Changes in the field of taxation in Hungary due to the pandemic situation
Contributed by Company Express kft
26 October, 2020
The current pandemic situation has greatly influenced the economic situation of the countries, but most of them are establishing new measures in order to keep the competitiveness of the market, and to facilitate the situation of the economic operators. Of course Hungary is not left out of the line either, the Government is establishing new taxation rules in order to achieve the above mentioned goals.
One of the most significant advantage is that the Government has suspended the obligatory of paying the social contribution tax from the employers' side. This step has significantly eased the burden of the employers, since in this case they only have to pay the 1,5% contribution to vocational training after the gross salary of the employees, and the Government has also fortified the labour market with this measure. This norm also applies for all the allowances provided to the employees, not just for their basic salary.
The Government has established an auspicious advantage in the field of the KIVA taxation system as well. This type of taxation system can be an appropriate one for start-up companies which are facing massive growth in the near future, and for those where the significant proportion of the costs are the wages of the employees. This type of taxation system simplifies the administration, and replacing the corporate tax, the social contribution tax, and the contribution to vocational training. Also in this case the staff expenses are subject to 12% tax, and the profit which has not been paid as a dividend is tax free. So far this type of taxation system can only be chosen if the company's income does not reach 1 billion Hungarian forint, but the Government has raised this limit to 3 billion Hungarian forint, in order to ease the situation of the business organizations.
The Government has also constituted a new law proposal, which in case of its acceptance, will make the situation of the undertakings more preferable from 2021. This modification would involve among others, preparing the draft of the VAT return for a couple of hundred thousand companies, and the simplification of the obligation for declaring the local government tax return, which could significantly facilitate the companies accounting obligations. Additional advantages are that, the above mentioned KIVA taxation system's tax rate could decrease to 11% from the current 12%, and that in the subject of the corporate tax, the 10 billion HUF upper limit of the development reserve of the companies could be terminated.
As you can see from the summary, the Hungarian government is doing its best to facilitate the situation of the entrepreneurs and to keep the competitiveness of the economic sector with these new measures. Even before the pandemic situation, the Hungarian taxation laws has established Hungary as a favourable tax environment previously, with inter alia its extremely low corporate tax rate. If you are considering to establish a business in Europe, this current situation should not discourage you, since the taxation conditions in Hungary are getting better and better as time goes by.
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