Proposed changes in the Hungarian tax regulations
Based on a proposed tax law modification new tax would be introduced to small enterprises, which may be applied from 1 January 2013. The name of the new tax would be “tax of small enterprises”, which would be taken into effect as of 1 November 2012, if it will be accepted by the Parliament.
1. Which companies can apply these regulations?
Based on the law mostly all of the companies subject to corporate income tax can apply this benefit excluding: company limited by shares, state owned companies, water supply companies, etc.). Further conditions which should be met together:
- maximum 25 employees (which cannot be exceeded during the previous tax year)
- tax year must be the same as the calendar year
- the net sales revenue cannot exceed the amount of THUF 500,000 during the year
- the tax number was not suspended in the prior two tax years
- the balance sheet date is 31 December
- the balance value of the company was less than THUF 500,000 in the last submitted balance sheet.
2. Why it is recommended?
The new tax would be 16%, which replaces the corporate income tax (currently: 10% and 19%), social security tax (currently: 27%), training contribution and the tax and contribution payable on dividend (16% personal income tax, 27% health contribution)
3. What is the base of the new tax?
The base of the new tax would be the personal expenditures and the change of the asset value of the enterprise, which should be modified with certain items (i.e providing/receiving a loan, receiving dividend, advance payment, non business related expenditure).
4. Other tax
With this tax a new tax would also be introduced to small taxpayers as well, which should mean a more preferential tax paying liability to self entrepreneurs. We would like to note that based on the modification the expenditure which is invoiced by an entity subject to this new tax, would not be deductible from the corporate income tax base of the business partner (this may cause a problem for competitiveness).
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