The legislative environment for tax and taxation will not remain unchanged in 2024. In many cases, lawmakers have integrated regulations into laws, in others they have amended them.
In this article, we will try to take stock of the more significant changes, mainly for information purposes.
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Personal Income Tax (SZJA)
Already with effect from 1 August 2023, some emergency government regulations have been incorporated into the Personal Income Tax Act, such as the benefit for mothers under 30, the additional family allowance for families with a permanently ill or seriously disabled child, or certain rules on the reimbursement of expenses for commuting to work.
A positive change is that taxable income in the form of a small gift, taxable as a certain specific allowance, can be given three times a year instead of once.
The time limit for declaring and paying the tax on certain fringe benefits, such as SZÉP card benefits or the aforementioned minor gifts, has been changed. These allowances must now be declared and the related contributions paid quarterly, in the quarter covering the month in which the allowance was granted.
A tax-exempt gift is a gift of a wine product, as defined by law, made by the donor in the course of hospitality, as a business gift or as a gift of a small value. The donor must keep records of this in such a way that the source of the purchase and the manner in which the product is used can be ascertained.
A new concept in the legislation is start-ups, which are unlisted micro and small enterprises that have been registered for five years or less, have not yet distributed profits and have not been created by merger or division.
A related provision in the law is the tax-free benefit whereby employees or senior management may acquire shares in a start-up company free of charge or at a reduced rate, provided that the rights or shares acquired are not sold by the holder for at least three years.
In addition to the rules on income from crypto transactions, the rules for trusts and private foundations created after 12 September 2023 will also change: their beneficiaries will have to pay tax if they receive income from the initial capital of the assets under management and if they have appreciated the assets within 5 years before.
From 1 January 2024, the Hungarian-American double taxation treaty will expire, and the ITA Act seeks to mitigate the effects of this with some new provisions. For example, the tax on income from performing, artistic and sporting activities will be payable in the state in which the activity is carried out. A significant relief is that interest or securities income earned by a Hungarian tax resident individual from an OECD member state is not considered as other income, so that the stricter rules on other income do not apply in these cases. Furthermore, the possibility of tax equalisation will be maintained, as transactions entered into with a US-based money market operator will still be considered as controlled capital market transactions, and in the case of separately taxable income from abroad (e.g. dividends), tax already paid abroad can be credited.
Social Contribution Tax (SZOCHO)
From 1 January 2024, the labour market entrants' allowance will be available for employment of Hungarian nationals and nationals of non-EEA countries bordering Hungary (Ukraine and Serbia). This benefit will still not apply to workers who are nationals of a state not covered by the bilateral social security agreement between the European Economic Area and Hungary (such as China or countries of South and Central America)
Corporation tax (TAO)
Due to the introduction of the global minimum tax, a new R&D tax credit will be introduced in corporate tax, where the new R&D tax credit will also be recognised as a refundable tax credit.
The tax credit will be available for the first time in the tax year 2024 for basic research, applied research, experimental development and related direct costs listed in the tax itemised accounts. The relief can be used in the year in which it is incurred and for 3 years thereafter, up to a maximum of 10% of eligible costs, although there are additional euro-based caps.
A significant change is that the order in which the tax reliefs can be claimed will also change, with the new R&D relief applying before any other tax relief and potentially reducing corporate tax to zero.
Also in line with the introduction of the global minimum tax, the law will be amended to allow taxpayers to declare their holdings that do not qualify as shareholdings declared on the day before 31 December 2023, afterwards, by the last day of the tax return deadline for 2023.
The definition of controlled foreign company has been amended, the definition of associated enterprise has been clarified and the system of tax relief for energy efficiency investments and renovations has been modified.
Small business tax (KIVA)
As regards the KIVA, the legislator has mainly amended the rules on tax liability. On the one hand, the KIVA will cease to be subject to the tax on the day preceding the conversion from a ZRT to a NYRT. On the other hand, in certain cases of dissolution by merger or division, the KIVA status remains optional, which may be an important consideration in the context of corporate restructuring.
Local business tax
An important change is that, in the case of a temporary work agency within the meaning of the Labour Code, the area of the municipality where the temporary workers employed by the agency work for a total of at least 21 000 hours during the tax year will be considered as a permanent establishment from 1 January.
The rules on rounding and, in the case of a simplified tax base, the rules on the calculation of the tax advance are also changed and, unlike before, the tax base cannot be reduced by the possibility of claiming the special tax credit for R&D activities.
Global minimum tax
The introduction of a global minimum tax is of great interest, but will not bring significant changes for companies in the smaller global or SME sector, where the 9% corporate tax rate will remain.
The global minimum tax will apply to members of multinational groups or large domestic groups of companies whose annual revenue as reported in the consolidated accounts of their ultimate parent company is equal to or exceeds €750 million in at least two of the four tax years immediately preceding the tax year.
The overall minimum tax rate is 15%, but the calculation will also take into account taxes levied on income or profits included in the accounting records, such as local business tax, innovation levy or energy suppliers' income tax - so-called "capped taxes" - in addition to corporate tax.
General sales tax (ÁFA)
In 2024, the NAV will launch the electronic ÁFA system, eÁFA, which will allow taxpayers to fulfill their ÁFA return obligations using more than just traditional ÁFA return forms (ÁFA return forms).
On the one hand, it will be possible to submit a ÁFA return via the electronic interface of the eÁFA system, using a draft ÁFA return based on the information available to the NAV.
On the other hand, it will also be possible to upload a standardized file to the NAV interface via a direct computer link (M2M, machine-to-machine), the data will be checked by NAV and the taxpayer will then be able to finalize the return.
In both cases, the taxpayer's approval is of course required to finalize the return.
Businesses accepting the draft return provided by the NAV are not only relieved of the burden of preparing and submitting the ÁFA return, but also of the obligations to submit the domestic summary report, known as the "M-sheets". This can significantly reduce the administrative burden, but at the same time the verification of the data and the draft return remains essential.
It is expected that from 1 July 2024, online cash registers will be replaced by an e-filing system, with any digital device (including mobile phones) being used for e-filing. The new receipts will have to include the name of the product or service and a reference to the exemption. A new provision on data reporting is that e-receipts must be reported in real time, other receipts within 3 days.
From 1 January, the definition of construction and installation services and the obligation to declare them will also be extended. The term 'activities relating to real estates' covers services relating to the construction, extension, alteration, demolition and change of use of real estates.
The reverse charge applies to such a service where the activity is subject to authorisation by or notification to the authorities, a fact which the taxable person using the service must declare in advance and in writing.However, if the official authorisation or declaration relates to the activity of the supplier of the service, the obligation to make a declaration is reversed and the supplier of the service will be liable.
