For 2016, the standard rate of personal income tax decreases from 16% to 15% (flat rate) in accordance with the aim of the Hungarian government to reform the tax system.
2.1 Method of exercising VAT deduction right
According to the regulations effective until 31st December 2015, the taxpayer can exercise its VAT deduction right from the arising of the right, in any tax assessment period within the expiration period (5 years), pursuant to the Act on the Rules of Taxation. The new regulations for the invoices from 1stJanuary 2016 define a shorter period than the expiration period. Pursuant to the main rule, the tax deduction right can be freely exercised in the year of its arising and in the following calendar year. Independently from the above, the not yet expired VAT deduction right after the above 2-year period can be exercised in the framework of a self-revision, through modifying the tax declaration of the VAT settlement period of the original arising date of the input tax deduction right.
2.2 Transactions with periodic settlement
According to the rules of the VAT law effective from 1st January 2016, if the parties agreed in periodic settlement or payment, or if the countervalue is determined for a specific period, then the date of fulfilment (due date of VAT payment) is the last day of the period relating to the settlement or payment.
However, there are two important exceptions:
a) The date of fulfilment is the date of issuance of the invoice, if the due date and the date of issuance of the invoice precede the last day of the settlement period
b) The date of fulfilment is the due date, but no later than the 60th day following the last day of the period, if the due date falls on a date following the last day of the period.
The date of fulfilment will emerge earlier according to the new rules in the following two cases:
< In the case of invoicing in advance, if the due date also precedes the end of the settlement period, then the fulfilment will occur already at the date of issuance of the invoice (eg. this type of invoicing is typical for real estate leasing),
< If the due date falls on a date more than 60 days following the settlement period, then the date of fulfilment is on the 60th day (this is relevant regarding transactions with too long due date).
In the other cases according to the new rules, the date of fulfilment will practically fall on the same month, quarter, as according to the earlier regulations.
The new performance rules shall be applied first in those cases, when the first day of the concerned period, the due date, and also the date of issuance of the invoice fall after 31st December.
3.1 Classification of taxpayer
Pursuant to the new regulations, the tax authority classifies all companies every year quarter, and informs taxpayers about the classification in electronic way.
3.2 Reliable taxpayers
The taxpayers qualify as reliable, who basically comply with the law, that is, who fulfil their tax liabilities. It is reasonable to provide allowances for them, for two reasons: on one hand to make the reliable taxpayer classification attractive, and on the other hand to support them in the fulfilment of their liabilities.
A reliable taxpayer is a taxpayer registered at the company registry or it is a taxpayer registered for VAT, fulfilling all of the below criteria:
a) It has continuously been in operation for at least 3 years, or classifies as a taxpayer registered for VAT purposes at least 3 years ago;
b) In the subject year and in the preceding 5 years the total of tax differences assessed by the state tax authority does not exceed 3% of the tax payment liability of taxpayer assessed for the subject year;
c) In the subject year and in the preceding 5 years the state tax authority did not initiate liquidation procedure against taxpayer, excluding reclassification and the practice of retention rights;
d) In subject year and in the preceding 5 years taxpayer was not subject to bankruptcy, liquidation, involuntary deletion proceedings;
e) The taxpayer does not have net tax debt exceeding 500 THUF;
f) In subject year and in the preceding 5 years taxpayer is not and was not subject to suspension of tax number;
g) In subject year and in the preceding 5 years taxpayer is not and was not subject to tax number deletion;
h) The amount of default penalty, due 2 years before the subject year, imposed by the state tax authority against taxpayer did not exceed 1% of the assessed tax payment liability of taxpayer in the subject year;
i) In subject year and in the preceding 5 years, the taxpayer was not and is not subject to enhanced surveillance by the tax authority; and
j) Taxpayer does not qualify as risky taxpayer.
In the case of reliable taxpayers, the inspection period maximized to 180 days is an advantage, but if the taxpayer obstructs the conducting of the tax audit with its behaviour – if it is not available for the tax authority, or does not provide documents – then of course the inspection can continue beyond 180 days, too.
Favourable rules apply to reliable taxpayers with regards to default fine as well: in the case of default of registration-, declaration-, data provision liability, for the first time the tax authority only notifies the reliable taxpayer to fulfil its obligation. Exceptions are registration of employees and the fulfilment of declaration obligation in the electronic road freight monitoring system (EKÁER). In case a default fine is nevertheless imposed, then, if taxpayer qualifies as a reliable taxpayer at the time of committing or assessment of the default fine (entering into a protocol), based on the general rules, only 50% of the penalty can be imposed.
Present document does not contain the full list of changes and is not meant to substitute for the review of particular transactions or for any related consultation.