New surtaxes apply and will be levied on credit institutions and the retail sector as part of the government’s response to the coronavirus (COVID-19) pandemic.
Surtax on credit institutions
The surtax to be levied on credit institutions (published in Decree 108/2020. (IV. 14.) on 14 April 2020) has an effective date of 1 May 2020.
Based on this decree, due to the COVID-19 pandemic, credit institutions will be required to pay surtax in the 2020 tax year. They will be required to declare the amount of the surtax on a separate form by 10 June 2020 and to pay the amount of the surtax in equal instalments by 10 June, 10 September and 10 December 2020.
The base of the surtax is the amount of the adjusted balance sheet total exceeding HUF 50 billion (the adjusted balance sheet total will be based on the data of the annual report for the second tax year preceding the given tax year). The tax rate is 0.19%.
Taxpayers can elect to reduce their computed tax liability by a portion of the amount paid as team sport subsidies (determined pursuant to the corporate income tax law) if that amount has not yet been used as a base of tax allowance for corporate income tax purposes (the reduction must not exceed 50% of the extraordinary surtax liability).
Based on a press release from the Ministry of Finance, an amendment to the surtax could be forthcoming. That change would allow credit institutions to deduct the amount of this surtax from their usual surtax on financial institutions in equal instalments over the next five tax years.
The surtax on the retail sector (published in Decree 109/2020. (IV. 14.) on 14 April 2020) has an effective date of 1 May 2020. The new retail surtax is comparable to the “crisis tax” that applied in 2010-2012, although some aspects of the retail surtax are more extensive in that it applies to more than just domestic retailers—it also applies to foreign retailers in certain circumstances. The following retail activities will be subject to the surtax:
Foreign persons and entities that do not have a Hungarian branch office also can be subject to the surtax for goods sold to their customers through a delivery point located in Hungary.
The basis of the retail tax is the net sales revenue deriving from the taxable activities or in case of foreign taxpayers, the net sales price increased by the income derived from services provided by the taxpayer to the supplier of the goods sold, or the discount provided by such suppliers.
The rate of the retail tax is as follows:
Related parties (as defined under the corporate income tax) are to calculate their retail tax liabilities jointly as a group, provided that the related-party status exists as a result of a legal transformation (demerger, spin-off) completed after the effective date of the decree, or if the taxpayer transfers or leases its assets necessary for the retail activity to a related party. Group taxation does not apply if the parties can prove that the transactions were conducted for “pure economic reasons” and not with the aim of avoiding taxation.
Taxpayers must declare and pay a tax advance by 31 May 2020, and subsequently pay advances of the tax in each month during the state of emergency period, by the last day of the given month. The amount of the advance is calculated as one-twelfth of the annual tax base determined on the basis of the organization's latest available annual report, or absent that, its estimated annual tax base of the current year.
The monthly advance may be proportionally reduced upon a separate request of the taxpayer filed with the tax authority, in instances when the monthly taxable income does not reach at least 60% of the taxable income realized in the same month of the previous year.
Annual tax liability for the tax year including 1 May 2020 is to be determined on the basis of the annual taxable income realized in the tax year, whereas the tax on that basis is to be calculated pro-rata according to the number of days falling within the state of emergency period as from 1 May 2020. The year-end tax return is to be filed within 30 days following either the end of the state of emergency period, or the financial year-end—whichever occurs first.
Read an April 2020 report prepared by the KPMG member firm in Hungary
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