On 12 December the parliament passes the 3rd bill of tax changes for 2017. The bill modifies 21 taxes, out of which we detail the most important ones below:
1. Corporate Income Tax – 9%
The currently valid 10/19% of corporate income tax will be reduced to a flat rate of 9% from 2017. As a consequence, the rules of controlled foreign companies (CFC) were modified accordingly, and threshold of classification of a country as tax heaven decreased to 9% as well. Those countries which – among other indicators – impose less than 9% tax for corporate profits are deemed to be “off shore” country.
Due to the CIT change, the tax for private entrepreneurs will be decreased to 9% also and changes the tax base allowance of investments in start-up companies as well.
2. Duty tax – changes of limitation of exemptions
Also the Act on duties contain restrictive rules for CFCs (very similar to that rule in Corporate Income Tax law). This limitation has high importance, as it has effect on the exempt status of beneficiary asset deals, share deals and M&As. Without this change all domestic beneficiary transactions would have lost its favourable status around transfer duties.
3. Social tax and Health Care Contribution – 22%
Both social tax and health care contribution will be reduced from 27% to 22%. From 2018 further 2% decrease follows, to 20%.
4. Advertisement tax – new subjects
The advertisement tax filter into local taxation, as the law enables local authorities to implement tax on open air advertisement places. Local tax authorities may impose building tax on such advertisement places, counted on the size of the surface. The cap of tax is HUF 12,000/m2/year (approx: 40 EUR/m2/year).
5. Income tax on property sale – more beneficial scheme
From 2017 the profit on sale of any kind of immovable property (real estate) is free from personal income tax if the transaction is performed 5 years after the acquisition. Currently it is valid for living houses and flats (and related rights) only, profit of other properties is tax exempt only after 15 years. The tax allowance can be used up from the 1st year proportionally, which is increasing year by year, while in the 5th year it reaches 100%, so the tax base is decreased to zero.
6. Tax for small enterprises – decreasing rates
The tax on profit for small enterprises will be decreased from 16% to 14% starting 2017, later further 1% decrease follows, to 13%.
