to pay wages for the individual development time;
• that the amount of salary including the Subsidy shall total the employee’s absence pay during the subsidy period;
• to preserve the headcount during the Subsidy period and for 1 more month (headcount retention obligation);
• to report to the government office any changes in the conditions of the Subsidy or the period of shortened working hours within 2 working days.

With regard to claiming the Subsidy, the Government Decree sets forth the following exclusion criteria:

• the employee has a payment obligation in connection with a subsidy reclaimed in a final decision by a state employment authority;
• the employer does not comply with lawful employment relation conditions and/or does not provide evidence thereof;
• the employer is under voluntary liquidation or liquidation ordered by a final resolution, or bankruptcy or other statutory proceedings ordered by a final resolution and aimed at its termination are underway;
• as of 31 December 2019 the employer is considered a business in difficulty pursuant to Government Decree 37/2011 (III.22) on procedures relating to State aid measures as defined by EU competition law and on the regional aid map;
• the employer does not show there is a direct and close connection between the economic reason for the employment under shortened working hours and the state of emergency, and does not provide reliable supporting documents to prove that maintaining the continuity of the employees’ business activities is in the interest of the national economy.

Furthermore, no Subsidy shall be granted for employment other than under an employment contract or employment as part of agency work.

Period of the Subsidy

The period of the Subsidy shall be no more than 3 months. The Subsidy may be granted for a period – defined in months – following the submission of the claim. The Subsidy shall not be paid for the duration of unpaid leave.

Rate of the Subsidy

The rate of the Subsidy is 70% of the monthly absence pay assessed as of 11 March 2020 – less personal income tax advances and contributions defined based on the general rules – corresponding to the 30, 40 or 50% reduction in working hours. There is a ceiling to the absence pay less taxes and contributions: the amount shall not exceed double the mandatory minimum wage less prevailing taxes and contributions at the time of submitting the claim, i.e. HUF 214,130 (roughly EUR 608).

Procedural issues with claiming the Subsidy

The Subsidy shall be granted at the joint request of the employer and the employee.

The claim for the Subsidy shall be submitted by the employer electronically using the form available on the website of the Hungarian Employment Service (not yet available) during the state of emergency, or within one month of the end of the state of emergency. The claim for the Subsidy shall be submitted at the competent government office for the place of employment.

Decisions of the government offices cannot be appealed, and they may not be challenged in court. If the claim is rejected, the employer and the same employee may resubmit it no more than one more time.

Following the expiry of the Subsidy period and 1 month after the end of the headcount retention period, new claims may be submitted only with employees who previously were not subsidised.

The Government Decree will take effect on 16 April 2020.

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New funds for protection measures during pandemic and for restarting the economy

As we predicted in one of our recent articles the 2020 Hungarian budget will be amended as a result of the measures: the budget deficit has been raised from 1% to 2.7%. The regulation on this was published in the Hungarian Gazette on Monday night entitled “Amended rules of the Hungarian central budget for 2020 due to state of emergency”.

Pursuant to Government Decree 92/2020 (IV.6) three new funds have been created for the settlement of national and potentially European Union resources and expenses required to protect against the pandemic and for restarting the economy: Protection Against the Pandemic Fund, Economy Protection Fund, and the Fund for European Union Funding to Combat the Pandemic. The government is reallocating 50% of the funds previously assigned to support political parties into the Protection Against the Pandemic Fund, and it will channel vehicle taxes collected in 2020 for registered vehicles in Hungary as well as revenue from retail taxes into this fund too.

Key elements of the second phase of the economy protection action plan

Comprising many measures, the key economic measures of the economy protection action plan are the following (the detailed rules of the given measures were not yet released when the article was written):

• The social contribution tax paid by employers will be reduced by 2 percentage points to 15.5% from 1 July 2020, as previously agreed.

• To save workplaces, the Hungarian government will support shortened working hours (Kurzarbeit). If production is temporarily suspended (the exact definition of temporary has not yet been specified), the government will pay 70% of the lost wages for a maximum of three months. This assumption of expenses will probably be bound to a set of conditions.

• The government shall provide a 40% wage supplement for employees and engineers working in the fields of research and development for no more than three months.

• Financial reports and related tax returns can be submitted until 30 September, instead of the end-May deadline set for businesses whose financial year follows the calendar year. To our understanding, the deadline for filing annual tax returns (corporate tax, local business tax) will also be postponed.

• Collateral exemption will be introduced to the EKAER system.

• The process of VAT refunds will be accelerated: for regular taxpayers the procedure will take 30 days instead of 75 days, while for reliable taxpayers the 30-day period will be reduced to 20 days.

• As part of the economy protection action plan, special payment relief, instalment payments, payment deferral and tax reduction options will be available, and forms will be simplified too.

• No Hungarian taxpayer shall be downgraded in terms of taxpayer rating as a result of defaults arising during the state of emergency.

• Under the new measures, anyone forced to take unpaid leave as a result of the pandemic will remain in the Hungarian social security system, meaning their social security status will not change.

• Contrary to earlier practice, documentation of sick leave can be filed electronically.

• For companies retaining their workforces, the government will launch tenders for technology development, environmental protection and energy efficiency investments amounting to more than HUF 100 billion (roughly EUR 280 million).

• The Hungarian government is suspending payment of the tourism tax until the end of the year. The social contribution tax on SZÉP card payments will drop to 4% until the end of June, and the applicable threshold will be increased.

• In the next three years the government will allocate extra resources for priority intervention areas in the form of investment subsidies, tax cuts, infrastructure developments, soft and guaranteed loans, and capital programmes.

• The corporate sector will be supported through loan guarantee and capital programmes.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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