EMERGENCY TAX MEASURES IN HUNGARY IN RESPONSE TO COVID-19

Protecting workplaces and businesses is of foremost importance amidst fighting COVID-19. In order to so, Hungary – like most of other developed countries – also introduced numerous emergency tax measures in the past few weeks, as follows:

1. Exemption from social contributions. Employers and employees in sectors most effected by COVID 2019 (hospitality, tourism, taxi, sport, etc.) are exempted from payment of social contributions. This means that qualifying employers are relieved of contributions of 19% on the gross salary of their employers, while their employees, as a general rule, should see a rise of their net salary with at least 15%. Given the emergency, however, in practice the distribution of the gains from the exemption might be up to the agreement between the parties to retain the workplace, at all.

2. KATA relief. Hungary implemented a specific exemption from the so-called KATA (‘Fixed-rate tax of low tax-bracket enterprises’) in the concerned sectors. The scope of the exemption also includes hospitality, tourism, taxi, sport and construction industry services.
Both social contribution and KATA exemptions apply to businesses with at least 30% of their income from the specified sectors and temporarily, for periods between March – June 2020.

3. Tourism development contribution. Taxpayers – restaurants and accommodation providers – are exempted from tourism development contribution of 4% for the period for periods between March – June 2020.

4. Procedural rules. Enforcement of outstanding tax debts has been suspended indefinitely, until the end of the emergency plus 15 days.

Additionally, in accordance with the general rules taxpayers with liquidity problems can apply for payment facilitation (deferral or installments). The Hungarian tax authority declared their intention of taking greater account of those suffering the effects of COVID-19 most.

There have been already indications of additional sector specific taxes, for instance contribution required from banks and financial institutions. The details of those measure, however, are yet to be published.

This is a busy period for tax developments with rapidly emerging tax and fiscal policy to be expected. Those measures will be crucial to many businesses directly impacting their day-to-day operations.