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Hungarian Government Submits Tax Bill

Friday, November 15, 2019

On November 12, 2019, Hungary's Ministry of Finance announced that it has submitted to parliament the seventh and final part of its Economic Action Plan, which includes various tax measures.

The newly tabled bill contains proposals to merge four existing social contributions, including the pension contribution, healthcare contribution, and unemployment contribution, into a single levy of 18.5 percent from 2020.

The bill also includes measures to improve rates of value-added tax compliance. Under these changes, most invoices will have to be submitted online. At present, only invoices for amounts of at least HUF100,000 (USD330) are submitted using Hungary's real-time invoice reporting system, which came into force on July 1, 2018.

Furthermore, the bill will require suppliers of most VAT-exempt services, such as private healthcare, education, and real estate sales, to issue an invoice or receipt.

The Hungarian parliament has already approved other tax aspects of the Economic Action Plan. Among others, these changes include:

  • A reduction in the small enterprise tax (KIVA) from 13 to 12 percent effective from January 1, 2020.
  • A reduction in the VAT rate on supplies of hotel and accommodation from 18 to five percent.
  • The abolition of advanced corporate tax payments, which applies to firms with annual turnover in excess of HUF100m. This means that the affected businesses must settle their tax payments with their tax returns by May 20 each year, instead of on December 20 in the previous year.
  • The gradual reduction in the project value threshold for the development tax discount from the existing level of HUF500m to HUF50m for small business and to HUF100m for medium-sized firms by 2023.