Proposed tax law amendments for 2012

From all sectors it is probably retail and consumption that are the most affected by the proposed tax law amendments – there are several products on which many types of indirect tax are imposed on. The public health product fee will increase for most products from 1 January 2012.

A HUF 20/litre tax will be imposed on flavoured beers and alcopops, plus low fruit content jams and extruded salty products will also be taxed. An amendment will significantly modify the regulation of the environmental protection product fee: the main elements will not change but the fees themselves will be much higher (by 50 percent for plastic packaging or by 400 percent for mobile phones). Excise taxes were raised as of 1 November 2011 and the tax on ‘quality alcoholic beverages’ is more than 40 percent lower than other alcoholic products’. As of 1 January 2011 the VAT rate will increase from 25 to 27 percent. Hungary will have the highest VAT rate in the European Union. Retailers will have time until 29 February 2012 to set their systems to the new VAT but they should not forget that this work cannot be done overnight, especially in the case of retailers with large internal systems. Two other expected changes in the VAT regulation: the VAT of vehicle rental will become deductible; in the case of chain transactions there will be no counter-enquiry by the tax authority. Changes in the personal income tax could have the biggest influence on companies’ marketing campaigns and promotional or business gifts and events. Current regulation is that the criteria for tax exemption in promotion campaigns are to be public, widely advertised and to tie the discount to buying. The proposed amendment is that from next year discounts will only be granted tax free in the value of the purchase. Discounts granted above the value of the purchase could mean an extra tax burden up to 51.17 percent for companies. It is important to note that the taxation of income gained through prize games could vary, depending on the precise conditions of the prize game. Therefore it is worth closely studying the personal income tax and gambling laws when elaborating the conditions of promotional prize games. If a prize draw connected with buying does not meet the related requirement of the gambling law, the proposed amendment is that the company will have to pay the tax. Promotional gifts can fall into the category of mass gifts of gifts of small value. Current regulation is that this type of promotional activity taxation is favourable but there is significant administrative burden. If the value of these gifts exceeds the limit laid down by the law, these presents qualify as ‘other type of income’ for private individuals but the good news is that next year will bring positive changes in handling these cases. As regards corporate income tax, one of the most significant changes next year will be stricter rules in the usage of accrued loss. Loss accrued from previous years will be allowed to be used up to 50 percent of the tax base, at the maximum. Planned amendments also include changes in the regulation of thin capitalisation, benefits related to immaterial assets, preparing transfer price documentation and the regulation of R+D. Food industry companies will probably have to pay a new contribution: the idea is that a food chain supervision fee will be have to paid to the Central Agricultural Office (MgSzH), in the value of one thousandth of the company’s net sales revenue. Reporting obligation will have to be fulfilled by 31 May each year and the fee will have to be paid in two instalments.