The Hungarian Ministry of Foreign Affairs and Trade has launched a public consultation on the expected amendments and invited feedback until 21 March 2025.

Investments from EUR 2 million can be supported

The amendment of the government decree will allow investments from EUR 2 million to be eligible for support in some parts of Hungary. The regions concerned are Borsod-Abaúj-Zemplén, Heves, Nógrád, Szabolcs-Szatmár-Bereg, Bács-Kiskun, Békés, Csongrád-Csanád, Baranya, Somogy, Tolna and Zala counties.

The minimum eligible cost of the investment will remain tiered depending on the location of the investment. The additional bands are as follows:

• EUR 3 million: in municipalities of the counties of Hajdú-Bihar, Jász-Nagykun-Szolnok, Pest, Fejér, Komárom-Esztergom, Veszprém, Győr-Moson-Sopron and Vas not qualifying as district seat municipalities.
• EUR 5 million: in Salgótarján, Miskolc, Nyíregyháza, Békéscsaba, Pécs, Kaposvár, Szolnok, or in municipalities of the counties of Hajdú-Bihar, Jász-Nagykun-Szolnok, Pest, Fejér, Komárom-Esztergom, Veszprém, Győr-Moson-Sopron and Vas that are considered as district seats.
• EUR 10 million: in the municipalities of Győr, Székesfehérvár, Tatabánya, Szekszárd, Kecskemét, Szombathely, Veszprém, Zalaegerszeg, Debrecen, Szeged and Eger.

Changes in terms of commitments

There are also significant changes to the commitments for subsidy for investments. The two main elements of the commitments will be wage bill (EUR 5 million increase in wage bill over the maintenance period) and turnover (EUR 25 million increase in turnover over the maintenance period) instead of staff maintenance.

However, in addition to these, the following commitments are expected to be required:

• a wage increase per capita or
• a per capita increase in turnover, or
• creation of at least 25 new jobs.

In addition to the above, at least two of the following commitments will be required:

• creation of R&D jobs,
• R&D expenditure increase,
• achieve the required proportion of suppliers within 100 km to reduce environmental impact,
• use of own renewable energy, also to reduce environmental impact,
• increase the number of employees in dual training or student employment contracts, possibly with a vocational training contract.

It is clear from the expected changes that support for investments will be more focused on innovation and environmental protection than before, and that the emphasis will be on average wage growth rather than employment growth, thus supporting higher value added production as opposed to lower value added mass production.

The experienced financial management experts of WTS Klient Hungary are happy to provide our clients with up-to-date information on investment support options, legal requirements and financial accounting for subsidies. Contact us if you need an expert!

 This article provides general information and does not constitute advice.

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According to the government decree entering into force on 1 July, natural persons have to pay social contribution tax on the part of the interest income under Section 65 of the Personal Income Tax Act – with the exception of interest income from real estate fund units – that is taken into account as the basis for personal income tax on interest income.

What was the situation so far?

Previously, there were several types of taxable income on which no social contribution tax was payable. These included interest income, which is now subject to a 13% social contribution tax, or income from controlled capital market transactions and crypto currency income, which will continue to be taxed at just 15%. As a general rule determined several years ago, the tax liability on returns from securities held in a long-term investment account is lowered from 15% to 10% after three years, and to 0% after five years, meaning that after a certain time there was no tax liability at all, and under the new rules, no social contribution tax liability will be imposed on this income either. The same applies to long term pension saving accounts.

Who is affected by the new social contribution tax on savings?

The new social contribution tax on savings will mainly affect Hungarian individuals, and foreigners who are Hungarian tax residents. The government decree does not apply to companies.

What is it paid for?

The social contribution tax on savings is payable on deposits with banks, interest on sums held on current accounts, on bonds if interest is paid on them, and on the return from insurance settlements, so on almost every type of interest income.

What is it not paid for?

There will be no social contribution tax on savings in the case of government bonds, and the returns from real estate funds will not be subject to the 13% tax either.

Interest on member loans is treated differently from the above. The Personal Income Tax Act only includes cooperative member loans under taxable interest income. If a Hungarian company has extended a member loan to its Hungarian owner and pays interest to the individual on it, this counts as earned income in respect of this relationship. By definition, it is not interest, so it does not fall under the scope of the Social Contribution Tax Act on this basis, but the details of the member relationship must be examined and personal income tax and social contribution tax must be accounted for accordingly.

When do you have to pay?

The government decree enters into force from 1 July, so if your money is sitting on a current account, you will have to pay the 13% extra tax on any interest earned on that current account after 1 July. For fixed-term deposits, the additional burden applies to deposits fixed after 30 June, and in the same way for securities, to interest on securities acquired after the decree enters into force, furthermore, to insurance settlements of insurance contracts concluded after the decree enters into force.

Due to the nature of the tax changes brought in by this decree, and the lack of consultation and opinions given the swift decision process, there are still many uncertainties and unanswered questions surrounding the social contribution tax on savings. Our tax specialists, however, will be happy to provide more information to our clients and delve into the more complex tax situations. Feel free to contact us.

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What had to be done by 30 April?

The deadline of 30 April applied to businesses and institutions that produce waste, and collect waste separately. The entities subject to the obligation and opting for collective fulfilment after Government Decree 80/2023 entered into force had to register on the electronic platform operated by the concession company (MOHU MOL Hulladékgazdálkodási Zrt.). These companies were typically already contracted with a service provider, and had transported packaging or other waste from their Hungarian sites. Organisations starting such activities now have 15 days to register. When registering, the necessary information for contracting must be provided on the MOHU website (what waste is generated, how it is collected, where it is collected) in order to be able to sign a contract for waste collection from 1 July. Failure to register can trigger a waste management fine of up to HUF 200,000, so it is worthwhile fulfilling this duty as soon as possible. This is still possible on the MOHU website even after the 30 April deadline.

Double registration required until the end of May!

Registration is required on two different electronic platforms by 31 May:

• As mentioned above, those who qualify as a producer under the EPR scheme must register via the MOHU electronic platform. In the case of products manufactured in Hungary, the producer is the manufacturer of the product. If the product is not manufactured in Hungary, the producer is the company that first places the product on the market in Hungary as part of its business activity. For “new” producers, registration is required before the start of the activity.

• You also need to register on the electronic platform of the National Waste Management Authority (OKIRkapu), which can be done by a person authorised to sign on behalf of the company after logging in through the government portal. The process can also be carried out by an authorised representative with a power of attorney, but in this case, please note that the authorisation process takes time, so it is worth starting now. Data has to be provided to the National Waste Management Authority with a KÜJ number requested via the OKIRkapu (for the first time by 20 October, for the quarter from July until the end of September). The KÜJ number (environmental client number) is the environmental ID for companies, organisations and individuals. 

Is the environmental product fee payment system here to stay? 

The environmental product fee obligations will remain, but there will be a new environmental product fee calculation formula to work with parallel to the start of the EPR scheme from 1 July 2023.

If someone pays the product fee, they will most likely be affected by the EPR scheme too, but the product fee system will still not be discontinued. This means returns still have to be filed and the environmental product fee still needs to be paid. It is important to be aware of which products are covered by the two schemes. However, applying the product fee calculation method in force from 1 July, when dealing with the same product the EPR fee can be deducted from the amount of the environmental product fee payable.

What do the environmental product fee and the EPR scheme have in common, and where do they differ? 

Environmental product fee returns still have to be submitted to the tax authority. For the EPR, however, data must be provided to the National Waste Management Authority (just like the product fee, this mainly relates to the quantity of products subject to the obligation).

As regards fee payments, the two systems are the same in that both fees are calculated based on the weight of the waste or polluting product, and the accounting period is the same, i.e. both fees are payable quarterly. However, the difference is that the product fee is payable by the 20^th day of the month following the given quarter, while the EPR fee is payable to the concession company based on an invoice issued by the concession company.

The invoice clauses set out in the EPR scheme have to be indicated on all invoices issued on the placing of circular products on the market, and/or on other documents that verify such placing on the market. Text that is generally used: “The seller is liable for paying the extended producer responsibility fee.” There are invoice clauses in the case of the environmental product fee too, but such do not apply to all invoices and supporting documents, and only in certain cases must information be included.

We have no stock, we do not handle packaging, we do not generate waste. Can we be subject to the scheme?

Many distribution chains in Hungary are set up in such a way that the Hungarian-registered subsidiary only invoices the products to the Hungarian customer as part of a distribution chain, the products do not arrive at the warehouse of the intermediary partner, and the end-customer receives the product directly. In this chain, such a company would be the first domestic distributor and subject to paying the environmental product fee, which is not clear at first sight.

This also shows that – prior to the launch in July – distribution chains need to be reviewed, the product ranges concerned must be identified, and the basis for the two fee payment systems established, in order to avoid paying double the fees.

As the EPR scheme and the obligations it imposes affect a wide range of businesses in Hungary, we recommend that all companies should assess as soon as possible whether or not their activity and their products will make them affected by the new administrative and fee-payment obligation. If you need specialist help with this do not hesitate to contact us.

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What does the extended producer responsibility scheme mean?

Introducing the extended producer responsibility scheme in Hungary became necessary to meet EU waste management targets and to comply with EU directives. The scheme aims to help Hungary switch as quickly as possible to a circular economy, where fewer products become waste and as much of the generated waste as possible is recycled as raw materials. The scheme places producers at the heart of the system, by making them financially responsible for waste management throughout the life cycle of the product. Consequently, the main obligation for producers will be paying an extended producer responsibility fee.

Which businesses qualify as producers?

In the case of products manufactured in Hungary, the producer is the manufacturer of the product. If the product is not manufactured in Hungary, the producer is the company that first places the product on the market in Hungary as part of its business activity.

What activities give rise to a liability for the producer?

The extended producer responsibility fee obligation essentially arises when the circular product is placed on the market by the producer. For the purposes of the extended producer responsibility scheme, it is important that placing on the market means the first transfer of ownership of a circular product in Hungary, free of charge or for consideration, or its transfer from abroad to Hungarian households or other users as part of an electronic commercial service (distance selling). In addition, use for own purposes is deemed to be placing on the market, as well as the removal of the product from a VAT warehouse or from a product fee warehouse to the territory of Hungary.

Which products are covered by the extended producer responsibility scheme?

Producers as defined above are only covered by the extended producer responsibility scheme if they carry out the activities defined above with one of the following product ranges:

• packaging,
• single-use and other plastic products,
• electrical and electronic equipment,
• (re-chargeable) batteries,
• vehicles,
• tyres,
• office paper,
• advertisement paper,
• cooking oil and fat,
• textile products,
• wooden furniture.

Since each of the above product ranges represents a broad concept, for the sake of clarity, point 1 of Appendix 1 to the Government Decree gives a more precise definition of which products within the given product range are covered by the extended producer responsibility scheme. Certain product ranges can be identified with the help of a customs tariff heading.

Obligations

Before going into the obligations in more detail, it is important to clarify that the producer responsibility obligation can be fulfilled in two ways: collectively or individually. When this is done collectively, a significant part of the producer’s waste management tasks (such as waste reception, collection, transportation, pre-treatment, trading, etc.) is performed by the concession company (MOHU MOL Hulladékgazdálkodási Zrt.) and its subcontractors. With individual fulfilment, these tasks are left to the producer.

Registration and contracting obligation 

From 1 April 2023, companies subject to the obligation and opting for collective fulfilment after the government decree enters into force have to register on the electronic platform operated by the concession company. Those fulfilling their obligations individually must conclude a concession contract with the concession company that includes specific content.

Registration 

Companies subject to the decree must register with the Hungarian waste management authority. This registration should normally be applied for before starting the activity with the circular product. Businesses that become subject to the government decree when it enters into force (from 1 April) have to submit their registration application to the authority by 31 May 2023.

Documentation and reporting obligations 

The obligated parties must keep records with the data specified in the legislation from 1 July 2023, and must report data to the national waste management authority based on these records on a quarterly basis by the 20^th day of the month following the given quarter (for the first time by 20 October 2023).

Fee payment obligation 

The obligated companies must pay an extended producer responsibility fee to the concession company quarterly based on an invoice issued by the concession company. The extended producer responsibility fees applicable to certain product ranges will be determined by a separate ministerial decree. It is important to note that the extended producer responsibility fee payable can be deducted from the environmental product fee. Accordingly, the method for calculating the environmental product fee is also being amended in the product fee law, with effect from 1 July.

Inclusion of specific text on invoices

Invoice clauses familiar from the environmental product fee regulations are part of the extended producer responsibility scheme too.  However, unlike the product fee system, the invoice clauses set out in the extended producer responsibility scheme not only have to be indicated in defined cases, but on all invoices issued on the placing of circular products on the market, or on other documents that verify such placing on the market. Text that is generally used: “The seller is liable for paying the extended producer responsibility fee.” The compulsory text changes in the event of a buyer’s statement and agreement to pay the fee.

Exemption from obligations

In the case of vehicles, producers can take on the extended producer responsibility obligation from the manufacturer of a circular product that is a vehicle accessory or component, such as electrical and electronic equipment, (re-chargeable) batteries and tyres. This requires a contract between the parties for the assumption of the fee.

Another case of exemption concerns the producer’s fee-payment obligation. Under the legislation, the given producer does not have to pay the extended producer responsibility fee if its customer declares and verifies that at least 60% of the purchased circular product is delivered abroad, either separately or incorporated into another product.

Legal consequences 

If the obligations are not met, or met but not in line with the legal requirements, the national waste management authority is entitled to impose a waste management fine, ranging from a few thousand Hungarian forints to millions of forints. In addition, in certain cases the authority can even suspend the placing on the market of the circular product by the parties concerned.

As the extended producer responsibility scheme and the obligations it imposes affect a wide range of businesses (it suffices to think just of the businesses creating packaging that are also deemed producers and thus subject to the scheme), it might be advisable for all companies to assess as soon as possible whether or not their activity and their products will make them affected. If you need specialist help with this do not hesitate to contact us.

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Options for payers in the low-tax scheme

According to the Ministry of Finance, those who do not qualify or cannot opt for the new low-tax scheme have a number of favourable tax options at their disposal. Flat-rate taxation for sole proprietors, small business tax for companies and simplified contribution to public revenues (Hungarian abbreviation: ekho) for artists may be the best alternatives. The latter may be made even more attractive by the ekho reduction, the details of which were published in Government Decree 297/2022 on the application of certain provisions allowing for simplified contributions to public revenues, in Hungarian Gazette No 134 of 9 August.  

Ekho reduction

Under the decree, the ekho reduction means that the so-called paying agent ekho will be abolished from 1 September 2022. In other words, paying agents do not have to pay the simplified contribution to public revenues on the income received as remuneration by individuals – for their occupation – who fulfil their tax liability under the Ekho Act. According to the ministry, this represents a 13 percentage point ekho reduction and ultimately a 15% ekho rate.

Those switching from the low-tax scheme and opting for the ekho are helped not only by the ekho reduction but also by the lower administration, as the ekho income is included in the draft tax return prepared by the tax office in the same way as income from employment. 

Other relief

In addition to the ekho reduction, the decree also helps people transition from the low-tax scheme who do not or cannot opt for the ekho. Although general partnerships, limited partnerships, sole proprietorships and law firms using the low-tax scheme on 31 August will fall under the scope of the Act on Accounting, the new provision does not require them to have their opening balance sheets audited.

Another relief is that if a member/unlimited partner of an existing limited or general partnership registered as a small taxpayer wishes to become a flat-rate sole proprietor, they do not have to wait for the company to be wound up by a simplified liquidation. Under the decree, it is sufficient for the simplified voluntary liquidation to be notified to the tax authority by 30 September 2022, and from the notification date they can be entered into the register of sole proprietors.

Corporate tax paid in foreign currency

Government Decree 298/2022 on the payment of corporate tax in foreign currency was also published in issue 134 of the Hungarian Gazette, which may help companies whose income is received partly or entirely in foreign currency. Under the decree, taxpayers may declare to the tax authority, using the form provided for this purpose – by the first day of the month preceding the first day of the tax year – that they will pay their corporate tax in US dollars or in euros for the whole fiscal year. The amount of the transferred euros or US dollars is credited to the taxpayer’s tax account in HUF at the exchange rate published by the National Bank of Hungary on the day the bank account used for the transfer is debited. The taxpayer can provide this notification for the first time for fiscal years beginning after 30 September 2022. The taxpayer must pay the conversion costs for transfers made using accounts kept in currencies that differ from the notification currency.

The change in the law on the low tax scheme in Hungary and the government regulations brought to alleviate this, i.e. the ekho reduction affect not only small businesses and entrepreneurs, but also, indirectly, large multinational companies, i.e. our clients. Their suppliers are very likely to include taxpayers in the low tax scheme – language teachers, translators, other service providers – who have chosen this favourable tax treatment so far but now need to rethink their operations and fees. If you are interested in how this change may affect your company, feel free to contact the tax consulting team at WTS Klient Hungary.

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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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Which infringements violate the requirements of lawful employment conditions?

For the purposes of the Public Finances Act, the requirements of lawful employment conditions are not complied with if the employer was fined

a) by the Hungarian tax authority or the employment supervisory authority for failing to meet the data reporting obligation regarding the establishment of an employment relationship as defined in the Act on Rules of Taxation or the Act on Simplified Employment,

b) by the employment supervisory authority

• for infringing the provisions regarding age for establishing an employment relationship and the prohibition of child labour,
• for infringing the provisions on salaries and wages pursuant to the Act on Employment,
• for violating the rules on recording temporary employment activities, or

c) by the authority supervising the implementation of the equal treatment requirement under the Act on Equal Treatment and the Promotion of Equal Opportunities for violating the requirement of equal treatment

in a final, enforceable and published public administration decision (upon the first legal infringement too) – included in a final decision of the court in the case of a public administration action – within two years of claiming the budgetary subsidy.

Furthermore, the requirement of lawful employment conditions is not met if the employer was fined as a result of employing citizens from third countries without a work permit or a combined permit issued during a permit procedure conducted to facilitate gainful employment pursuant to the Act on the Admission and Right of Residence of Third-Country Nationals in Hungary, in a final, enforceable and published public administration decision (upon the first legal infringement too) – included in a final decision of the court in the case of a public administration action – within two years of claiming the budgetary subsidy.

What documents can verify compliance with the requirements of lawful employment conditions?

 As a rule, the following documents facilitate confirmation that lawful employment conditions have been fulfilled:

A document containing data published from the registers of

• the Hungarian tax authority,
• the employment supervisory authority,
• the authority supervising the implementation of the equal treatment requirement.

Request for deletion of data published based on the official register kept by the employment supervisory authority

For decisions falling within the general competence of the employment supervisory authority, with the exception of labour fines levied because of employing citizens from third countries without a work permit, the Government Decree allows employers to request the deletion of its data published in connection with an infringement decision once per calendar year, before the expiry of the two-year publication deadline, provided that

• it submits a deletion request to the employment supervisory authority,
• it pays the amount specified in the Government Decree, which is three times the amount of the fine pertaining to the deletion request, but at least three times the number of employees affected by the infringement multiplied by the minimum wage;
• the content of the published decision has been enforced voluntarily and completely, and the labour fine paid.

If you have further questions as an employer on whether the lawful employment conditions requirements are fulfilled at your company, or if you need a legal expert to delete your data published with regard to the infringement decision, the lawyers working with WTS Klient Hungary are happy to help the clients of our group.

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Tax administration relief 

Based on the Hungarian government decree, the tax authority may, on one occasion, give a taxpayer up to 6 months of an interest-free payment deferral or up to 12 months of interest-free payments in instalments based on a submitted application, if it is likely that the payment difficulties can be attributed to the state of emergency. The application and the justification for the payment difficulties must be submitted by 31 December 2021, and the relief may be requested for tax registered at the tax authority of up to no more than HUF 5 million (roughly EUR 14,250).

If paying the tax debt would make it impossible for the applicant to continue its business activity for reasons attributable to the state of emergency, the tax authority may reduce the tax debt once by up to 20%, but by no more than HUF 5 million (roughly EUR 14,250). Such applications must be submitted by 31 December 2021, and a tax reduction may be requested for one tax type only.

If a tax debt is reduced, no payment relief may be authorised for the remaining amount. A tax debt reduction may not be authorised if the tax authority has granted payment relief to the taxpayer.

Social contribution tax exemption 

Under the government decree, no social contribution tax needs to be paid for the entertainment and business gift benefits defined in the Act on Personal Income Tax if the benefit was given between 10 June 2021 and 31 December 2021.

Another important change alongside the social contribution tax exemption for entertainment and business gifts is that in the case of jobs established between 10 June 2021 and 31 December 2021, anyone who according to the NAV was in employment, a partnership or was a sole trader and insured under the Act on Social Security for no more than 92 days of the 183 days prior to the start of the preferential employment will be considered to be joining the labour market.

SZÉP card and tourism development contribution

In addition to the above, the government decree once again extends the social contribution tax exemption in Hungary on amounts that can be granted – as fringe benefits – under the Széchenyi Rest Card for 2021 benefits, and retains the amount of the allowance raised last spring and already extended on one occasion. For employers not qualifying as budgetary organisations, this means a limit of HUF 800,000 (roughly EUR 2,280), from which HUF 400,000 (roughly EUR 1,140) can be transferred to the accommodation sub-account, HUF 265,000 (roughly EUR 755) to the catering sub-account, and HUF 135,000 (roughly EUR 385) to the leisure sub-account.

No tourism development contribution needs to be assessed, declared or paid from 1 January 2021 until 31 December 2021 either.

Should you have any questions about the fringe benefits paid to SZÉP cards, the social contribution tax exemption for entertainment costs and business gifts or about any other part of the government decree, please do not hesitate to contact our tax experts.

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What financial statements must be prepared during voluntary liquidation? 

If owners have decided to initiate the voluntary liquidation of an entity, they must prepare financial statements ending the company’s activity as of the previous day. One of the liquidator’s main tasks after being appointed is to prepare an adjusted opening balance sheet for voluntary liquidation as of its start date of the proceedings. A voluntary liquidation must be completed within 3 years of its start date. During the voluntary liquidation period annual financial statements must be prepared and published for each 12-month period as a financial year, while annual tax returns must also be submitted. If there are subsequently no obstacles to completing the voluntary liquidation, the liquidator must prepare financial statements for the final period of the liquidation too.

What provisions apply for financial statements prepared in relation to voluntary liquidations? 

All of the above-mentioned types of financial statements are subject to specific rules, which need to be adhered to during their preparation. Firstly, the provisions of Government Decree 72/2006 (IV.3) on the accounting tasks during voluntary liquidation need to be considered. For all matters not governed by the government decree, the Act on Accounting is applicable. 

Financial statements ending the company’s activity 

The financial statements ending the company’s activity must be prepared at the start of the voluntary liquidation. Based on the owner’s decision, the given financial year must be closed as of the day before the voluntary liquidation, as the reporting date. In this case it is important to note that the deadline is very tight: you only have 30 days to prepare the financial statements and have them approved by the owners. In the case of a compulsory audit, the approved financial statements and the auditor’s report must be filed and published within 30 days. The good news, though, is that the entity preparing the annual financial statements does not have to prepare a business report.

Adjusted opening balance sheet for voluntary liquidation 

The liquidator prepares an adjusted opening balance sheet for the voluntary liquidation as of the start date of the voluntary liquidation. By taking into account reported creditor claims and the assessment of the company’s financial position, the liquidator may adjust the data of the opening balance sheet for voluntary liquidation: in practice, this means that new items can be added and existing ones amended. The adjusted opening balance sheet for voluntary liquidation is prepared in a three-column format. The first column contains the opening balance sheet data as of the start of the voluntary liquidation, the middle column contains the adjustments, and the third column contains the consolidated figures. The deadline for preparing an adjusted opening balance sheet for voluntary liquidation is 75 days.

Annual financial statements to be prepared during voluntary liquidation 

During voluntary liquidation, Hungarian business entities must compile annual financial statements for each financial year. Financial statements on the first financial year must be compiled within no later than 12 months from the start date of the voluntary liquidation. Besides the data of the previous period, this shall also present the impact on the balance sheet and the income statement caused by the differences in the adjusted opening balance sheet for voluntary liquidation. If the voluntary liquidation is not completed within the first financial year it started in, then there is a reporting obligation for each financial year during the voluntary liquidation until the proceedings are completed. These financial statements must be prepared, filed and published within 5 months and are also governed by the provisions of the Hungarian Act on Accounting prescribing an audit.

Financial statements closing the voluntary liquidation, for the last period of the voluntary liquidation 

One special requirement of the financial statements prepared by the liquidator for the last period of the voluntary liquidation is that all assets and liabilities other than liquid assets must be recognised at market value, and the impact on profit/loss of the accounted differences must be recognised in the income statement as prescribed by the government decree. If the company’s assets include items subject to VAT upon the distribution of assets, pursuant to the Hungarian Act on Value Added Tax, then the amount of VAT payable must be recognised as a liability against other expenses. The financial statements must be prepared, filed and published within 60 days.

As our article reveals, a number of different types of financial statements must be prepared by companies during voluntary liquidation proceedings. During these special reporting tasks, Hungarian entities must consider not only the Act on Accounting but also the guidelines of the relevant government decrees, and in certain cases they have to comply with rather tight deadlines. Therefore, it is always worth relying on the help of experienced professionals. Feel free to contact the staff of WTS Klient Hungary for help.

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Foreign investor

In line with the government decree, a foreign investor is:

• a citizen, legal entity or other organisation registered outside the European Union, the European Economic Area, and the Swiss Confederation, or
• a legal entity or other organisation registered in Hungary, in another Member State of the European Union and the European Economic Area or the Swiss Confederation, in which a legal entity or organisation registered in a state outside the European Union, the European Economic Area or the Swiss Confederation has a majority interest.

Strategic company

Any limited liability company or company limited by shares with a registered office in Hungary is considered a strategic company if it conducts any of the activities specified in the government decree. The scope of activities considered “strategic” is quite broad: including, but not restricted to, the energy sector (supply of electricity, gas and steam), chemical industry, telecommunication, defence industry, various machine production sectors, agriculture (plant production, animal husbandry, wildlife management), also including food and beverage manufacturing, healthcare and construction, but the decree also lists the financial sector and retail and wholesale trade as well as tourism.

Legal transactions subject to reporting

Essentially, the following types of transaction affecting companies deemed to conduct strategic activities are classified as legal transactions subject to reporting:

• transfer of ownership on any legal grounds,
• capital increase,
• transformation, merger, demerger,
• issuance of convertible bonds, bonds with subscription rights, equity bonds
• establishing a usufruct right on the shares or partnership shares of a strategic company.

The related conditions are rather complicated, but the above legal transactions basically result in the following outcomes:

• acquisition of controlling interest;
• the foreign share acquired directly or indirectly in the strategic company is at least 10%, and the total amount of investment reaches or exceeds HUF 350 million (roughly EUR 1 million);
• foreign share acquisition of 15%, 20% or 50%;
• the share of foreign investors in the strategic company reaches or exceeds 25% as a result; or
• the foreign investor acquires the operating right following the transfer of the infrastructure and equipment essential to carry out the strategic activity and the granting of rights of use and operation for assets, or the allocation of such assets as collateral.

Reporting

Reporting to the Minister of Domestic Economy shall take place electronically with the mandatory use of a legal representative, within 10 days of the establishment of the legal transaction, detailing essentially the entire legal transaction and attaching the documents created.

The minister has 45 days to acknowledge or deny the transaction. The reasons for denying the transaction must be provided, which may include state interests, public safety and public order being violated or jeopardised– with particular regard to the safety of providing basic social needs – an audit by a public administration body of an EU Member State underway, the risk of an illegal activity or criminal act, or a previous act violating EU security or public order. It is possible to lodge an appeal against the decision in court.

If no acknowledgment is forthcoming or the request is denied, the legal transaction is deemed null and void. The reported transaction must be acknowledged before the change can be registered in the company registry and in the strategic company’s documents. Data registered in spite of the lack of acknowledgement or a denial from the minister shall be deleted from the company registry in a regulatory supervision procedure.

Sanctions

Any person violating the reporting obligation may be further penalised with a fine. The amount of the fine may be up to twice the value of the transaction, but it must exceed

• HUF 100,000 (roughly EUR 290) in the case of a natural person,
• 1% of the net sales revenue generated in the last financial year by the strategic company involved in the acquisition of ownership, in the case of a legal entity or other organisation.

The government decree is effective until 31 December 2020. Although the legal regulation was adopted with reference to protecting strategically important Hungarian companies from being acquired by “foreign investors”, it is important to bear in mind that the government decree also contains a provision that prescribes the reporting of any controlling interest acquired directly or indirectly by legal entities or organisations registered in the European Union, the European Economic Area or Switzerland.

The new reporting obligation may raise a number of issues for managers of Hungarian companies as well as foreign companies wishing to invest. The legal experts of WTS Klient Hungary have been dealing with the Hungarian legal obligations of international clients for decades, and have thus acquired significant professional expertise and wide-ranging experience which are at your disposal, should you have any questions about how to interpret the government decree.

A New reporting obligation for foreign investors bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.