At year-end, companies should examine whether they are liable to tax-advance supplement obligation (also known as top-up liability). The deadline for fulfilling the obligation is 20 December, so it is worth now to ensure the proper preparation of related calculation.
In our current newsletter, we summarized which taxes are affected by tax-advance supplement obligation and collected the most important rules related to the top-up.
Tax advance supplement liability
In respect of the following tax types, the paid tax advances have to be supplemented to the amount of the expected annual tax:
- Corporate income tax
- Innovation contribution
- Local business tax
- Income tax of energy suppliers
- Advertisement tax
- Simplified entrepreneurial tax (EVA)
(Our current summary we are not going to cover the top-up related rules of simplified entrepreneurial tax.)
Those companies who chose a financial year what differs from the calendar one, the deadline for completion the paid tax advances to the expected tax is the 20th day of the last month of the chosen financial year.
In the following we are going to summarizes what it’s worth paying attention during the top-up for each tax types.
Corporate income tax
Taxpayers who are liable to tax advance supplement
Those companies who are subjected to the double-entry book-keeping and whose previous year’s net sales revenue exceeded HUF 100 million are obliged to complete the paid tax advances to the expected tax payable.
There is no tax advance supplement liability:
- Where the net sales revenue of previous year does not reach HUF 100 million;
- In case of termination of the taxpayer and if the tax declaration is submitted due to the completion of the registration process at Company Court;
- For specific taxpayers listed by law (public benefit business associations, water management associations, foundations, associations, churches etc.);
- Companies using single-entry book-keeping;
- Taxpayers who were established in the current year, because in their case we cannot talk about the net sales revenue of their previous year.
The top-up liability payment’s- and submission of the return on top-up obligation’s deadline the 20th day of the last month of the tax year. (Taxpayers who chose a tax year what corresponds to the calendar year, this means the 20th ofDecember.)
Taxpayers who are obliged for top-up have to pay the last monthly or quarterly tax advance together with the top-up liability.
Declaration and payment
In 2016 the amount of the tax advance supplement has to be submitted towards to the tax authority in the tax declaration no. 1601, in the line 15 on the 1601-01 sheet.
It is important to mention, that the top-up amount included in the declaration and the amounts payable may differ what difference may arise because the tax return shall include the difference between the calculated tax for the financial year and the submitted tax advances during the financial year, while the payable amount shall be the difference between the expected amount of tax payable and the tax advances already paid for the tax year.
Those taxpayers who are subjected top-up obligation must submit their tax declaration even if there is no top-up liability because the advances of the tax year exceed the amount of the expected annual tax.
Contrary to the corporate income tax, in case of the innovation contribution the net sale revenue of previous year shall not be considered, therefore every company, who has innovation contribution liability, is obliged to top-up thus the contribution advance paid during the year is have to be completed to the expected amount of innovation contribution of the year.
The deadline for the top-up for innovation contribution is the same as the corporate income tax deadline , so the declaration and payment liability is have to be fulfilled on tax return no 1601, in the line 17 on the 1601-01 sheet by the 20th day of the last month of the tax year.
Local business tax
Every company has tax advance supplement liability with regard to local business tax that is obliged to the same responsibility in respect of corporate income tax.
The deadline for the submission of the tax declaration and payment match with the deadline for corporate income tax, therefore it have to be fulfilled by the 20th day of the last month of the financial year, but counter to the corporate income tax, the tax declaration about local business tax top-up is to be submitted to the local municipality on whose territory of jurisdiction the company performs business activity.
In that case if a company has business activity at the territory of more local municipalities, it has to share its tax base according to the methods prescribed by law.
Income tax of energy suppliers
Those energy supplier companies are obligated to top-up in relation to the income tax of energy suppliers whose previous year’s net sales revenue exceeds HUF 50 million.
Their deadline for the fulfillment of the top-up obligation is the 20th day of the last month of the financial year on the tax return no. 1601, in the line 16 on the 1601-01 sheet.
According to the law two types of taxpayers are distinguished:
- The publisher of the advertisement,
- and the customer (who ordered the advertisement).
It is important to highlight that top-up obligation only arises to the publisher. The deadline for the tax advance supplement declaration and payment is also the 20th day of the last month of the tax year on the tax return no. 1694 in the line 30 on the 1694-01 sheet.
That publisher, whose tax base does not exceed HUF 100 million, according to the law, fall under the tax rate of 0% and is exempt from top-up obligation as well as from the zero data tax submission.
Sanctions of failing the top-up obligation
If the taxpayer does not comply with the top-up requirement by the above-mentioned deadline, the tax authority may levy default penalty, but as it is cannot be expected from the taxpayer to be able to exactly calculate the final tax payable before the end of the financial year, the law allows a “margin of error” up to 10%, therefore the tax advances already paid have to be supplemented only at least up to 90% of the expected tax amount within the framework of the top-up liability thereby company should expect sanctions only if they did not arrange their payment for at least 90% of the expected tax by the deadline, also taken into account the tax advances paid for the tax year.
Amount of the default penalty is 20% of the difference between 90% of the annual tax liability and the total amount of advance payments and top up payment made for the tax year.
The already prepared top-up calculations should be reviewed by tax advisors, in order to avoid possible mistakes in the final return, may causing the risk of default fine.
If you have any other questions regarding the top-up obligation, please feel free to contact us, our tax experts would be pleased to help you.