Which enterprises are entitled to apply for the reduced rate in Hungary? | News Flash

The Government Decree No 639/2020 (XII. 22) on certain measures necessary to mitigate the impact of the coronavirus pandemic on the national economy (hereinafter referred to as the “Decree”) allows eligible enterprises to pay 1 % reduced rate in Hungary for local business tax for the 2021 tax year.

Those businesses who meet the conditions for qualification as micro, small and medium-sized enterprises „SMEs”, under the Act on SME and whose annual net turnover or balance sheet total is less than HUF 4 billion (Approx. EUR 12 million) on the basis of the last available and accepted annual report.

An enterprise is considered to be an SME

• total number of employees is < 250
• the annual net turnover is <50 million or a balance sheet total is < EUR 43 million.

In the lack of an accepted annual report, i.e., if the company started operating in 2020, the estimated balance sheet total, annual turnover and headcount figures should be taken into account.

In the case of autonomous enterprises, the figures shall be determined based solely on the records of the enterprise in question.

In the case of enterprises having partner or linked enterprises, the figures shall be determined based on the consolidated annual accounts, or in the absence of this, on the records of the partner or linked enterprise concerned.

Looking at the above figures, we can clearly state that the above-mentioned criteria are met in case of an autonomous enterprise with 249 employees, with the balance sheet total of EUR 42 million and with the annual net turnover of HUF 3,9 billion in 2019.

Under the Decree, the eligible entrepreneurs are required to pay only 50 % of their tax advance as due at the given tax advance due date for 2021.

By the amount of the released instalment, the tax authority will reduce the amount of the local business tax liability and this fact will be entered into the records of the tax authority without taking any decision.

In order to claim the LBT allowance, a declaration must be submitted by 25 February 2021, which can only be send electronically via National Tax Authority on the form of 21NYHIPA.

The above-mentioned declaration shall be made in case of the joint compliance with the following conditions:

• it qualifies as a micro, small and medium-sized enterprise under the Decree,
• it is entitled to use the amount of LBT allowance as temporary subsidy under a separate Government Decree No 640/2020,
• on 31 December 2019, it was not qualified as an „undertaking in difficulty” within the meaning of the Government Decree No 37/2011 on the state subsidy in the sense of EU competition law and on the regional subsidy map,
• under the Act on Local taxes, all the permanent establishments of the undertaking have been declared to the State Tax Authority by the time this declaration is submitted at the latest.

In other words, as an additional condition for eligibility, it has been highlighted that if the undertaking has not reported so far, all its permanent establishments to State Tax Authority, it should be done until the date of declaration.

The notifications should be submitted towards State Tax Authority in electronic form.

Ildikó Hajnal-Balázs

Senior Tax Consultant | Accace Hungary

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