Mandatory automatic exchange of information in relation to reportable cross-border arrangements (DAC 6)
The aim of the amendment of the Act XXXVII of 2013 on certain rules for international administrative cooperation in relation to taxes and other public charges is to implement the Council Directive 2011/16/EU amendments on administrative cooperation in the field of taxation (DAC Directive), instated as a response to the economic effects of the COVID-19 pandemic. According to the Amendment, DAC 6 data reporting deadlines applicable to intermediaries, taxpayers and the Hungarian Tax Authority are deferred by six months. As per the Amendment, for those who are obliged to file information, the following deadlines are to be met:
- With regard to reportable cross-border arrangements carried out between 25 June 2018 and 30 June 2020, intermediaries and relevant taxpayers shall meet their reporting obligation by 28 February 2021 at the latest.
- If the reportable cross-border arrangement was carried out between 1 July 2020 and 31 December 2020, the 30-day deadline for intermediaries and relevant taxpayers to file information begins from 1 January 2021.
- In the case of marketable arrangements, intermediaries are required to prepare their first period report by 30 April 2021 at the latest.
- By means of an automatic exchange, the Hungarian Tax Authority shall communicate the information pertaining to reportable cross-border arrangements to the competent authorities of all other member states by 30 April 2021 at the latest.
As per the Amendment, penalty may not be imposed by the Tax Authority, if the person obliged to file information verifies that they acted as one would reasonably expect them to do in the given circumstances.
- The Amendment exempts associations and foundations from paying building tax and land tax in connection with real estate which falls under their property management, but in fact are owned by the Hungarian State.
- Based on the accepted Amendment, the regulation of the local business tax top-up liability is abolished; it applied to those taxpayers who were subject to corporate income tax and kept their books with double-entry bookkeeping, and whose net sales revenues exceeded HUF 100 million in the preceding tax year. The obligation of the top-up liability is abolished from the date when the amended law has entered into force and it is applicable for the current, ongoing tax year (including for those corporations whose business year differs from the calendar year), i.e. from 14 July 2020 on, no one will be subject to local business tax top-up obligation.
- In order to simplify the tax system, the amended law takes out the provisions of local building tax liabilities of advertising platforms from the Local Tax Act.
- As of 1 January 2021, the EKAER registration obligation will only be applicable to risky goods over a certain value and weight limit. The aim of the modification is to harmonize EKAER more effectively with the legal system of the European Union, and, at the same time, to maintain the EKAER system as an effective tool for fighting against tax fraud. The list of high-risk goods will be defined at a later stage (at a decree level), accordingly, and it is an open question whether the scope of risky products will change as well.
- The penalties applicable for non-compliance with EKAER registration obligations will be amended: the amount of the general default penalty may be imposed if the data of the product is not indicated in EKAER in accordance with the applicable legislation, up to HUF 500,000 (approx. EUR 1,400). Nevertheless, in case of any mismatches in weight and/or quantity data, the default penalty can still amount to 40% of the difference (or the undeclared part). Furthermore, as applied earlier, no default penalty may be imposed if the taxpayer justifies that he acted as it can be generally expected from him/her in the given situation.
- In order to promote the renewal of interim, former industrial areas of cities, a reduced VAT rate of 5% has been introduced for the sale of any new residential apartment located in so-called “rust zones” on the condition that it forms part of a multi-apartment building and its size does not exceed 150 m2..
Simplified taxation (known as “KATA”)
- As of 1 January 2021, individuals can opt for KATA with respect to one activity only.
- The 40% tax rate, currently applicable to yearly revenue exceeding HUF 12 million, will be used in other cases next year.
- 40% tax liability shall be determined, reported and paid by an entity regarded as payer pursuant to the Hungarian legislation on any revenue provided to an individual applying KATA taxation (hereinafter referred to as an “entrepreneur”), if they are deemed affiliated parties.
- If a payer entity provides more than HUF 3 million per calendar year revenue to an entrepreneur, 40% tax shall be payable by the payer entity on the part of the revenue which exceeds HUF 3 million. The tax law amendment contains some exemptions, e.g. this rule does not duplicate the tax payment obligation if the parties are affiliated and the yearly revenue provided is more than HUF 3 million.
- 40% tax shall be payable by the entrepreneur on any revenue received from an affiliated entity which is not corporate registered in Hungary.
- If the entrepreneur receives more than HUF 3 million per calendar year revenue from an entity that is not registered in Hungary, 40% tax shall be payable by the entrepreneur on part of the income exceeding the aforementioned threshold.
- The revenue subject to 40% tax rate in accordance with the above points shall be disregarded when calculating the total yearly revenue for the application of the HUF 12 million yearly cap.