A new excise tax may arrive in Hungary, but there are still many open questions

Reset Tax

The capital is considering the introduction of a half-percent reset tax, which companies with a business tax base of more than HUF 5 billion would have to pay until Budapest emerges from the economic crisis caused by the coronavirus epidemic. In his presentation yesterday, the mayor stressed that the new crisis tax would be introduced temporarily, in the case of Budapest, for the period until full employment is achieved.

Under the rule, companies with an IPA tax base of HUF 5 billion would pay 0.5% of the IPA tax base in the following sectors:

• Manufacturing industry;
• Supply of electricity, gas, steam and air conditioning;
• Water supply: collection, treatment, waste management, sewage decontamination;
• Trade, auto repair,
• Transportation, storage, information, communication;
• Financial and insurance activities;
• Professional, scientific and technical activities;
• Administrative and support service activities)

There are many open questions

We asked Tamás Gyányi, partner of Client WTS, about the proposal announced yesterday by the mayor. The tax expert said that the new type of tax must be paid by companies with a corporate tax base of more than HUF 5 billion, according to previous reports. What we still know is that the capital wants to experience a HUF 69 billion budget hole with this new concept. Unfortunately, no other details besides the above are known, so we do not know what

• exactly what annual turnover (corporate tax base) should be taken into account,
• if a group level tax base would be important,
• exactly what the tax rate would be,
• if accompanied by activity exemptions (for example, given the current situation, healthcare providers or companies that otherwise generate losses from the viral situation would be exempt, etc.),
• the temporal scope of the new type of tax is still in doubt,
• more importantly, the issue of the tax base is not clarified either.

At the moment, the concept runs under the name ipa +, which heralds the relationship with the local business tax. However, under the Local Tax Law, the maximum local business tax rate that the capital would otherwise apply can be 2% (individual municipalities can set a lower business tax rate for companies with permanent or temporary business activities in his territory).

It is a limiting factor that only one type of tax can be introduced after the same tax subject,

In this way, the question of what exactly would be subject to the tax is even more open, given that companies continue to pay the business tax.

It should also be seen that there are several companies with a high business tax base in Hungary at present, which are based in Budapest, but have a national network, branches or business tax offices, and the business tax for these sites is paid to the respective municipalities. method. It also follows that there may be companies in which the business tax base of the registered office is less than HUF 5,000 million and the majority of the sales revenue, which constitutes the base of the business tax, is generated in places outside of Budapest, Tamás Gyányi said.

Returning to the general provisions of the Local Tax Law, the representative body of the local government (municipality, city, capital and district) and the county government can introduce local taxes in the area of ​​competence of the municipality and, with the exception of the government county, local taxes (all therefore an option, not an obligation), in such a way that a tax structure would be created that guarantees the freedom of the local government and the possibility of increasing its own income, and would be included in the system warranty rules that limit the duplication of taxes (surcharges).

Cover image: Hugh Rooney, Getty Images