The deadline for the 2023 accounts has arrived. Businesses with a normal financial year (1st January to 31st December) must prepare their accounts and declare their corporation tax on their 2023 profits by 31st May 2024. The experience is that one in two companies do not take advantage of the tax base reduction and tax reliefs they are legally entitled to, and this can be a serious waste of money in today's economic environment," says Csaba Szabó, Accounting and Tax Director of ICT Europa Finance Zrt.
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Corporate tax relief is based on three pillars: tax deferral, tax base reduction and tax incentives.
The best-known example of tax deferral and tax deferral is the creation of a development reserve. This method is used by businesses that expect to make investments in the next 4 years. This is because they have to use the development reserve (with one or two exceptions) in the next 4 years, failing which they will have to repay the previously unpaid corporation tax with a penalty. In many cases, companies that have no investment plans but are facing liquidity problems also make use of this possibility and thus delay the payment of this tax," the expert believes.
The range of tax base reduction options and tax incentives in Hungary is very wide. They are mostly linked to small to large investments, but also include R&D discounts, the possibility of offering spectacular team sports, regional and other discounts, and discounts for small and medium-sized enterprises. The significant difference is that while tax deferral options defer tax and are paid over time, tax relief and certain tax base reduction options save actual tax revenue.
In recent years, development tax credits have also become available in the SME sector, offering one of the biggest savings when a company is about to invest.
What is a development tax credit?
It is a tax relief that businesses can claim from corporation tax, up to a maximum of 80% of the amount of corporation tax in a given year. A taxpayer can claim the tax credit for 13 tax years in the tax year following the year in which the investment is put into service - or, at the taxpayer's option, the tax year in which the investment is put into service - and in the 12 tax years thereafter, up to a maximum of 16 tax years after the tax year in which the declaration or application is made. The law also sets a minimum investment amount and limits the tax relief and aid intensity as a percentage of the value of the investment.
Which investments are eligible for the aid?
Maximum rate of tax relief as a percentage of the investment for SMEs:
As the above shows, information on the development tax credit is of paramount importance due to the available tax credit available.
In recent years, tax credits for energy improvements have also become available, which can also save a business millions of dollars. It should also be borne in mind that incentives such as the company car tax credit are also available for company cars.
The professional director of ICT Europa Finance Zrt. points out that, as a result of their tax due diligence on more than 100 companies in recent years, almost every second company examined has identified unused tax benefits in the order of millions of forints.
The company's audits found an average of 2.6 million forints of tax paid that would not have been due if the discounts had been taken into account. In today's difficult economic environment, not taking advantage of legal tax deduction opportunities can be a serious waste of money for businesses, so it is worth consulting an experienced tax advisor before preparing the final corporate tax return," the expert points out.
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