Legal background

The Hungarian Government Decree 314/2025. (X.17.), published in the Official Gazette on 17 October and effective from the next day, amends Decree 210/2014. (VIII.27.) on the use of investment promotion funds.

According to the new provisions, the changes introduced to the grants provided by HIPA – the Hungarian Investment Promotion Agency – are designed to:

• encourage a greater number of clinical research projects to be conducted in Hungary, and
• align national regulations with the European Commission’s guidelines on state aid, as detailed in communication C/2025/3602.

Major changes in supporting R&D collaborations

One of the most significant updates to the EKD regulatory framework involves the treatment of costs related to contract research carried out jointly by companies and universities or healthcare institutions.

Previously, only up to 50% of such collaborative research costs could be claimed as eligible. As of 18 October, this threshold has increased to 75%.

This change is especially aimed at fostering the local implementation of clinical research, deepening collaboration between pharmaceutical and medical technology companies and Hungarian universities or clinics.

The broader objective is to strengthen Hungary’s position among international R&D hubs and support the expansion of its knowledge-based economy.

Introduction of the Clean Industrial Deal State Aid Framework (CISAF)

The domestic implementation of the Clean Industrial Deal State Aid Framework (CISAF) – approved by the European Commission over the summer – marks a key step toward more flexible and effective support for clean industrial investments.

The CISAF program specifically targets industries critical to achieving net-zero emissions, with a focus on the following areas:

• Development of clean technologies, such as solar panel systems, thermal energy storage solutions, and geothermal power plant manufacturing
• Production of key components for these technologies
• Extraction or recovery of critical raw materials essential to the advancement of clean industry.

This new support scheme is a cornerstone of Hungary’s ambition to play an active role in Europe’s green transition and sustainable industrial development.

Renewable energy and storage: updated grant conditions

Investments in renewable energy continue to be eligible for support under the HIPA system. However, the latest changes in the EKD regulatory framework clarify the eligibility criteria.

Support is now only available if the project involves not only the expansion of production capacity but also the installation of an energy storage system.

This approach aims to foster the development of stable and flexible energy systems, in line with Hungary’s goals for decarbonisation and energy independence.

The latest amendment to the EKD regulatory framework in Hungary opens up new opportunities for companies active in R&D and clean technologies. The Strategic Advisory, State Aid and Incentives business line of WTS Klient Hungary is ready to advise you on investment plans with expert guidance. Don’t hesitate to contact us!

This article provides general information and does not constitute advice.

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According to the official justification, the amendment seeks to attract high value-added, innovative investments, promote industrial development in Hungary’s southern regions and smaller municipalities, strengthen the role of domestic suppliers in international value chains, and to encourage collaboration between investor companies and universities.

“Invented in Hungary”

This marks one of the most significant steps in the strategic direction long promoted by the Hungarian Ministry of Foreign Affairs and Trade and HIPA Nonprofit Plc., aiming to transition from “Made in Hungary” investments to the “Invented in Hungary” model.

On one hand, a new form of state aid has been introduced fordeveloping rural R&D centres, available to medium-sized and large enterprises employing at least 50 people. Eligible applicants must undertake to create at least ten new R&D jobs and enter into a formal cooperation agreement with a Hungarian university. Under the scheme, the eligible costs may be either the two-year wage costs of the newly created R&D positions or, alternatively, capital expenditures related to the investment project (e.g., construction, machinery, software).

On the other hand, the existing support mechanism for R&D projects remains available, with the eligibility threshold now lowered from 100 to 50 employees. Projects are still required to obtain an R&D certification; however, a new incentive element has been added: companies that commit to file patent applications with priority claimed in Hungary may benefit from extra amount of cash subsidy under the regulations of EKD Decree.

“From Békés to Baranya”

However, it would be premature to conclude that the government’s focus has shifted exclusively to research and development activities; there is still work to be done in the area of traditional capacity-expanding investments. The primary goal of Hungary’s investment incentive framework remains to channel foreign direct investments (FDI) primarily to the southern part of the country, where the largest mobilisable labour reserves are located. It is no coincidence that István Joó, CEO of HIPA, stated in a recent interview with public television that “there’s still work to do from Békés to Baranya.”

The international competition for foreign investments is intensifying, and Hungary must continue to position itself as an attractive destination. Moreover, nearly all funding for significant investment projects – particularly those planned by SMEs – must now come from the domestic budget. In light of this, the EKD Decree has significantly lowered the minimum required investment value to EUR 2 million in 11 of Hungary’s least developed counties (excluding county seats).

Following the amendment, four different minimum thresholds apply depending on the investment’s location:

• EUR 10 million: in Győr, Székesfehérvár, Tatabánya, Kecskemét, Szombathely, Veszprém, Zalaegerszeg, Debrecen, Szeged, and Eger
• EUR 5 million: in Salgótarján, Miskolc, Nyíregyháza, Békéscsaba, Pécs, Kaposvár, Szolnok, Szekszárd, and district seats in Hajdú-Bihar, Jász-Nagykun-Szolnok, Pest, Fejér, Komárom-Esztergom, Veszprém, Győr-Moson-Sopron, and Vas counties
• EUR 3 million: in other settlements in the above counties
• EUR 2 million: in Borsod-Abaúj-Zemplén, Heves, Nógrád, Szabolcs-Szatmár-Bereg, Bács-Kiskun, Békés, Csongrád-Csanád, Baranya, Somogy, Tolna, and Zala counties, excluding county seats

New mandatory commitments

For years, professional discussions have centred on how the conditions tied to investment grants could help integrate large Hungarian companies and SMEs more closely into supply chains, thereby increasing the national economic return of foreign investments. The previous version of the EKD Decree did not require such multiplicative effects, but the new amendment finally includes them among the mandatory commitments.

In the future, companies receiving cash grants must commit to conditions among others such as:

• generating at least EUR 15 million in additional revenue and
  at least EUR 2 million in additional wage costs during the monitoring period,
• increasing per capita wages and/or revenue (replacing the former emphasis on headcount retention),
• raising the proportion of suppliers located within a 100 km radius,
• increasing the use of renewable energy sources, and
• raising expenditures on research and development.

Easing the burden for SMEs

Although the support is still primarily aimed at significant market players, stronger Hungarian medium-sized enterprises may now be able to meet the eligibility criteria. The revised EKD Decree offers a new benefit for them: up to 25% of the awarded cash grant can now be disbursed in advance to SMEs.

The amendment of the EKD Decree has solidified a new investment promotion strategy that prioritises innovation, value creation, and sustainability. By lowering the minimum eligible project cost, new opportunities have opened for SMEs – especially those focused on innovation and high value-added production – primarily in Hungary’s southern counties. The new business line of WTS Klient Hungary is ready to advise you on investment plans with expert guidance. Don’t hesitate to contact us!

This article provides general information and does not constitute advice.

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What qualifies as wine products given as business gifts? 

According to the current Hungarian legislation, under Section 70 of Act CXVII of 1995 on Personal Income Tax, income determined in the fiscal year based on the provision of entertainment and business gifts falls into the category of other benefits, with the proviso that tax-free benefits under the provisions of the same legislation are to be disregarded when assessing said income.

Other benefits currently include:

• taxable income received once a year by way of a low-value gift (a low-value gift is a gift of goods or services worth less than 10% of the minimum wage), as documented;
• taxable income provided by means of free or discounted goods or services to which several individuals are entitled at the same time, and the payer, despite acting in good faith, is unable to determine the income earned by each individual;
• expenses incurred by the payer (including expenses for gifts given to participants at such events, provided that the individual value of the gift does not exceed 25% of the minimum wage per person) in connection with a free or discounted event organised for multiple individuals (including business partners) at the same time (if the event or function is predominantly hospitality or a leisure activity, as determined by the circumstances of the benefit).

However, based on Government Decree 451/2023 (X.4) on the rules applicable in the state of emergency to the taxation of other benefits, which entered into force on 16 November, certain wine products can now be gifted tax-free in Hungary. This means that these wine products will no longer be subject to 15% personal income tax and 13% social contribution tax on 1.18 times the value of the benefit, as an other benefit.

What wine products can be given tax-free?

As a result of the rule change, the following are exempt from tax in Hungary under Section 9 (1) of Act CLXIII of 2020 on Viticulture and the Wine Industry (hereinafter: Wine Act): wine products

• from the winery licence holder that initiated their placing on the market
• purchased in bottles,
• with a protected designation of origin or protected geographical indication,
• in accordance with Section 1 (3) of the Wine Act

in the context of hospitality for entertainment and non-entertainment purposes, furthermore as a business gift or a low-value gift.

The exempted wine products are grapevine products listed in Part II of Annex VII to Regulation (EU) No 1308/2013 of the European Parliament and of the Council. This document defines the categories of grapevine products in 17 points.

Accordingly, grapevine products include, among others:

• wine;
• new wine still in fermentation;
• liqueur wine;
• sparkling wine;
• quality sparkling wine;
• aerated sparkling wine;
• semi-sparkling wine;
• aerated semi-sparkling wine;
• grape must, etc.

Other conditions of tax exemption 

The tax exemption applies only to the free supply of wine products obtained by the payer/beneficiary directly from the winery licence holder, i.e. directly from the winery or from the winery’s own distributors, and which are purchased in bottles and labelled in accordance with the rules.

Purchases in other commercial transactions, such as drinks bought in shops or served in restaurants, are not tax-exempt.

The tax exemption applies both to personal income tax and social contribution tax.

What is useful to know, however, is that if an individual receives income as consideration for an independent or non-independent activity carried out by them or by another person, the rule on non-taxable income, on fringe benefits and on other income will still not apply for the purposes of assessing their tax liability. It follows, for example, that year-end bonuses cannot be exchanged for a tax-free gift package from a winery.

And for example, if wine is served on the spot to the participants of a wine tasting in the cellar of a winery, this can be exempt from tax without any limit. However, wine products as a low-value gift may only be claimed once a year by a given individual, provided that the individual has not received a low-value gift in any other form from the payer during the fiscal year, and can provide documentation to prove this.

If you have any questions about the tax rules on gifts of wine products or any other aspects of the autumn tax law amendments in Hungary, please contact the tax experts of WTS Klient Hungary who will be happy to assist you.

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But the last few hot days of June brought a cold shower. On 29 June, two days before entering into force, Government Decree 276/2023 (VI.29) amended the rules of certain government decrees related to the extended producer responsibility scheme, including the EPR decree, in several places. Below we have summarised the main changes to the EPR decree, which, importantly, came into force on 1 July. Those affected should therefore consider the impact of any changes on their business as soon as possible. 

Key changes affecting packaging 

According to the latest amendments to the EPR decree, the extended producer responsibility obligation for packaging that is made from packaging designed and intended for filling at the point of sale to the consumer – and packaging made from single-use packaging sold, filled or designed and intended to be filled at the point of sale to the consumer – is imposed on the manufacturer of the packaging, instead of the entity selling the packaging to the producer of the packaging.

Changes affecting reusable packaging 

Thanks to the new amendments, an option similar to the product fee scheme and beneficial for stakeholders was introduced to the EPR decree from 1 July. Accordingly, final separation from the product of reusable packaging that is part of packaging imported from abroad does not constitute use for own purposes and therefore does not give rise to an EPR obligation, if the reusable packaging is verifiably returned to the foreign country within 365 days of the obligation arising. The legislator also clarified that delivery abroad can be certified by a transport document or a waybill.

The amendments also clarify that, for the final separation of reusable packaging owned by a Hungarian economic operator and returned from abroad, reusable packaging shall mean packaging included in the register of reusable packaging at the National Waste Management Authority.

Another positive change for manufacturers of reusable packaging is that, with the exception of the placing on the Hungarian market of packaging made for the first time from reusable packaging, manufacturers do not have to pay the extended producer responsibility fee for the placing on the market of packaging made from reusable packaging material if the reusable packaging used to produce the packaging is included in the National Waste Management Authority’s register of reusable packaging. 

Amendments relating to assuming contractual obligations 

From 1 July, not only vehicle manufacturers but also farmer organisations will be able to take advantage of the option to assume contractual obligations. In the case of a circular product placed on the Hungarian market via a farmer organisation under EU rules, the farmer organisation can take over the EPR obligation. Compared to the previous provisions of the EPR decree, the minimum information content of the associated contracts changed in the legislation as of 1 July.

A further change from the previous provisions of the EPR decree is that when assuming contractual obligations, the vehicle manufacturer is entitled to a flat-rate payment, and this selection cannot be changed within the given year.

Taking to stock: new rule in EPR decree 

The possibility of taking to stock was added to the EPR decree, presumably to ensure consistency with the product fee legislation. Accordingly, the producer is entitled to keep records on the circular products taken to stock instead of circular products placed on the market, but may not change this selection within the given quarter. 

Subsequent changes to data reporting 

The previous wording of the EPR decree gave those affected a relatively short time to amend their data reporting. This is because only 15 days were given from receipt of the EPR fee invoice issued by the concession company to make any changes. This deadline has now been extended slightly: under the new rules, manufacturers, concession companies and concession subcontractors may amend the data submitted for each quarter of the given year until 31 March of the year following said year at the latest.

Change to invoice clause 

Thanks to last-minute amendments to the EPR decree in Hungary, those placing circular goods on the Hungarian market in the context of a retail sale are exempt from the obligation to add clauses to their invoices.

Statement-based exemption 

The amendments clarified the relevant part of the EPR decree, since the previous wording could be construed as meaning the customer must ship at least 60% of the circular product abroad when providing a statement. Under the new legislation, no extended producer responsibility fee must be paid if the customer of the fee-paying manufacturer declares and verifies that at least 60% of the purchased circular product is delivered abroad, either separately or as part of another product. Another change is that delivery abroad can be certified by a transport document or a waybill in the future, and no invoice or other document proving completion of the transaction is required.

Other changes to EPR decree 

It is also good to know that, as a result of the amendments, certain annexes to the EPR decree entered into force with different content as of 1 July. Among other things, the circular codes for certain circular products have changed, as well as the part relating to the minimum data content of the registers.

The last-minute changes to the EPR decree could affect the way most economic operators work, so we believe it is important that the next step for the businesses concerned is to review their processes and consider the impact of these amendments on their processes. If you need specialist help with this, please do not hesitate to contact us.

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EPR fees many times higher than product fees

Yet after reading through the EPR fee decree, they will have been saddened to see that the EPR fees are several times higher than the product fee rates. There are some product groups where the difference is 2/3-fold, but there are also some product groups where the EPR fee is more than 9 times the current product fee (e.g. paper and cardboard packaging), and there is only one exception where the EPR fee is equal to the product fee, and that is wood packaging (19 HUF/kg).

The EPR fees are payable from 1 July, and since the product fees will also remain after 1 July, we can rightly ask how the payment obligations of those affected will change after this date in Hungary. For products that are subject to both the product fee and the EPR fee, the legislation allows us to deduct the EPR fee from the product fee payable from 1 July. Since the EPR fees are almost always higher than the product fee, overall this means there will be no product fee payable for these products, but the much higher EPR fee will be there instead, i.e. the payment obligation will increase.

Sample calculation for EPR fees

Let’s look at an example. A company in Hungary purchases small computer equipment in cardboard packaging from abroad, and sells it – with the packaging – to its Hungarian customers. One piece of equipment weighs 3 kg, and the associated packaging is 0.5 kg. Both the packaging and the computer equipment are considered circular products, and are also subject to product fees. For each piece of equipment the company’s product fee liability so far was HUF 180.50 (3 kg x HUF 57/kg (product fee for electronic equipment) + 0.5 kg x HUF 19/kg (product fee for paper packaging)). From 1 July, an EPR fee of HUF 869.50 will be charged for each piece of equipment and its packaging (3 kg x HUF 261/kg (EPR fee for electronic equipment) + 0.5 kg x HUF 173/kg (EPR rate for paper packaging)), and since the EPR fees exceed the product fee rates, the product fee for the equipment does not have to be paid. The total payment obligation will increase from HUF 180.50 to HUF 869.50 from 1 July.

Although the computer equipment in the above example will no longer be subject to the product fee, please remember that the other product fee obligations will not cease after 1 July, so product fee records will still have to be kept and returns will still have to be submitted every quarter.

Other obligations in EPR system

In addition to paying the higher EPR fees, from 1 July this company will also have to keep records in the EPR system and report quarterly data to the National Waste Management Authority. Furthermore, the invoice on the sale of the computer equipment in Hungary will have to include the following clause: “The seller is liable for paying the extended producer responsibility fee.”

Due to the higher EPR fees and the new obligations related to the EPR system, it is important that the next step for the companies affected should be to review their processes, identify their circular products, set up their records system and prepare their billing software for including the invoice clause by 1 July. If you need specialist help with this do not hesitate to contact us.

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Company car tax in general

Amending the company car tax does not affect the scope of taxpayers, the subject of the tax or the procedural regulations, it is only a change to the tax rate. So in this respect, there should be no big surprises for businesses in Hungary: the general provisions detailed in our earlier article are the only ones to bear in mind.

The company car tax continues to apply for passenger cars, which are

• not owned by private individuals and have a Hungarian licence plate, or
• are privately owned or have a foreign licence plate and costs are accounted on them in accordance with the Act on Accounting or the Act on Personal Income Tax.

Based on the above and further provisions in the legislation, two very important conclusions can be drawn regarding the persons liable for paying the tax. Firstly, not only businesses (economic entities) established in Hungary may be subject to the company car tax, but foreign enterprises too. Secondly, the business using the car does not have to own the car to become liable for the tax (with particular regard to rental and leasing arrangements).

Another important factor is that the obligation to pay the company car tax is also independent of where the vehicle is used. So for instance, when setting up foreign posting arrangements, companies must account for company car tax when determining the expenses incurred in connection with the posting.

What has changed?

The tax continues to be assessed monthly for every passenger car based on the engine power expressed in kilowatts and emissions standards, using the itemised tax rates set out in the legislation and the decree.

The monthly rate of the company car tax based on emissions standards and engine power until 30 June 2022:

The monthly rate of the company car tax based on emissions standards and engine power from 1 July 2022:

When is the new tax rate applicable?

In line with the decree, the company car tax amendment is temporary, with the increased rates applicable between 1 July 2022 and 31 December 2022. However, it will be worth keeping an eye on law amendments from 1 January 2023, as a provision implemented on a temporary basis can be passed into law by legislation (see, for instance, the special retail tax), and the Hungarian government may also adopt other special measures to ensure the stability of the national economy during the declared state of emergency.

What are the consequences of the company car tax amendment in numbers?

Until 30 June 2022, the monthly tax rate was set within the HUF 7,700 – 44 000 (roughly EUR 20 – 111) range. In the second half of 2022, the tax rate will range from HUF 14,000 up to HUF 81,000 (roughly from EUR 35 up to EUR 204). In terms of the individual passenger car categories, this is equivalent to a tax hike of 82-86%. (In terms of amount, the monthly tax increase will be HUF 6,300 – HUF 37,000; roughly EUR 16 – 93.)

Given that the company car tax must be paid in full every month in which costs are accounted in some way on the car concerned, or the vehicle was owned by the taxpayer (which means using a daily pro rata method is not possible), companies in Hungary may incur an additional cost ranging from HUF 37,800 to HUF 222,000 (roughly from EUR 95 to EUR 559) per passenger car.

With the tax changes and the increase in energy costs, companies must take special care when planning the use of cars.

How can you avoid the increasing burden?

It is perhaps too soon to envision a future in which the participants of a client meeting all roll in on their company bicycles, in spite of the fact that legislation is trying to steer businesses in this direction too by introducing personal income tax exemption for bicycles provided by employers from 1 January 2022. In reality, taxpayers still favour car rental arrangements, which is facilitated by ensuring the right to deduct up to 50% of the value added tax on rental fees.

Not every car is subject to company car tax, however, as the tax is not applicable to environmentally friendly cars, so its amendment will not impact green-minded companies. Tax-exemption and other tax-related reliefs regarding environmentally friendly vehicles may in future act as incentives for the spread of electric cars in the business sector.

From a tax perspective, there are many circumstances that have to be considered in the context of using of passenger cars, both for company cars and for other tax purposes. Since the increasing tax burden means a higher tax risk, feel free to contact us if you have any questions on how your company is impacted by the topic. Our specialists will be happy to help you in assessing the risks.

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Most of the decree provisions will take effect on 1 July, and will apply for the fiscal years of 2022 and 2023.

Extra-profit tax for the financial sector

The new bank tax is one of the special taxes to keep public finances balanced in Hungary. The extra-profit tax on credit institutions and financial enterprises is a new obligation for the affected taxpayers, in addition to the special sectoral tax already in place for several years now. The extra-profit tax is based on the net sales revenue determined in the financial statements for the fiscal year preceding the current fiscal year, or for banks, more precisely, the net interest income and the net income from fees and commissions. The rate will be 10% in 2022 payable in two equal instalments by 10 October and 10 December, and 8% in 2023 payable in three equal instalments by 10 June, 10 October and 10 December.

Insurers will also be charged a new additional tax for the period between 1 July 2022 and 31 December 2023. For insurers the extra-profit tax will be based on premium income, its rate will be tiered, and it will also depend on whether it pertains to life insurance, or to comprehensive motor insurance, property or liability insurance, or third-party motor liability insurance, which are already taxed. Insurance companies in Hungary have until 30 November 2022 and 31 May 2023 to assess, pay and declare the advance on the additional tax. The deadline for declaring and paying the tax will be 31 January 2023 and 31 January 2024. If the paid advance on the extra tax exceeds the amount of the extra tax declared, the taxpayer may reclaim the difference from the day the extra tax return is submitted.

The decree extends the obligation to pay the transaction duty on the purchase of securities (not the sale thereof), and raises the transaction duty ceiling from HUF 6,000 to HUF 10,000 (from roughly EUR 15 to roughly EUR 25). The tax will remain at 0.3%, but from now on it will also apply to financial service providers rendering cross-border services.

Contributions from airlines

The extra-profit tax applied for passenger airlines will be levied on the business entity providing ground handling services, and the tax will be based on the number of passengers departing from Hungary, excluding transit passengers. The taxpayer will have to pay HUF 3,900 (roughly EUR 9.8) per passenger with destinations in Europe (more precisely Albania, Andorra, Bosnia-Herzegovina, North Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, Great Britain, Ireland, Norway, San Marino, Switzerland, Serbia, Ukraine and the European Union), and HUF 9,750 (roughly EUR 24.5) per passenger for destinations outside Europe.

Pharmaceutical tax

In line with the government decree, the marketing authorisation holder or in certain cases the distributor of medicinal products too will have to pay the extra-profit tax. The new tax burden will apply to medicinal products with a producer price exceeding HUF 10,000 (roughly EUR 25), on which 28% tax will be paid instead of the current 20%. The 20% tax rate will remain for medicinal products with a producer price of less than HUF 10,000. The new tax rate shall first be applied for payment liabilities due on 20 July 2022.

Special energy taxes

The government decree imposes a new 25% extra-profit tax on producers of oil products, and it also states that contrary to the District Heating Act in effect in Hungary, entities in the manufacturing sector will also be subject to the income tax on energy providers for the fiscal years of 2022 and 2023. In practice, this means bioethanol producers, starch and starch product manufacturers as well as sunflower oil producers, who will have to declare their payable tax advances for the 2022 fiscal year by 20 September, and pay them in equal monthly instalments by the 20^th day of each month. The tax advance payable for the 2023 fiscal year must be declared by 20 January 2023 and also paid in equal monthly instalments by the 20^th day of each month.

Extra telecommunications tax

The rate of the extra-profit tax for telecommunications companies in Hungary will also be tiered in line with net sales revenues for the reporting year, as follows:

• 0% on the part not exceeding HUF 1 billion (roughly EUR 2.5 million),
• 1% on the part exceeding HUF 1 billion, but not exceeding HUF 50 billion (roughly EUR 126 million),
• 3% on the part exceeding HUF 50 billion, but not exceeding HUF 100 billion (roughly EUR 251 million),
• 7% on the part exceeding HUF 100 billion.

The telecommunications extra tax for the fiscal year including 1 July 2022 and the fiscal year starting in 2023 must be determined, paid and declared by the last day of the 5^th month of the fiscal year following the reporting year. Telecom companies are also subject to pay tax advances: an extra tax advance equalling the extra tax assessed for 2022 must be paid and declared by 30 November 2022 based on the net sales revenue generated in the fiscal year started in 2021, and by the last day of the 5^th month of the fiscal year starting in 2023. 

Changes to special retail tax

The tiered rates of the special retail tax already raised in February will not be further increased this year, but taxpayers will have to pay an additional 80% of the tax originally levied this year as the extra retail tax. In 2023, however, the tax rate will increase. The rate based on the tax base thresholds will therefore

• remain at 0% for the part not exceeding HUF 500 million (roughly EUR 26 million),
• rise from 0.1% to 0.15% for any amount exceeding HUF 500 million, but not exceeding HUF 30 billion (roughly EUR 75.33 million),
• rise from 0.4% to 1% for the part not exceeding HUF 100 billion (roughly EUR 251 million),
• increase from the current 2.7% to 4.1% for the part exceeding HUF 100 billion.

Company car tax

In addition to the special taxes impacting on certain sectors, the government decree also amends the Act on Vehicle Tax. Accordingly, between 1 July 2022 and 31 December 2022, the monthly rate of company car tax will almost double in Hungary. (We will explain the details on this shortly in a separate article.)

Advertising tax

Although the decree does not contain a paragraph on this, upon disclosing the other tax measures the government also announced the reintroduction of the advertising tax. The advertising tax is to return from 1 January 2023, and according to our information its rate will rise from 0% to 7.5% on the part of the tax base exceeding HUF 100 million (roughly EUR 252,000).

In our article we only highlighted the most important aspects of the decree on extra-profit tax published on 4 June. If you have any questions about these or any other rule changes not mentioned here, such as changes to the mining royalty, simplified employment, excise tax or the public health product tax, feel free to contact the tax consulting team at WTS Klient Hungary.

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Local business tax cut in half if revenue does not exceed HUF 4 billion

The favourable change for SMEs was published on 22 December 2020 in the Hungarian Gazette and took effect that day. The Hungarian law sets the local business tax rate for the fiscal year ending in 2021 at 1% for micro-, small- and medium-sized businesses that would originally be subject to a tax rate higher than 1% pursuant to applicable local government regulations. So this relief essentially means the tax is halved compared to the local business tax rate otherwise defined (for most local governments) at a maximum of 2%. It is very important to note though that the regulation is only applicable to SMEs whose annual net sales revenues or total assets do not exceed HUF 4 billion (roughly EUR 11 million). It is because of this amendment that reviewing compliance with the definition of SMEs is strongly recommended.

In 2021 Hungarian businesses affected will have to pay 50% of their tax advance – declared and assessed with the tax rate specified in the local government tax decree. The amount of a company’s local business tax obligation is reduced by the tax authority ex officio, without a resolution, by the part of the tax advance which is not to be paid.

Pursuant to the government decree, the favourable rate of local business tax qualifies as state aid, on which taxpayers must submit a statement with pre-defined content to the tax authority of the local government of their permanent establishment by 25 February 2021 (and are obliged to report the address of their permanent establishment too, if they have not done so before).

One important technical detail is that this statement can only be submitted electronically through the Hungarian National Tax and Customs Administration (NAV) on the relevant form.

Electronic invoicing through the NAV

Besides reducing local business tax, another amendment deserving special attention from the law amendments announced at the end of 2020 is the one modifying Decree 23/2014 of the Minister of National Economy on invoicing. The amendment was published on 30 December in the Hungarian Gazette and took effect on 4 January.

As we have reported several times, NAV’s data reporting system for online invoicing moved to the next level in Hungary from 1 January, extending the online data reporting obligation for invoicing to invoices issued to non-taxpayers, invoices issued for the intra-Community tax-exempt supply of goods, or even to export invoices (in other words, all invoices issued pursuant to VAT rules effective in Hungary). The XSD 3.0 is ready for use from 4 January in the live Online Invoicing system, but its application will only be mandatory from 1 April 2021.

In accordance with the latest amendment to the Invoicing decree, taxpayers can transfer certain invoices subject to the online data reporting obligation to their customers via the NAV’s specially designed infrastructure. If an issuer issues an invoice electronically (e.g. in PDF format) and submits the so-called HASH code of the invoice during the data reporting, they do not have to use a digital signature and time stamp; what is more, the electronic archiving of the invoice is simplified for both parties to backing up the PDF.

As a result of the amendment, new opportunities open up for taxpayers to introduce electronic invoicing with their partners, and to forward and archive invoices. With this legislation the NAV took another step towards automating invoicing and reducing the taxpayers’ administrative burden.

Registering / de-registering invoicing software 

The latest amendment of the Invoicing decree also cancels the obligation to register the start and end date of using invoicing software with the NAV. 

Non-cooperating states published

Legislation disclosing the list of non-cooperative tax jurisdictions was also published in the 30 December edition of the Hungarian Gazette. The list includes the following countries: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, the Seychelles, Trinidad and Tobago, the American Virgin Islands and Vanuatu.

This list is primarily relevant with regard to corporate tax, and for ratings as controlled foreign companies.

This year, Hungarian businesses have to familiarise themselves with a number of new rules affecting taxation and invoicing, and they can expect legislators to continue making frequent, swift and drastic changes due to the ongoing coronavirus pandemic. The tax experts at WTS Klient Hungary are here to help, providing support with issues related to local business tax, invoicing, or any other tax-related matters.

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Goods subject to reporting obligation according to new EKAER decree 

According to the new EKAER decree, from 2021 the obligation to request an EKAER number may only arise with regard to goods deemed risky under the previous regulation. These typically include food products and clothes as well as other products subject to reporting as defined in a separate decree.

So Hungarian businesses are now exempt from the reporting obligation with regard to goods deemed non-risky under the previous regulation.

Exemptions 

When assessing the reporting obligation, the weight and value of the transported products are still a major aspect for consideration. This is because no EKAER number is required for transporting goods subject to reporting and transported from the same dispatcher to the same recipient in the same vehicle not exceeding HUF 1 million (roughly EUR 2,800) in value and 500 kilograms in gross weight. These thresholds are the same as the ones previously applicable for transporting risky goods.

One important difference, however, is that contrary to the previous regulation, based on the new EKAER decree the reporting obligation is applicable not only for road transportation with tolled vehicles weighing over 3.5 tonnes, but it may be applicable for road transportation with any type of vehicle.

Risk collateral 

Besides the previous exemptions, no risk collateral has to be paid by reliable taxpayers according to the Act on Rules of Taxation, and the obligation to provide risk collateral for the transportation of products subject to the 5% tax rate no longer applies either.

Exemption for short-range transportation 

Special exemption from requesting an EKAER number with respect to short-range transportation (i.e. less than 20 km) will now be available for any transport direction. The authorisation is valid until withdrawn.

Voluntary reporting 

The new EKAER decree enables taxpayers to make voluntary EKAER reports even if they are not subject to a reporting obligation. In these cases too it is important to make sure the reported data is accurate, but there is no collateral obligation in the case of voluntary reporting.

To sum up, the majority of Hungarian businesses will be relieved from a significant administrative burden from 1 January 2021. This is because the scope of transportations subject to reporting shrank to a fraction of the previous range as the new EKAER decree took effect. Given the positive changes of the default penalty rules announced earlier, the EKAER system has seen the most favourable amendments in recent years. Nevertheless, the EKAER rules should still not be taken lightly since if a reporting obligation does arise, data reporting must be accurate and detailed and the deadlines complied with to avoid any detrimental legal consequences.

If you wish to learn more about the details of the new EKAER decree, and you need help from experienced professionals regarding the registration and processing of data in the EKAER system, as well as in handling system messages, and implementing and operating solutions to facilitate communication with the EKAER system, feel free to contact us.

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What does the new transfer pricing regulation mean, and why was it necessary?

Decree No. 32/2017 of the Hungarian Ministry of National Economy was promulgated on 18 October 2017. It is referred to as the new transfer pricing documentation decree, and it replaced Decree No. 22/2009 of the Ministry of Finance. The new regulation was necessary to achieve the goals included in the BEPS action plan, namely, to curb the aggressive tax planning and tax evasion efforts of multinational enterprises. Bearing these goals in mind, after implementing the rules on country-by-country reporting, Hungary incorporated the requirements of the master and local files into its rules as part of the new transfer pricing documentation decree.

From when should the rules of the new transfer pricing documentation decree be applied?

The requirements of the new transfer pricing documentation decree must be applied for the first time in relation to documentation for tax liabilities for fiscal years beginning in 2018. Essentially, this means that companies that are obliged to prepare transfer pricing documentation and whose financial year tallies with the calendar year have to prepare their documentation with the expanded content as per the new decree by the end of May 2019.

What are the most important changes?

One of the most important changes is that from 2018 the new transfer pricing documentation decree terminated the option to prepare independent documentation, and made it mandatory to prepare two separate documents, the master file and the local file.

What is the master file, what does it have to contain, and what should we pay attention to when preparing it?

The master file basically contains detailed information for the entire company group. So among other things, this document must present the supply chain for the group’s five largest products and services and the products and services with a turnover exceeding 5% of the group’s turnover, broken down by sales revenue, a brief description of intragroup services that qualify as significant, and a description of intragroup financing, to mention but a few of the many mandatory elements.

It is also important to mention for the master file that the Hungarian legislation follows the requirements of the OECD guidelines on the mandatory elements of the master file. This means that, given compliance with the OECD rules, the master files prepared at the group’s headquarters most often contain all the information required by Hungarian legislation. However, caution is advised and you are better to check the documentation prepared by your parent company, since even one missing element can provide an excellent reason for the tax authority to levy a default penalty.

 Have the contents of the local file changed?

The new transfer pricing documentation decree requires more data in the local file too. In addition to the current content, when presenting the taxpayer you need to show the management structure, an organisational diagram, and the names of the individuals who report to the management. Additionally, the most important competitors of the enterprise have to be listed and the local file has to include a concise description of how the financial data used when applying the method to establish arm’s length prices can be linked to the data included in the taxpayer’s annual financial statements.

When should the transfer pricing documentation be prepared by?

Similar to the previous rule, the local file must be compiled by the submission date of the corporate tax return, but it does not have to be submitted to the tax authority. The new transfer pricing documentation decree enables the local file to be considered the documentation for a period of 12 months from the last day of the taxpayer’s fiscal year (also bearing the parent company’s deadlines in mind), until the master file is available. However, it is important that this rule does not apply to cases where the parent company is Hungarian and it prepares the master file, or when the foreign parent company does not prepare a master file, for whatever reason, and thus the Hungarian related company has to prepare it instead. In this case, the master file has to be completed by the submission date of the Hungarian corporate tax return.

What should you look out for in respect of intragroup services of low added value?

The new transfer pricing documentation decree retained the option for related companies to prepare simplified transfer pricing documentation for certain intragroup services. Both the range of services and the value and percentage limits defined under the conditions remained unchanged. However, the upper limit of the applicable mark-up changed from 10% to 7%, while the lower limit remained at 3%.

Ability to make modifications

One important and favourable change in the new transfer pricing regulation is that within the limitation period and until the start of any tax authority inspection, taxpayers can modify their transfer pricing documentation if they discover that they did not prepare the documentation according to the legal regulations, or if they detected an error affecting the tax base, the tax, the arm’s length price and the arm’s length price range (profitability) in the documentation. The modifying document must designate the documentation affected by the modification along with the modification and its date. The modification has to be performed according to the rules valid as of the original due date of the documentation, but no modification may be made if the taxpayer lawfully opted for one of the possibilities in the decree, and would change this with the modification. In practice this means, for example, that the selected method to define the arm’s length price cannot be changed with a self-revision.

What did not change

The size of the penalty for incomplete documentation will not change in the case of transfer pricing documentation prepared for 2018. It is still very high, i.e. it can amount to HUF 2 million (roughly EUR 6,160) per incomplete document, and as much as HUF 4 million (roughly EUR 12,320) in the case of a repeated failure to comply with the laws.

You do not have to prepare documentation on product and service sales recharged without a mark-up, provided that you transacted with an independent party. However, it is important that if the re-charging is carried out for several related parties, the taxpayer will only be exempted from the documentation obligation as per the new transfer pricing documentation decree if it is substantiated that the distribution method applied – with due consideration of the facts and conditions characteristic of the particular transaction – complies with the arm’s length price principle.

The transfer pricing consultants of WTS Klient Hungary have considerable experience in preparing these documents and in successfully supporting tax authority inspections, including, among others, industry knowledge on how to manage and support transactions of suppliers in the automobile sector and their tax inspections. As a member of WTS Global’s transfer pricing advisory team, we offer solutions for all kinds of transfer pricing problems at international level. Please do not hesitate to get in touch.

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