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Tax & Legal AlertPwC Hungary • Issue 527 • November 2014

ContentsTaxes and contributions on labour . . . . . . . . . . . . . . . . . . .2• Personal income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2• Social security contributions . . . . . . . . . . . . . . . . . . . . .3• Social tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3• Simplified employment . . . . . . . . . . . . . . . . . . . . . . . . . .3

Changes concerning corporate income tax . . . . . . . . . . . . .4

Changes concerning other direct taxes . . . . . . . . . . . . . . . . .5• Local taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5• ‚Robin Hood’ tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5• Telecommunications tax . . . . . . . . . . . . . . . . . . . . . . . . .6• Advertising tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6• Special tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6• Financial transaction tax . . . . . . . . . . . . . . . . . . . . . . . .6• Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Changes related to indirect taxes . . . . . . . . . . . . . . . . . . . . .7• Changes to the VAT Act effective

from 1 January 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . .7• Changes to the VAT Act effective from

1 July 2015 and 1 January 2016 . . . . . . . . . . . . . . . . . .8• Excise duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8• Food chain supervision fee . . . . . . . . . . . . . . . . . . . . . . .8• Energy tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9• Public health product fee . . . . . . . . . . . . . . . . . . . . . . . .9• Customs Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Changes related to tax proceedings . . . . . . . . . . . . . . . . . . .9

Changes in accounting regulation . . . . . . . . . . . . . . . . . . 10

The following newsflash provides a summary of the most important amendments to tax legislation for 2015, adopted by Parliament on Tuesday, 18 November 2014. In addition to these legislative amendments, a number ofproposals have been submitted to Parliament that may give rise to significant changes for taxable persons from 2015, including in particular companies involved in the tobacco industry. Such proposals concern, amongother changes, the introduction of a special health care tax payable by tobacco manufac-turers and registered traders, an increase of the excise tax rate applicable to tobacco pro-ducts, and the modification of the tobacco retail supply chain. These proposals are ex-pected to be adopted before the end of this year. We will inform our Clients on related developments in future newsflashes.

The most important tax legislative changes effective from 2015

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Taxes and contributions on labour

Personal income tax

Cafeteria benefits –Therewillbesignificantchangestonon-cashbenefits.Asageneralrule,thecurrent35.7%taxratewillapplyonlytoHUF200,000(insteadoftheearlierthresholdofHUF500,000)fromtheamountoffringebenefitsgrantedbyemployers(e.g.Erzsébetvouchers,localtravelpasses,etc.),whereasthepartexceedingthisamountwillbesubjecttoanincreasedtaxrateof51.17%.However,SZÉPCardbenefitsprovidedabovethethresholdofHUF200,000willremainsubjecttothelowertaxrateuptoatotalannualamountofHUF450,000.IncompaniesprovidingcafeteriabenefitsoveranetamountofHUF200,000,thischangemayresultinashifttothechoiceofSZÉPCardbenefits.

Tax allowance for first-time married couples – Theintroductionofanewtaxallowance,andtheex-pansionoftheexistingallowances,willprovidefurthersupporttofamilies.Couplesmarryingafter31Decem-ber2014willbeabletodecreasetheirtaxbasesbyatotalmonthlyamountofHUF31,250,whichrepresentsmonthlytaxsavingsofHUF5,000.Totakeadvantageofthistaxallowance,itissufficientifoneofthepersonsmeetsthecriterionofmarryingforthefirsttime.Thetaxbasereductionwillbeavailabletofirst-timemar-riedcouplesforamaximumof24monthsfollowingthewedding,untiltheybecomeentitledtousethetaxbaseallowanceforfamilieswithchildren.

Expanding tax allowances for families –Withinfouryears,startingin2016,theamountoffamilytaxal-lowanceforfamiliesraisingtwodependentchildrenwillbedoubled.Nextyear,theconsolidatedtaxbasemaybedecreasedbyamonthlyamountofHUF62,500,justasthisyear.From2016on,thetaxallowancewillincreasebyanannualamountofHUF15,625,whichrepresentsamonthlytaxsavingofHUF2,500.

Taking advantage of tax allowances during the year –Achangeintherulesfortaxadvancedeclarationswillenableprivateindividualswithlong-termpersonalservicecontractstotakeadvantageofthetaxallowancesdecreasingtheirpersonalincometaxortaxbase,orthefamilycontributionallowancealreadyduringtheyear,beforetheyfiletheirtaxreturnsatyear-end.Prohibition of salary substitution – Thenewregu-lationsstateasabasicprinciplethatsalariesmaynotbesubstitutedbygrantingbenefitssubjecttofavourabletaxrates.Althoughthisprinciplecouldalreadyhavebeenconcludedbylegalinterpretationbeforetheenactmentofthisamendment,thenewactincludesaspecificpro-visiontoconfirmthattax-exemptorfringebenefitsmaynotbeprovidedtoprivateindividualsascompensationsfortheiractivities.

Ensuring accessibility for people with disabili-ties will also be eligible for support –Accordingtothebill,fundsusedforensuringaccessibilityforpeoplewithdisabilities,incompliancewiththeGovernment

Decreeonstatehousingsubsidies,willberegardedasservinghousingpurposes.Therefore,ifcertaincon-ditionsaremet,employerswillbeallowedtoprovidetax-exempthousingallowancesandwillnotbeobligatedtodetermineincomefrominterestiftheygrantloanstotheiremployeesforthispurpose.

Reporting securities provided as benefits – Employeeshareschemessubjecttofavourabletaxationwillhavetobereportedtothetaxauthority.

Host companies receiving leased staff will also qualify as employers – ThenewlegislationwillenableHungariancompaniesleasingstafffromforeigncompaniestoactastheiremployersinregardstothepersonalincometaxpayableontheirremuneration.

Students working out of student-work placement offices will also be entitled to cafeteria benefits – Employerswillbeallowedtograntbenefits,includingfringebenefits,tostudentsemployedthroughstu-dent-workplacementofficesunderthesameconditionsastotheiremployees.

Liability insurance for senior executives – Liabilityinsurancepremiumspaidbycompaniesfortheirseniorexecutiveswillbecometaxexempt.Thischangewillhavearetroactiveeffectandcanbeappliedtoanypreviousyear.

Phasing out the preferential treatment for whole life insurance – Asof1January2018,wholelifeinsurancepolicieswillbesubjecttothesametaxationasotherinsurancepoliciesthatareusedassavingsin-struments.Therefore,taxesandcontributionsonwholelifeinsurancepoliciestakenoutbypayersforprivateindividualswillbetreatedasotherspecificbenefitsfromthepayer’sperspective(currenttreatment:taxexemptifcertainconditionsaremet),andasinterestincomefromtherecipient’sperspective(currenttreatment:otherincomeinspecificcases).

Instalments reimbursed by banks – Wewouldalsoliketocallyourattentiontoanewprovisiononpersonalincometaxthatenteredintoforceon1November2014.ThisprovisionstipulatesthatamountsrepaidbybankstoprivateindividualsincompliancewiththeHungarianSupremeCourt’suniformitydecisiononhousingloansmaynotbeconsideredtomodifytheprivateindividual’staxliabilitiesinanytaxyear.Thisalsomeansthatsuchrepaymentsmaynotaffectthetaxexemptionofemployer-assistedhousingbenefits,either.

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Social security contributions

Insurance of secondees from third countries – Underthegeneralrules,secondeesfromthirdcountriesworkinginHungaryforlessthantwoyearswillremainexemptfromtheobligationtopaysocialsecuritycontri-butionsnextyear.Accordingtotheproposedamendment,thetwo-yearperiodiscountedfrom1July2013(insteadofthecurrentlyvalidstartingdateof1January2013).

Cancellation of the healthcare service contri-bution – ThemonthlyamountofhealthcareservicecontributionpayablebypersonswhodonotqualifyashavinginsuranceinthepublicsystemwillincreasefromHUF6,810toHUF6,930.Afurtherchangeisthatpersonswhohadtheirhabitualplaceofresidenceinaforeigncountryandweresubjecttothehealthinsurancesystemofthatcountrymayrequestthecancellationofthispaymentobligation.

Social tax

Tax allowance available to employers of parents of small children – Employerswillbeentitledtotakeadvantageofthefullamountofsocialtaxallowanceforparentsemployedpart-time,i.e.thetaxallowancewillnothavetobeapportionedaccordingtothepartialworkingtime.

START Card programme to be phased out – TheallowancesrelatedtotheSTARTCardthathasbeenphasedoutsince2013willbeabolished.Therefore,from2015,theseallowanceswillnolongerreducethesocialtaxpayablebyemployers.Theaboveallowanceswillfi-nallybereplacedbythetaxallowancesintroducedunderthejobprotectionactionplan.

Simplified employment

Salaries paid under simplified employment – Foremployeesemployedunderthesimplifiedemploymentscheme,amountsexemptedfromper-sonalincometaxwillhavetobecalculatedbasedonthedailyamountoftheguaranteedminimumwage,ratherthantheminimumwage,iftheemployeeisentitledtoatleast87%oftheguaranteedminimumwage.Asaresult,thetax-exemptpartofremunerationpaidtoemployeeswithatleastsecondaryeducationwillincreasebyappr.16%,iftheyareemployedunderthesimplifiedemploymentscheme.


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Changes concerning corporate income tax

Definition of related companies – From2015,relatedpartystatuswillbedeemedtoapplywhereacontrollinginfluenceonbusinessandfinancialpolicyexistsbetweenthetaxablepersonandanotherpersoninviewoftheiridenticalmanagement.

Limitation of taxation of foreign real estate funds – ThedefinitionofpermanentestablishmentwillbebroadenedtoensurethatrealestatefundsestablishedinanEEAmemberstateandhavingthesamelegalstatusasHungarianrealestatefunds(havinglegalpersonalityinthestateoftheirestablishmentbutnotbeingsubjecttoanytaxthatmaybesubstitutedforcorporatetaxac-cordingtothenationallawofthecountrywheretheyareestablished)shouldnotbesubjecttocorporateincometaxinrespectoftheexploitationorsaleofrealpropertyornaturalresourcesorthetransferofrelatedintangiblepropertyrights.

R&D classification not mandatory –Incontrastwiththeearlierbill,claimingataxbaseallowancewillnotrequirepreliminaryclassificationbytheHungarianIntellectualPropertyOffice.

Supporting institutions of higher education – Similarlytocompaniessupportingpublic-benefitorganisations,theHungarianDisasterReliefFund,andtheNationalCulturalFund,anewtaxreliefwillbeavailabletocompaniesprovidingsupportiftheymeetthefollowingcriteria:• underahighereducationsupportagreement

concludedwiththeinstitution’sfounderorfundingbody,thesupportingentityagreestosupporttheinstitutionofhighereducationunderpre-agreedtermsintheformofagrantprovidedforaperiodofatleastfiveyears;

• inthetaxyearinwhichsuchsupportisprovided,thetaxablepersonmaydeductfromitscorporatetaxbaseupto50%oftheamountpaidundertheagreement,withtheprovisonthatthedeductedamountmaynotexceeditspre-taxprofits.

Thetaxreliefmayalreadybeclaimedfortaxliabilityconcerningthe2014taxyearinrespectofagreementstosupportinstitutionsofhighereducationconcludedinthe2014taxyear.

Losses carried forward –From2015,therulesontheuseoflossescarriedforwardwillbecomemorestringent:• inrespectoflossesincurredfrom2015,thetimelimit

forusinglosseswillbereducedtofivetaxyears;• further,accordingtotheamendment,lossescarried

forwardthatwereincurreduptothelastdayofthetaxyearstartingin2014andhavenotbeenusedtoreducethetaxbasemaybewrittenoffaccordingtothetermsinforceatthetimewhentheywereincurred,withtheprovisonthatlossescarriedforwardmayatthelatestbeusedtoreducepre-taxprofitsinthetaxyearincluding31December2025;

• thecurrentrestrictionsontheuseoflossescarriedforwardacquiredbyasuccessorcompanyincon-nectionwithcorporatetransformationoracquisi-tionwillbecomemorestringent,inrespectoftherequirementtocontinuethepredecessorcompa-ny’sbusinessactivity.Lossescarriedforwardandacquiredbythesuccessorcompanyinthecourseofcorporatetransformationmaybeused(writtenoff)inataxyearonlyinproportiontotheratioofthesalesorotherrevenuesgainedinthetaxyearinrespectofthecontinuedbusinessactivityandtheaveragesalesorotherrevenuesgainedbytheprede-cessorcompanyinthelastthreetaxyearsprecedingthetransformation.

Allocating corporate taxes to organisations involved in sports and performing arts as well as for film production projects –Inthefuture,taxpayersinterestedinsupportingsportsandcultureasameansofoptimisingtheircorporatetaxliabilitywillbeabletochoosebetweenprovidingsuchsupportunderthecurrentcorporatetaxallowanceregimeorallocatingsomeoftheircorporatetaxesunderthenewrulescomingintoforcefrom1January2015.Thetworegimeswillnotbeapplicableinparallelwithinthesametaxyear;taxpayerswillonlybeabletochooseoneofthetwoformsofsupport.

Underthenewcorporatetaxrules,taxpayersmayallocateupto50%oftheirmonthlyorquarterlycorpo-ratetaxadvances.Declarationsonallocationmaybemodifieduptofivetimeswithinataxyear.Taxpayersomittingtomakeadeclarationonallocatingcorporatetaxadvancesmayallocateaportionoftheirpayablecorporatetaxesintheircorporatetaxsupplement(“top-up”)returnorannualcorporatetaxreturn.Totalallocationswillbecappedat80%ofpayablecorporatetaxes.Inthecaseofsportssupport,12.5%oftheamountallocatedwillqualifyassupplementarysportsdevelop-mentsupport,whichwillentitlethetaxablepersontoapplyasponsorshiparrangement,while1%willbeduetothesupervisorybodyasanofficialfee.

Taxpayerswillbeeligiblefortaxcreditbymakingallo-cations.Taxcreditonallocationsfromtaxadvancesandtaxadvancetop-uppaymentsmayequaltheallocatedamount–inthecaseofsportssupport,reducedbytheamountofsupplementarysupportandthe1%officialfee–,cappedat7.5%of80%ofpayablecorporatetax.Forallocationsmadeintheannualcorporatetaxreturn,thetaxcreditmayalsoequaltheallocatedamount–inthecaseofsportssupport,reducedbytheamountofsupplementarysupportandthe1%officialfee–,butwillbecappedat2.5%of80%ofpayablecorporatetax.


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Theamendmentopensfavourabletaxtreatmentforprovidingsportsorculturalsupporttocompaniesthatpreparetheirannualfinancialstatements,orreporttotheirforeign-basedparentcompanies,accordingtoInternationalFinancialReportingStandards(“IFRS”).

Income (profit) minimum – From2015,whendeterminingtheincome(profit)minimum,totalrevenuesmaynotbedecreased bythecostofgoodssoldorthevalueofintermediatedservices.

Depreciation of goodwill – From2015,taxableper-sonsmay–subjecttopursuingtheirbusinessinlinewiththeirintendedpurpose–recognisecorporateincometaxdepreciationatanannualrateof10%.

Development tax incentive – ThetermsoftheGeneralBlockExemptionRegulationmayalsobeappliedtoinvestmentprojectsforprocessinganddistributingagriculturalproducts,i.e.claimingthetaxreliefissubjecttoagovernmentdecree–basedonauthorisationbythe

EuropeanCommission–ifthetotalamountofstateaidrequiredfortheinvestmentprojectexceedstheamountthatcanbeprovidedatthesamemunicipalityforaninvestmentprojectwitheligibleexpensesexceedingtheHUFequivalentofEUR100millionatpresentvalue.

Transfer pricing – Anewparagraphhasbeenaddedtotransferpricingregulations,containingguidanceontheapplicationofcertaintransferpricingmethods.Un-derthenewregulation,incertaincasestaxablepersonswillberequiredtoapplytheinterquartilerangewhendeterminingandpresentingthearm’s-lengthnatureoftheirprices.Onthebasisofthewordingofthelaw,casesinwhichapplyingtheinterquartilerangeisjustifiedwillbesetoutintheministerialdecreeonrecord-keepingrequirements.Therelevantdecreeisexpectedtobeupdatedbeforetheendofthisyear.

Changes concerning other direct taxes

Local taxes

Municipal tax –Localgovernmentswillbeabletolevytaxeswithintheirareaofjurisdictionbyissuingadecree.Municipaltaxmayonlybeleviedontaxableassetsthatarenotsubjecttopublicduesregulatedbylaw.Taxablepersonssubjecttomunicipaltaxwillnotincludeorgan-isations,entrepreneurs,statesandlocalgovernments.Publicduesfrommunicipaltaxeswillrepresentrevenuesofthelocalgovernmentconcerned.

Value of intermediated services and cost of goods sold deductible from local business tax according to revenue brackets –From2015,forthepurposesofapplyingtherulesofaggregation,salesrevenues,thecostofgoodssoldandthevalueofintermediatedserviceswillhavetobetakenintoaccountinproportiontothelengthoftheperiodofrelatedcompanystatus.Asaresultoftheamendment,thetaxbasewillnotbedisproportionatelyhighforbusinesseswhichduringthetaxyearbecomerelatedcompaniesofentitiesinrespectofwhichrevenuebracketingmustbeapplied.

‚Robin Hood’ tax

Top-up obligation – From2015,thetaxadvancetop-upobligationoftaxablepersonswillberaisedfrom90%to100%oftheexpectedpayabletax.Thehighertop-upobligationcanalreadybechoseninrespectofthe2014taxyear.

Provisions for expected obligations and future expenses – From2015,similarlytocorporateincome

tax,amountsrecognisedasexpensesinrespectofprovi-sionsandadditionstoprovisionsmustbeaddedto,whileamountsrecognisedasrevenuesinthetaxyearwhenusingprovisionsaredeductiblefromthetaxablebaseforthe‘RobinHood’taxpurposes.Toapplyadeduction,thetaxablepersonconcernedmusthavepreviouslyin-creaseditstaxbase,unlesstheprovisionsconcernedhadbeenmadebeforethetaxablepersonbecamesubjecttothe‘RobinHood’tax.Inthelattercase,thedeductioncanalreadybeappliedinrespectofthetaxyearcom-mencingin2014.

Reversal of impairment recognised on owner-ship interest – Similarlytocorporateincometax,theamountofimpairmentrecognisedonownershipinterestandreversedinthetaxyearisdeductiblefromthetaxbase,providedthatthesamehasbeenpreviouslyaddedtothetaxbaseofthetaxablepersonconcerned.Thisoptioncanalreadybeappliedinrespectofestablishingthetaxliabilityforthe2014taxyear.

Items received free of charge – Taxbaseadjustingitemswillincludeassetstransferred/receivedfreeofchargeandservicesprovided/receivedfreeofcharge.Exceptionswillincludeitemsprovidedtoorreceivedfromlocalgovernmentspursuanttoastatutoryobligation.

Termination with legal succession –Similartocorporateincometax,forthelegalpredecessorinthelasttaxyear(inthecaseofade-merger,forthelegalsuccessorinthefirsttaxyear),thetaxbasemustbeincreasedbytheamountofpositivevaluationdifferencerecognisedinthefinalclosingbalancesheet,asincreasedbyappreciationofprovisionsmadeforcontingenciesandfutureexpenses,anddecreasedbydepreciationofprovisionspreviouslyrecognisedasitemsincreasingpre-taxprofits.


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Telecommunications tax

No ‘internet tax’ – Asthebillon‘internettax’willnotbeintroduced,therewillbenochangesinrespectofthetelecommunicationstaxliability.

Advertising tax

Definition of publishing advertisements – Underthenewdefinition,itwillbeirrelevantforthepurposeofpublishingadvertisementsthatunderthecontractbetweentheparties(advertiserandpublisher),theplace,timeandmannerofpublishingadvertisementsispre-determinedonthepublisher’swebsiteorprogrammingschedule.

New tax authority register –Inthefuture,thetaxau-thoritywilldiscloseonitswebsitealistofadvertisementpublishersthathavedulysettledtheirtaxliabilityaswellasthosethatarenotliabletopaytax.Taxablepersonsmaybeenteredintheregisterbyfilingarequesttothetaxauthority,providedthatitcanbeestablishedthatthetaxablepersonhasdulysettleditstaxliabilityorhasmadeadeclarationonhavingnoadvertisingtaxliabilityinthetaxyear.

No requirement to make a declaration –Taxablepersonswhichpublishadvertisementsandhavebeenenteredintheregisterofthetaxauthorityhavenoobli-gationtodeclarewhetherornottheyhaveanadvertisingtaxliability.

Tax liability of advertisers – Notaxliabilityarisesfortheadvertiserifpublishingoftheadvertisementisorderedfromaperson/entityincludedintheregisterdisclosedonthewebsiteofthetaxauthority.Also,notaxliabilityarisesifallofthefollowingconditionsaremet:• theadvertisercanverifiablydemonstrate(e.g.bya

returnreceipt)thatithasrequestedthepublishertomakeadeclaration,and

• ithasnotreceivedthedeclarationwithin10workingdaysofreceiptoftheinvoiceorotheraccountingdocument,and

• thisfact,togetherwiththedetailsofthepublisherandtheconsiderationforthepublishingisreportedtothetaxauthority.

Scope of advertising tax adjusted – Inrespectofsports,thepublishingofadvertisementswithintheframe-workofamateursportsactivitiesaswellasconnectedtoprofessionalsportsorganisations,talentresearchanddevelopmentwillnolongergiverisetoanadvertisingtaxliability.

Tax rate for top bracket raised – From2015,therateapplicabletotheamountoverHUF20billionofthetaxbasewillincreasefrom40%to50%.

Establishing the tax base of related companies – Underthecurrentrules,relatedcompaniesmusttakeintoaccountthetaxbasecalculatedforthewholetaxyear,regardlessofthelengthoftheperiodforwhichtheyqualifiedasrelatedcompaniesinthetaxyearconcerned.Accordingtotheamendment,from1December2014,onlythetaxbaseamountcalculated–proportionatelyad-justedbythenumberofapplicabledays–fortheperiodofrelatedcompanystatuswillhavetobetakenintoaccount.

Tax liability of taxable persons using a non-cal-endar financial year –Ifataxablepersonisusinganon-calendarfinancialyear,forfinancialyearscommencingin2014,theperiodbetween1January2015andthelastdayofthefinancialyearmustberegardedasatransi-tionaltaxyear.Theamendmentprescribestheamountoftaxesandtaxadvancesaswellasthedateofsettlingtaxadvancesforthisperiod.Taxadvancespertainingtothetransitionalyearmustbedeclaredby15January2015;50%ofthetaxadvancesmustbepaidbythatdateandtheother50%bythelastdayofthetransitionaltaxyear.

Special tax

Specialtaxfortradersandinvestmentfunds–Asubsec-tionentitled‘specialtaxfortradersandinvestmentfunds’willbeaddedtoActLIXof2006ontheSpecialTaxandBanker’sContributionIntendedtoImprovetheBalanceofPublicFinances.

Specialtaxliabilitywillariseinrespectof• foreign-issuedcollectiveinvestmentsecuritiestraded

inHungaryandkeptinsecuritiesaccountsonbehalfofclientsbytradershavingtheirregisteredofficeorbranchofficeinHungaryandmeetingthedefinitionof‘trader’withinthemeaningofActXVIof2014oninvestmentfundmanagersandcollectiveinvestmentschemesandontheamendmentofcertainfinanciallaws,aswellas

• investmentunitsissuedbyinvestmentfundsregis-teredinHungaryandmanagedbyafundmanagerregisteredorhavingabranchofficeinHungary.

Thetaxwillbepayablebythetraderortheinvestmentfund,asapplicable.Thetaxbasewillbecalculatedbasedonthequarterlyaverageofthedailynetassetsvalueofthecollectiveinvestmentsecuritiesorinvestmentunitsconcerned.Thetaxratewillbe0.05%ofthetaxbase.

Thetaxliabilitywillhavetobesettledbyself-assessmentfortradersandbytaxcollectionforinvestmentfunds.Bothwillbeobligedtofiletaxesonaquarterlybasis,bythe20thdayofthemonthfollowingthequarterconcerned.

Financial transaction tax

Tax on card payments –Inthecaseof(card)paymenttransactionsinitiatedbythepayerthroughthepayee,theprevioustaxbasedonthetransactionalamountwillbereplacedbyaflat-ratetaxofHUF800peryear,wherethetaxbasewillbetheaggregateofpaymenttransactionsexecutedwiththesamecash-substitutepaymentinstrumentinthepreviouscalendaryear.Ifthetaxbaseincludestransactionsexecutedwiththeuseofacontactlesspaymentfeature,thetaxratewillbeHUF500.Paymentserviceproviderswillberequiredtodeclareandsettlethetaxliabilityconcerningcardpaymenttransac-tionsonceayear,bythe20thdayofthefirstmonthofthecalendaryear,forthefirsttimeby20January2015.


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Duties

Bank transfer instead of stamp duty – Saveforafewexceptions,itwillbepossibletosettleadministrativeproceduralfeesbybanktransfer.

Company owning real estate in Hungary – ThedefinitionofacompanyowningrealestateinHungarywillbecomemorestringent.Forclassificationpurposes,ofassetsrecognisedinthebalancesheet,inadditiontoliquidassetsandreceivables,prepaidexpensesandaccruedincomewillalsohavetobedisregardedforthepurposesofdeterminingthe75%ratio.Duetothischange,therangeoftaxablepersonsmeetingthedefi-nitionofacompanyowningrealestateinHungarymayincrease,andsuchtaxablepersonsmaybeliabletopayrealestatetransfertaxuponacquiringtheirholdings.

Suspension of procedure for levying real estate transfer tax – Ifpurchasingresidentialproperty,privatepersonsmayrequestinawrittendeclarationthattheirliabilitytopaypropertytransfertaxshouldariseonthedateonwhichtheysellanotherresidentialproperty,withinoneyearofsuchpurchase.If,despitesuchadeclaration,thesaleofresidentialpropertydoesnotoccurwithinoneyear,thetaxauthoritywilllevytherealestatetransfertaxtogetherwithasurchargecalculatedatdoubletheprimerate.

Changes related to indirect taxes

Changes to the VAT Act effective from 1 January 2015

Advance payments –Theadoptedamendingactwillclarifythedefinitionofadvancepayment,asspecifiedintheVATAct,bystipulatingthatVATliabilityarisesevenifthetaxpayergainsapecuniaryadvantagebymeansotherthancashorcashequivalents.(Inthiscase,thechargeableeventwilloccuronthedateonwhichtheadvancepaymentisreceived.Thisamendmentmaybeofrelevancee.g.forexchangetransactions.)

Tax exemption – Portfoliomanagementofassetscoveringtechnicalprovisionswillbetax-exempt,whereasportfoliomanagementoffinancialassets,asspecifiedinpointsd)andf)ofthesamesectionoftheVATAct,willbesubjecttoVAT.

Cancellation of tax numbers – TaxpayerswillnotbeentitledtoexercisetheirrighttodeductVATstartingfromthedayonwhichthedecisiontocanceltheirtaxnumberbecomesfinalandnon-appealable,ifthetaxauthoritycancelsthetaxnumberwithoutsuspension,inaccordancewiththeVATAct,orterminatesthesuspen-sionofthetaxnumberbycancellingit.

Domestic reverse charge mechanism –Leasingstafformakingavailablepersonnel,andtheuseofstudent-workplacementofficesforconstructionworkorconstructionofrealestateunderaconstructioncontractwillqualifyastransactionssubjecttothedomesticre-versechargemechanism,eveniftheseactivitiesarenotsubjecttoaconstructionpermitissuedbyanauthority.Accordingtotheamendingact,moresteelproductswillbesubjecttothereversechargemechanism.

5%VATrate–Asaresultoftheamendment,moreproductswillbesubjecttothe5%VATrate.

(Theamendmentwillaffectthesaleofliveandpro-cessedlargeanimalse.g.sheep,goats,cattle).

Domestic recapitulative statement – EntitieswillberequiredtofileadomesticrecapitulativestatementifathresholdofHUF1millionisreached,insteadoftheHUF2millionapplicableearlier.Taxpayersliabletofilethestatementmayopttoreporttheirtransactionsevenbelowthisthresholdtothetaxauthority.Theinvoicesissuedontransactionsreachingtheabovethresholdwillhavetoalsoincludethecustomer’staxnumber.

Tax warehousing –Regardingtaxwarehousingactivitiesandtheobligationsoftaxwarehouseopera-tors,foreigntaxpayerswillnotberequiredtorequestaHungariantaxnumber,iftheiractivitiesarelimitedtosupplyinggoodsfromthedomestictaxwarehousetotheterritoryoftheCommunity.Inthiscase,operatorsoftaxwarehousesmayalsobeauthorisedtofiletaxreturnsontax-exemptintra-communitysupplyofgoods.

Electronically issued receipts – Telecommunicationsserviceproviderssupplyingdatalinkservicesforreportingwillbeobligedtoinformthetaxauthorityaboutanyinterruptionorterminationoftheirservicessuppliedtocashregisteroperators.

Sale of residential property – TaxpayerswhohaddeclaredtheirchoicetomaketaxablealltheirsuppliesthatmeetthecriteriainSection86(1)j)andk)oftheVATAct,willhavetheopportunitytomodifythischoicewithregardtoresidentialpropertyuntil28February2015,basedonSection88(4)oftheVATAct.Declara-tionsaboutthetaxexemptionforthesaleofresidentialpropertymaybefiledfrom1January2015.


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Changes to the VAT Act effective from 1 July 2015 and 1 January 2016

Date of supply for transactions subject to periodic settlement –Theamendmentwilltakeeffectintwophases:• inthecaseofaccounting,auditandtaxconsulting

services,thenewrulesmustbeappliedfirsttoperi-odsstartingafter30June2015,forwhichpaymentisalsodueafter30June2015;

• forothertransactionssubjecttoperiodicsettlement,thenewrulesmustbefirstappliedtoperiodsstart-ingafter31December2015,forwhichpaymentisalsodueafter31December2015.

Accordingtothenewrules,thedateofsupplyfortrans-actionssubjecttoperiodicsettlementwillbe,asageneralrule,thelastdayoftheperiodtowhichthesettlementorpaymentisrelated.Exceptionalruleswillapplytothefollowingtwocases:• iftheduedatefortheconsiderationpayablefor

thesettlementperiod,andthedateonwhichthereceiptorinvoiceisissuedprecedesthelastdayofthesettlementperiod,thedateofsupplywillbethedateonwhichthereceiptorinvoiceisissued;

• iftheduedatefortheconsiderationpayablefollowsthelastdayofthesettlementperiod,thedateofsupplywillbetheduedatefortheconsiderationpayableforthesettlementperiod,nolaterthanthe30thdayfollowingthelastdayofthesettlementperiod.

Environmental protection product fee

Change in the range of products subject to a product fee –Thefollowingproductflowswillbecomesubjecttoaproductfee:• otherchemicalproducts(soaps,organicsurface-

activeagents,laundrydetergents(exceptproductsincontainersofagrosscapacityexceeding50kg)andcosmeticortoiletpreparations);

• paperstationery(writing,printingorphotocopyingpaper,notepads,letterpads,journals,binders,dossiers,etc.);

• otherplasticproducts(plasticartificialflowers,foliageandfruitandpartsthereof;articlesmadeofartificialflowers,foliageorfruit).

Therangeofproductflowscurrentlysubjecttoaproductfeewillalsochange;forexample,amongpackagingmaterials,aproductfeewillbepayableforplasticedgeprofilesandironandsteelstrappingbands,aswellasforelectricgenerators,transformers,electronicintegratedcircuitsandmanyelectronicparts.

Change in fee rates – Feerateswillalsochangesub-stantially:theamendmentwillresultinafeereductionforcertainproductflows(e.g.forpackagingmaterialsmadeofpaper,metalorwood,theratewillbereducedfromHUF20/kgtoHUF19/kg),whileforotherproductflowsthefeeratewillbeincreased(e.g.forplasticpackagingmaterialsfromHUF42/kgtoHUF57/kg,andforsmallandlargeelectricalandelectronichouseholdandequipmentfromHUF50/kgtoHUF57/kg).

Other major changes

• Theoptiontoassumetheproductfeepaymentobli-gationwillincludecontractpackagingandleasingunderaleasearrangement.

• Thedefinitionofcommercialpackagingwillonly

includemetalbeveragepackaging(beveragepackagingmadeofothermaterialswillbesubjecttothegeneralfeerate).

• RegardingtheoptiontoissueadeclarationasperSection3(6)oftheEPFA,from1January2015,inadditiontodomesticcustomersoftheentityobligedtopaytheproductfee,theentity’sforeigncustomersmayalsoissueadeclaration.

Excise duty

Change in tax rates – Thetaxrateonfueloilsandliquefiedandcompressedhydrocarbongaseswillin-crease.ThedifferentialtaxrateforalcoholproductswillbeeliminatedandauniformtaxrateofHUF333,385perhectolitreofpurealcoholwillbeintroduced(withspecialrulescontinuingtoapplytocontractdistillingandprivatedistilling).

Reclaiming excise duty paid on commercial die-sel oil – TherateofexcisetaxreclaimableontheuseofcommercialdieseloilwillbereducedfromHUF17/ltoHUF11/l.

Excise guarantee –Theamountofexciseguaranteeforcommercialactivitiessubjecttoexciseauthorisationwill,asageneralrule,beraisedforalcoholproducts,beer,wine,champagne,andintermediatealcoholicproductsfromHUF22milliontoHUF150million,andformineraloilproductsfromHUF120milliontoHUF600million.

A“preferential”exciseguaranteeofHUF6millionwillbeintroducedforeconomicoperatorswhichholdanexciseauthorisationanddistributeonlylubricatingoils,certainfueladditivesanddiluents.

Food chain supervision fee

From1January2015,therateofthesupervisionfeewillprimarilychangeforstoressellingdailyconsumergoodswithinthemeaningoftheTradeAct.

Daily consumer goods –Foodstuffs,perfumeries,drugstoreproducts,householdcleaningproducts,chemicalproductsandhygienicpaperproductsfulfillingtheneedsofthegeneralpopulationthatconsumersgenerallyconsume,useorreplacewithinoneyear.

Base for the supervision fee – Netsalesrevenuesgainedinthepreviousyear,calculatednetofexcisedutyandpublichealthproducttax.

Rate of the supervision fee – ThefirstHUF500millionwillnotbesubjecttotax,theratewillbe0.1%forthepartofthetaxbaseabovethatamountuptoHUF50billion,1%forthepartbetweenHUF50and100billion,andwillincreaseby1percentagepointforeachHUF50billionabovethatamount.Thehighestrateof6%willbeapplica-bletothepartofthetaxbaseaboveHUF300billion.


9

Energy tax

Tax rate to increase –ThetaxrateforelectricpowerwillberaisedfromHUF295toHUF310.5permega-watthour,fornaturalgasfromHUF88.50toHU93.5pergigajoule,andforcoalfromHUF2390to2516perthousandtonnes.

Reclaiming energy tax –Usersusingenergyinmineralogicalprocesses(manufactureofothernon-metallicmineralproducts)willbeentitledtoreclaimenergytax.

Public health product fee

Range of products affected – Alcoholicbeverages(exceptforfruitspiritsandcertainbeveragesmadewiththeuseofherbs)willbesubjecttotaxatarateofHUF20-900/litre(dependingonalcoholcontent).

Taxableproductswillnolongerincludesugar-sweetenedproductsfallingundertariffheadings1704,1905or2105andhavingahoneycontentofleast20grams/100gramsandasugarcontentnotexceeding40grams/100grams.

Customs Act

Post-clearance audit – Thetypesofpost-clearanceauditshavebeenre-structured.

Customs penalty – Asageneralrule,therateofthecustomspenaltywillincreasefromthecurrent50%to100%ofthecustomsdutyshortfall,anditsminimumamountwillberaisedfromHUF3000toHUF4,000.Iftheobligationtopresentgoodstocustomsorsubmitacustomsdeclarationisbreachedinrespectofexcisegoods,therateofthecustomspenaltywillequal200%ofthecustomsdutyshortfall,andmaybenolessthanHUF40,000.Incertaincases,itwillbepossibletolevyacustomspenaltyinanacceleratedprocedure.Insuchcases,theamountofthecustomspenaltywillbe75%ofthecustomsdutyshortfall,andmaybenolessthanHUF4000,or,inthecaseofviolationsinvolvingexcisegoods,thanHUF25,000.

Changes related to tax proceedings

Different classification of transactions – Thetaxauthoritywillnotbeallowedtoassessthesametransac-tiondifferentlyatdifferenttaxpayers.Accordingly,thetaxauthoritywillbeobligedtotakeintoaccountthestate-mentsitmaderegardingoneofthetaxpayersinvolvedinaspecifictransactionwhenconductingtaxproceedingsattheothertaxpayerinvolvedinthesametransaction.

Different classification of international transac-tions –Itwillbeabasicprinciplethatinthecaseoflegalrelationshipsresultingfrominternationalagreements,andtheincomeobtainedfromsuchrelationships,thedifferentinterpretationofthefactsofthecaseandtheinternationalagreementbydifferentstatesmaynotleadtotheavoidanceoftaxationinbothstates.Basedontheadoptedamendingact,Hungarywillbeentitledtotaxthesetransactions.Ifthetaxbasecannotbedetermined,thetaxauthoritywillmakeanestimationbytakingintoconsiderationallcircumstancesofthetransaction.

Monthly payer’s declarations –Monthlypayer’sdec-larationspreparedbypayersontheirpaymentstoprivateindividualswillberequiredtoincludemoredata.

Data supplied on income from pension – ToensureharmonisationwithEUlaw,pensionadministrationbodieswillberequiredtosupplydatatothetaxauthorityonthepensionpaidfromHungarytopersonstaxresidentintheEU.

Data supply on e-commerce – Thetaxauthoritywillbeentitledtorequestdatafromtelecommunicationscom-paniesonturnoverfrompurchasesviainternet.

Tax authority certificates provided on foreign forms – Inadditiontothetaxresidencycertificate,thetaxauthoritywillbeentitledtoissueothercertificates(tax,jointtax,incomecertificates)onformsofforeigntaxauthorities,providedthattheformisinEnglish,ortheapplicantattachesitsHungariantranslation.

Avoidance of tax legislation – Ifthetaxauthorityperceivesarelationship,factorcircumstanceduringataxauditthatcouldrefertotheavoidanceoftaxlegislationconcerningseveraltaxpayers,thetaxauthoritycannotifyallthepartiesinvolved.

Advance tax rulings – Advancetaxrulingswillbebindingonthetaxauthorityuntilthelastdayofthefifthtaxyearfollowingtheyearinwhichtheadvancerulingwasissuedandmaybeextendedonce,foranadditionaltwo-yearperiod.Suchbindingrulingswillbeapplicableaslongastherearenochangesinlegislation,inthefactsofthecase,orininternationallegalobligations.

For extended advance tax rulings – whicharebindinginthecaseoflegislativechangesbutnotwhenchangesinthefactsoccur-taxpayersmayrequestthatthestartofthethree-yearperiodforwhichtherulingisbindingbedelayeduntilthetaxyearfollowingtheyearinwhichtherequestisfiled.

Taxpayerswillbeallowedtofileanadvancerulingrequesttotheministerinchargeoftaxationtoconfirmtheade-quacyofthecalculationmethodfortheallocationofinputVATcharged.However,suchrequestsmaynotbefiledto-getherwiththerequestsconcerningspecifictransactions.

ThefeeofpreliminaryconsultationconnectedtoadvancerulingswillincreasefromHUF100,000toHUF500,000.


10

Monthly VAT return –NewlyestablishedcompanieswillbeobligedtofilemonthlyVATreturns,insteadofthequarterlyreturnstheywererequiredtofileearlier,intheyearofestablishmentandthetaxyearfollowingtheirestablishment.

Quarterly VAT returns – TaxpayerswhohadarevenueoverHUF50million,excludingVAT,fromsupplyinggoodsorservicesinthesecondyearprecedingthecurrentyearwillberequiredtosubmitquarterlyVATreturnsinsteadofannualones.

Default penalty – Pursuanttotheadoptedamendingact,taxpayersrepeatedlyhinderingtheclosingoftheirshops,theauthorityproceedings,ortheenforcementproceedingswillbesubjecttoanincreaseddefaultpenaltyofuptoHUF1million.

Right of representation – Accordingtotheadoptedamendingact,therightofrepresentationwillbeextendedtoauditors.

New reporting obligation for goods transported on roads (EKAER)TheElectronicRoadFreightControlSystem(EKAER)willbelaunched.Basedontheregulation,onlytaxpayerswithavalidEKAERnumberissuedforspecificroadshipmentswillbeentitledtoperformthefollowingactivitieswithvehiclessubjecttotollpayment:

• acquiringgoodsorimportinggoodsforotherpurposesfromotherEUmemberstatestoHungary,

• supplyinggoodsorexportinggoodsforotherpurposesfromtheterritoryofHungarytootherEUmemberstates,or

• performingthefirsttaxabledomesticsupplyofgoodstopartiesotherthanendusersinHungary

TorequestanEKAERnumbervalidfor15days,taxpayerswillberequiredtopreliminarilyreportfreightdetailstothetaxauthority.

Riskyfoodorriskygoods(tobespecifiedlater)willbesubjecttostricterrules,accordingtowhichweightandvalue,amongotherparameters,willinfluencethedepthofreportingobligations.Ariskdepositmustalsobepro-videdforforwardingriskygoodsonroads.

Unreportedgoodswillbeclassifiedashavingnocertifi-cateoforigin.Forthesegoods,thetaxauthoritywillbeentitledtolevyadefaultpenaltyofupto40%ofthevalueofgoods,andtoseizethegoods.

Changes in accounting regulation

Explanatory notes and definitions – Thedefinitionoferrorsidentifiedinauditwillbeextendedtoincludesubsequentmodificationstoeconomictransactionscarriedoutinclosedbusinessyears.Financialleasing,whichhasbeendefineduntilnowasatransactionbasedonacontractconcludedincompliancewiththeprovi-sionsoftheCivilCode,willbedefinedaccordingtotheActonCreditInstitutionsandFinancialEnterprises.

General rules for financial statements –EntitiespreparingtheirfinancialstatementsinaforeigncurrencywillbeobligedtousetheHungarianNationalBank’sofficialexchangerateswhentranslatingthethresholdssetintheAccountingActinHungarianForints.

Interim balance sheet –Entitieswillbeallowedtousethelatestfinancialstatementsorinterimbalancesheetforsixmonthsfollowingthebalancesheetdatetosupporttheamountoftheirequity.

Composition of the balance sheet, content of the balance sheet items• Ifadditionalcapitaliscontributed/repaidinassets

otherthancash,theassetstransferredwillhavetobeaccountedaccordingtotherulesonsalestrans-actions,andretainedearnings/tied-upreserveswillhavetobereducedagainsttheresultingreceivables.

• PursuanttotherulesofthenewCivilCode,late-pay-mentinterestwillbepayablebylawfromthefirstdayofdefault.Accordingly,theaccountingregula-tionswillrequirethatlate-paymentinterestmustbeaccountedasliabilities,ratherthanaccruals.

(Acquisition and production) cost of assets

• Thecostofassetsreceivedasadditionalcapitalcon-tribution,orrepaymentthereof,willbethevalueoftheassetsdeterminedinthegeneralmeeting,founders’ormembers’meetingdecisiononaddi-tionalcapitalcontributionorrepayment.

• ThroughtherepealoftheCompaniesAct,“equitycapital”heldinlimitedpartnerships(“betétitársaság”)orgeneralpartnerships(“közkeresetitársaság”)hasbeenrenamed.Basedontheadoptedamendment,theAccountingActlabelsbusinesssharesheldinlimitedpartnershipsorgeneralpartnershipsasotherinvest-mentsincompanies.

Fair valuation –Prepaymentswiththecharacteristicsofreceivables,andaccrualswiththecharacteristicsofliabilities,mustberecognisedinthebalancesheetataHUFvaluetranslatedattheforeignexchangeratevalidonthebalancesheetdateofthebusinessyear.


11

Content of items in the profit and loss statement

• Currently,theconsiderationpaidfortransport,loadingandwarehousingfortheroutebetweentheHungarianborderandtheforeigndestina-tionreducestherevenuesfromexportsales.Thisprovisionhasbeenrepealedbytheadoptedamendingact,thereforetheconsiderationpaidfortransport,loadingandwarehousingfortheforeignanddomesticrouteswillnothavetobetreatedseparately.

• Considerationreceivedforthetransferofabusi-nesslineinexcessofthemarketvalueoftheas-setstransferred,netoftheliabilitiestransferred,willhavetoberecognisedasnetsalesrevenues.

• Discountsprovidedinindirectmoney-backcam-paignsinaccordancewiththeVATActwillhavetoberecognised,netofdeductibleVAT,asotherexpenses.

• IntheCivilCode,thedefinitionof“transforma-tionofcompanies”hasbeenmodifiedtoexclude“mergers”and“demergers”.ThisamendmenthasalsobeenadoptedintheAccountingAct.Asaresultofseveraladoptedamendments,“transformationofcompanies”willbereplacedby“transformation,mergeranddemergerofcompanies”.

Audit objectives, statutory audit – Ifthelegis-lationprovidesfororprescribeswithdrawaloftheauditor’sreport,entitieswillberequiredtoensurethatrepeatedauditiscarriedoutwithin90daysfol-lowingthewithdrawal.Thenewauditor’sreportwillbesubjecttotheprovisionsondisclosureandfiling.

Effective date of the amendments – Asageneralrule,theadoptedamendmentswillbeapplicabletobusinessyearsstartingin2015.Earlyapplicationisallowedforbusinessyearsstartingin2014.


Contacts

Tamás Lőcsei Partner, Tax and Legal Services LeaderTel.: +36 1 461 9358E-mail: [email protected]

Paul GrocottPartnerTel.: +36 1 461 9260E-mail: [email protected]

David WilliamsPartnerTel.: +36 1 461 9354E-mail: [email protected]

Dóra MáthéPartnerTel.: +36 1 461 9767E-mail: [email protected]

László DeákPartnerTel.: +36 1 461 9590E-mail: [email protected]

Ákos BurjánPartnerTel.: +36 1 461 9620E-mail: [email protected]

László RétiPartnerTel.: +36 1 461 9890E-mail: [email protected]

György AntallPartnerTel.: +36 1 461 9870E-mail: [email protected]

Tax & Legal AlertPwCHungary•Issue527•November2014

Legal disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. If you no longer wish to receive Tax & Legal Alert, please write to the following e-mail address: [email protected] © 2014 PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

Réti, Antall & Társai PwC Legal


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