The minor changes will come under the heading of economic protection, but only next year. The government waives the tax on tests, but the details are unclear.

The Economic Protection Operational Tribe (GOT) presented new proposals, which were announced by the head of the organization, Finance Minister Mihály Varga. It is important to note that these are only proposals, the GOT is not a legislator.

In the short term, most importantly, it is proposed that all epidemiological screening tests be tax-free. According to Varga, this can save more than 7,000 HUF in taxes per test. The Finance Minister did not specify exactly what tests he was thinking about and what kind of tax exemption, as human health services are VAT free, so presumably the test could be tax-free as a benefit to the employer. (We also ask the PM about this, as soon as they reply we will update the article.)

By the way, the government recently capped the price of corona virus tests to 19,500 HUF, before various service providers threw in the towel, because it was no longer worth offering tests at that price. Meanwhile, public testing is overloaded.

The other elements of the package announced by Mihály Varga are much less significant and will not have an immediate impact as the measures will only come into force in 2021. There are no groundbreaking innovations, as Varga said, the measures that have been in focus for years must be accelerated to mitigate the effects of the epidemic. Tax cuts, administrative simplification, and investment incentives are the three pillars.

Regarding the specific steps (proposed):

  • next year, the small business tax (kiva) will be even more favorable, the tax rate will be reduced from 12 to 11 percent. There is nothing new in this, this was already decided in spring. The new proposal is to double the revenue threshold to HUF 3 billion, so that more companies can choose.

  • The administration of 1.5 million cases of the public administration will be free, which will leave 5 billion HUF for the population and companies. The Finance Minister did not specify exactly which cases were involved, which will obviously be made clear in the relevant legislation. The government has been working for years to expand the range of free public administration matters. It is also worth noting that HUF 5 billion is an invisible amount for the Hungarian national economy and the central budget, a rounding error, so it will not have an economic recovery effect, although the simplification of administration (extremely complicated in international comparison) is welcome.

  • Starting in the second half of 2021, NAV will prepare a draft VAT return for each company. Half a million companies are tax exempt. There is also no big surprise in this, the tax authority has seen almost all invoices since mid-2020 and the exceptions are in effect until mid-2021. Since the tax authority will receive the information for each invoice from mid-2021, it will be able to prepare VAT returns. However, for many companies, this is obviously a relief.

  • The GOT intends to “propose the abolition” of the HUF 10 billion ceiling on the business development reserve next year, which they hope will be able to induce even more investment. The development reserve is an instrument to reduce the corporate tax base (tao). Raising the upper limit of HUF 10 billion actually means that it will be easier for businesses to invest, but this will hardly be of significant help to small businesses.

According to Mihály Varga, the measures can make a significant contribution to the operation of companies and also reduce the burden on families. They hope the economy can return to a faster growth path.



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