The Hungarian Government has adopted a new decree no. 47/2020. (III. 18.) Korm. r. (hereinafter the “Decree”) in order to alleviate the effects of coronavirus pandemics on the economy. The Decree sets forth the following relaxing measures in favour of the companies operating in Hungary and private debtors.
I. Corporate credits and credits to consumers
1. Suspension of payments
A general suspension of payments is introduced for all credits, loans and financial leases disbursed until midnight 18th March 2020. Both corporate and private debtors benefit from this moratorium, which concerns all payment obligations of capital, interest and banking fees. The suspension of payments is ordered until 31th December 2020.
The modification of payment deadlines operated by the Decree extends to securities securing loans like sureties, liens and mortgages. In our opinion, these securities are preserved during the extended term of the loan.
The moratorium applies to contracts expiring during the emergency situation. It means that these credits, loans and leases are automatically extended by the force of the Decree.
It should be highlighted that debtors are entitled to payback according to the original terms and conditions of the contract. This rule can be useful if the company or private person concerned wishes to decrease his debts.
2. Limitation of APR
Annual percentage rate of charge (APR) of consumer credits contracted after the entry into force of the Decree is limited to the prime lending rate plus 5 %.
We expect the adoption of further measures incentivizing banks to lend, possibly from the toolkit of the central bank.
II. Reliefs concerning sectors hit by the epidemic emergency
Taxation and employment rules have been announced by the Decree in order to save workplaces in the sectors most hardly hit by the crisis. The aim of the Government is to temporarily decrease the tax burden of the employment in sectors of tourism, restaurant and catering, gambling, film industry, performing arts, event organisation and sports (hereinafter the “supported sectors”).
1. Interdiction of termination and raising rents
Pursuant to Article 3 of the Decree, the rental agreements for offices and shops in the supported sectors cannot be terminated by notice before 30th July 2020. No distinction is made by the Decree between contractual termination and immediate termination. In our opinion the interdiction should be interpreted broadly. In fact, a restrictive interpretation would mean that many rental agreements would be terminated for late payment or non-payment of rents. This is the contrary of what the Decree wants to achieve in the supported sectors. Therefore we think that no termination can take effect until the 30th July, for whatever reason. During the same period, the rents cannot be increased either.
2. Reliefs concerning taxation and other contributions
– 0% social tax, 4% social contribution
Business units acting in touristic, catering, entertainment, gambling, film, performer, event-organiser or sports sectors shall not pay the 17,5% social tax and 1,5% vocational training fee. Employees working in these industries shall pay the 4% health care contribution only – thus they are exempt from 10% pension fund contribution, 3% health care contribution and 1,5% labour market contribution. What’s more, the 4% health care contribution is capped at HUF 7 710, so the volume of contribution does not increase above a gross salary of HUF 192 750.
– 0% tourism development contribution
Restaurants and other catering service providers and accommodation service providers shall not pay the 4% touristic contribution from March till end of June.
– HUF 0 Simplified Entrepreneurial tax for taxi drivers
Taxi drivers and other passenger transporters subject to Simplified Entrepreneurial tax are exempt from the monthly tax burden for the months of March, April, May and June.
Other pending questions
The practical rules – such as transitional rules, proportionating rules, etc. – will be ruled through Governmental Decrees in the near future.
III. Labour law modifications making employment more flexible
Many questions have arose since the declaration of the emergency situation on 11th March 2020 concerning the legality of measures taken by employers to contain infection and reorganise work. Article 6 of the Decree sets forth the following rules with the view of enabling flexible employment solutions:
1. Free modification of the work schedule
According to original rules of the Labour Code, employers could alter the communicated work schedule at least ninety-six hours in advance before the start of the scheduled daily working time. Moreover, work schedule could only be altered if it was justified by unforeseen circumstances in the business or financial affairs of the employer. The Decree exempts employers from these limitations. It means that now employers can alter work schedule at any time, on a discretionary basis.
2. Home office and teleworking
With some restrictions, employers have already been entitled to instruct employees to work from home. However, only a maximum period of 44 working days per calendar year could be covered by unilateral instructions and the consent of employees was required for longer terms. Now the Decree has suspended this limitation.
3. Possibility of medical screenings
The Decree empowers employers to take all necessary and proportionate measures to check the health status of employees. In our opinion, this provision overrides rules of the Labour Code concerning data procession. The employers are now entitled to require statements from the employees concerning their health conditions and to submit them to medical checks not prescribed by law. Thus it becomes possible for companies employing several employees at the same workplace to screen employees possibly infected by the coronavirus.
IV. Options for tax and tax advance reliefs
There are two options to relief the tax burden of taxpayers in all business sectors.
- Payment relief
- Moderation (decrease) of tax advance
The Hungarian Government announced yesterday that the tax authority shall treat the requests of payment reliefs fairly.
Besides payment relief, the another possibility is the moderating (decreasing) of the CIT advance.
A taxpayer may request the tax authority to revise the amount of tax advance if the advance is paid on the basis of the previous period and the amount of tax, according to the taxpayer’s calculations, will be less than the amount of tax advances payable on the basis of the previous period.
If you decide to use this procedure, please let us know and we are at your service to prepare and submit the application.