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Hungary: Innovation contribution rules revised, group taxation implications

Hungary: Innovation contribution rules revised

Companies qualifying as micro- or small-size enterprises (SMEs) continue to be exempt from the “innovation contribution.” However, beginning 1 January 2019, whether SMEs qualify for exemption from the innovation contribution is no longer based solely on the financials of the individual company. Rather, the exemption qualification is also based with consideration given to the financials of so-called partner and related companies (as defined by the law).


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In other words, the aggregated financials of the taxpayer group now are to be compared to what would have been considered the innovation contribution thresholds for purposes of qualifying as an exempt SME.

SMEs are defined as enterprises that employ less than 50 employees and have annual net sales revenue or total assets (annual balance sheet total) not exceeding the HUF equivalent of €10 million. A micro enterprise is defined as an enterprise that employs less than 10 persons and has annual net sales revenue or total assets (annual balance sheet total) not exceeding the HUF equivalent of €2 million.

Taxpayers that become liable for the innovation contribution for the first time in a tax year must declare and pay advances for the first two advance payment periods (the first and second quarters of the business year)—for taxpayers with a tax year based on the calendar year, these dates are 20 April and 20 July, respectively. The amount of advance payment must be proportionate to the expected annual amount of the innovation contribution. The base of the innovation contribution is the same as the local business tax base, and the rate of the innovation contribution is 0.3%.

KPMG observation

There may be instances when a taxpayer was exempted from the innovation contribution between 2015 and 2018 but now will be required to pay the contribution and submit tax returns from 2019 because of the revised rules relating to the financial thresholds being considered at the group level. Hungarian entities that are part of an enterprise group and that were previously exempted from the innovation contribution need to consider reviewing their potential innovation contribution obligation for 2019.


Read a February 2019 report prepared by the KPMG member firm in Hungary 

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