Magazine: Big tax changes

There will be great changes in tax rules as of next year. The Hungarian parliament voted with yes to Minister of National Economy Mihály Varga’s proposal to amend the tax law related to the 2017 budget. With the modifications the objective is to make the tax system simpler and more transparent, and to ‘whiten’ the economy, too. The changes also aim at improving the situation of workers, leaving more money in their pockets.

One of the biggest changes will occur in the cafeteria system. An analysis by the experts of Multi-Pay® Cafeteria revealed that the rules are different for employers working in the public sector and for those employed in the competitive sector. In the latter the annual cafeteria budget is HUF 450,000, from which HUF 100,000 can be cash and the remaining HUF 350,000 can take the form of Széchenyi Leisure Card (SZÉP) card. If more than HUF 100,000 cafeteria benefit is paid in cash, the sum above the limit will qualify as salary and the necessary contribution payment obligation will apply to it. All in all, we can say that the new cafeteria system will make these benefits cheaper for employers than the salaries are.

Hungary’s Act 100 on Accounting has also been amended in many places. According to audit and accounting specialist MAZARS, it is a welcome simplification that in the appendix contributions paid for wages don’t have to be presented in the form of inventory groups, but simply as title rights. MAZARS underlined the fact that a new accumulated profit reserve reducing item has been introduced, in order to ensure harmonisation with the rules of the Civil Code.

There were several modifications in the text of the Act on Corporate Income Tax, with the goal of preventing tax avoidance. Deloitte Hungary’s experts called attention to the fact that a basic principle had been modified: if a legal step is taken with the sole purpose of achieving a tax advantage, the tax advantage isn’t valid and the costs charged in connection with taking such a step can’t be written off from the tax base. The conditions for applying a tax base reducing item due to transfer pricing also became stricter. One of the conditions will be the related party having to make a declaration, stating that they used the sum based on the usual market price when calculating their corporate tax base.

Deloitte’s experts also called attention to the fact that more benefits can be granted tax-free. For instance not only crèche but also kindergarten service, plus crèche and kindergarten care fall into this category. Another tax-free benefit can be healthcare service provided to all employees with the same conditions. The VAT on several food products (poultry meat, egg, milk) reduced to 5 percent. There are a few exceptions, though, as goose liver and fat will continue to have the same VAT as in the past. What is more, only fresh milk’s VAT will drop to 5 percent, all other milk varieties will have the same VAT formerly. As for tobacco products, the first step in increasing the excise duty to 29 percent will be taken by 1 September 2016. As of 1 January 2017 an 18-percent tax will apply to food and non-alcoholic drinks prepared on-site by bar and restaurant owners; as of 1 January 2018, this tax rate will decrease further, to 5 percent.