Hungary: tax package for 2013 – presentedOctober 19, 2012
On 12 October 2012, the Minister of National Economy submitted a bill introducing the 2013 tax package to the Parliament. The bill is designed to:
- Streamline the tax system
- Implement a strict flat tax rate into individual income taxation
- Support families with children
- Resolve certain tax technical and legal issues
The proposals, if adopted, will include changes to the rates of transfer, inheritance and gift tax, making the business environment more competitive, and strengthening tax moral.
The most important features of the package are as follows:
Individual income tax
The “gross-up rules” will be removed from the tax base. This implies that Hungary will have a flat tax rate system. The tax rate will be 16%.
The current gross-up rules apply if income exceeds HUF2,424,000, implementing a second effective tax rate of 20.32%. The change simplifies the rules on tax base calculation, as well as the rules on the pay-as-you-earn (advance payment) system.
The “non-salary” benefits will be extended to vouchers provided by an employer for workplace catering, organized by the employer, even if the catering facility is open for the public. The monthly ceiling will be HU12,500.
Social security and health service contribution fee
Individuals, who are members of private pension funds, may enter into a contract with the Administration of National Pension Insurance for voluntary contributions.
The health service contribution fee will be increased from HUF6390 to HUF6,660 per month.
The definition of reported intangible assets will cover self-created intangible assets. Thus, the current capital gains exemption will be available in case of self-created intangible assets as well (the current exemption only applies to acquired intangibles).
This change favors taxpayers carrying out R&D activities which result in intangibles. The exemption means that the proceeds from the disposal of self-created intangibles will be tax exempt, if certain conditions (60-day reporting obligation, holding for one year) are met.
The definition of controlled foreign companies (CFC) will be clarified. According to the new rules, if a foreign state applies various tax rates, the smallest tax rate shall reach the 10% threshold (this 10% threshold determines whether a taxpayer is subject to low taxation or not).
50% of the increase, generated since the last tax year, in the debt owed by a company to its members will be added to the minimum corporate income tax base.
In case of corporate restructuring, according to the current rules, losses of a predecessor company can only be carried forward by the successor company if the successor company realizes revenue from one of the activities of the predecessor company within two years of restructuring.
Based on a new proposal, this requirement will not apply if the successor company ceases to exist without legal successor within two years of restructuring.
The rules on the credit for the promotion of development will be changed. Taxpayers will be obliged to report to the Minister of National Economy, and thus to the tax authorities, the end date of the development project (investment) on the basis of which the tax credit is granted.
A new database will be set up to provide information on local taxes. The database will be operated by the Treasury.
Local municipalities will report important information on a monthly basis to the database, including the contact details of the municipal tax administrations.
Furthermore, municipalities will be responsible for publishing every municipal tax decree, tax return form and contact detail on their website.
Value added tax
Intra-Community leasing of long-term (more than 30 days) means of transport to non-taxable persons will be taxable in the Member State of establishment of the customer.
Inheritance,gift and transfer tax
Inheritance and gift taxes will be levied at 18%, except for acquiring immovable property, in which case, a 9% tax rate will be applicable. Inheritance of an estate by the spouse after the deceased, irrespective of the net value of the estate, will be exempt.
The transfer tax will be levied at 4%. Accordingly, the second 2% tax rate will be revoked.
Any property transferred – irrespective of whether free of charge or not – to descendants or ascendants will be exempt from taxes.
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