AUTUMN TAX PACKAGE

On 22 November 2016 the Hungarian Parliament approved the autumn tax package. In addition to the two main objectives of the changes (i.e. reducing the tax charges and increasing competitiveness), decreasing tax bureaucracy has also become important.

According to the new rules, the income level for the fixed-rate tax of low tax-bracket enterprises (“KATA” in Hungarian) will be increased from HUF 6 million to HUF 12 million, in order to ensure higher tax savings and to widen the scope of tax payers choosing this form of taxation. The limit for the individual exemption from VAT will also be increased from HUF 6 million to HUF 8 million. The Hungarian Government intends to support small businesses by doubling the so-called expected revenue limit to 1 billion HUF under which tax payers may be eligible to pay ‘small business’ tax (“KIVA” in Hungarian).

Regulations on healthcare contribution (“EHO” in Hungarian) will be simplified by reducing the five-rate system to a two-rate system maintaining the 14% and 27% tax rates. Furthermore, no healthcare contribution shall be paid on interest income, which is currently 6%.

In addition, a new service of the Hungarian Tax Authority will debut next year, i.e. the so called “supporting process”, where the authority will not audit and impose sanctions, rather suggests self-revision and, if necessary, it provides professional support to eliminate errors and defects.

The Government has also announced the introduction of a one-rate, unified 9% corporate income tax system from 2017. This would replace the current two-rate system, i.e. 10% up to a positive tax base of HUF 500 million and 19% above HUF 500 million.