Changes in Taxation system in 2020
In our newsletter, we try to summarize the most important tax changes effective from 2020 (partly from 2019) and affect our Clients.
There will be several changes in the regulations of accountancy, value added tax, corporate income tax, small taxpayers tax, personal income tax, excise duty, local tax, social contribution tax, health contribution fee and the conditions for short-term rental activity.
Changes in accountancy regulation from 2020
Limited liability company founded by a private enterprise
Private entrepreneurs may establish one-person limited liability companies (Kft.). The advantage of this possibility is that the accumulated assets, earnings, losses etc. of the private business may be taken over by the company to be formed.
Depreciation of the small value assets
From 2020, the limit for immediate depreciation rises from 100.000.-HUF to 200.000.-HUF. The advantages of this change are obvious. The new legislation is applicable to the assets purchased after 1st January 2020.
Changes in the value added tax (VAT) from 2020
VAT choices due to termination of EVA taxation system
From 2020, EVA taxation system is no longer a possibility for taxpayers. Therefore tax subjects must pick a new VAT status and make their choices (VAT free, the taxation of properties etc.). Tax Office will declare the new tax number until 15th January 2020. This is a limitation date which means after this day taxpayers will not be able to pick a voluntary choice, instead, the Tax Office will determine a default VAT setup according to the general VAT rules.
Irrecoverable receivables in VAT legislation
The VAT law will allow irrecoverable receivables to be recognized and the amount to be deducted partly of fully from payable VAT. In order to do so, taxpayers should fulfill the following requirements:
- There is no cover for the receivable during a forced collection process
- The receivable was released during a bankruptcy or forced dissolution process or there is no cover for it
- There is no cover for the receivable based in a written certificate issued by the officer of the forced dissolution
VAT percentage of the short-term rental activity
The VAT rate of the short-term rental activity from 2020 will decrease from 18% to 5%. This is applicable for bookings made after 1st January 2020.
Expansion of the data submission of invoicing activity
From 1st July 2020, all invoices issued to another domestic VAT subjects must be reported independently of the VAT amount (including VAT free invoices also!).
From 1st January 2020, all invoices must be reported whether the invoice is issued to another VAT payer or not.
Data indicated in the invoice
From 1st July 2020, the tax number of the buyer (customer) must be indicated in the invoices. The maximum issuance period (i.e. the maximum time that may be elapsed from the fulfillment till the issuance) is narrowed down from 15 days to 8 days.
Changes in corporate income tax from 2020
The obligation of fill-up
Taxpayer will no more be required to fill up their corporate income tax at the end of the financial years. This obligation was already driven out in 2019.
Improvement tax allowance
From 24th July 2019 the maximum amount of improvement reserve is decreased to 300 million HUF. This sum will further be lowered to 200 million HUF (2021) and 50 million HUF (2022). Still it is a great opportunity to save some taxes.
Small taxpayers’ tax (KIVA) changes from 2020
The rate of KIVA is decreased to 12%.
The definition of the dividend received will be specified: in the future, dividend received should not be calculated in the overall income and, therefore, is not considered as tax basis.
Changes in personal income tax (SZJA) from 2020
Tax allowance for mothers with 4 or more children
Those mothers, who have more than 4 or more children (including the adopted ones also) and raise them in their own household, receive a full personal tax exempt. In parallel to this, they are entitled to obtain the family tax and social security allowances and get a refund from their salaries.
Social security tax changes from 2020
Social contribution tax
The rate of social contribution tax is lowered to 17.5% from 1st July 2019.
New unified social security law from 1st July 2020
From 1st July 2020, there will a new, unified social security legislation come into effect.
Merge of personal social security contributions
From 1st July 2020, the health contribution and unemployment contribution will be merged into one tax with 8.5% rate.
Minimum basis of contributions
The minimum tax basis of contributions and social security tax for those who are employed will be the 30% of official minimal wage independent of the actual wage. This regulation is “designed” for those who e.g. apply a 2 hours per week employment to minimize the taxes to be paid.
Tax exemption of retired persons
From 1st July 2020, all employment forms (including work, assignment contracts and personal contribution in a company) will fall under full personal social security tax (i.e. the contributions that are deducted from the gross salary) exemption. Those who are retired due to their age, will have not to pay social contribution tax also.
Social security tax of engagements
From 1st July 2020, the tax of any legal employment relationships that are not considered work contracts will be 18.5%.
Health contribution fee, invalidation of social security number (TAJ)
From 1st January 2020, the amount of health contribution fee will be raised to 7.710.-HUF/month/capita.
There will be also a new legislation that requires the individuals to have not more than 3 months of unpaid health contribution fee otherwise the social security number (TAJ) will be invalidated.
Minimum wage 2020
The minimum wage from 2020 will be gross 161.000.-HUF, the guaranteed minimum wage (in case of a job that requires at least a secondary school education) will be gross 210.600.-HUF
Changes in local taxes from 2020
Local turnover tax declaration
Local turnover tax declarations will not be forwarded by NAV unless all the errors that emerge are corrected.
The tax declaration of the different business addresses
From 2020, it will be possible to post the local turnover tax declarations of the different business premises directly to NAV.
Tourism Improvement Contribution
From 1st January 2020, the short-term rental, in addition to restaurants, will be the subject of tourism improvement contribution. The rate will be 4% of the income realized.
Changes of the excise duty from 2020
From 1st Janary, 2020 the excise duty of cigarettes will be 20.500.-HUF/1000 pieces. Excise duty regarding to other tobacco products will be 20.100.-HUF.
The excise duty of cigarette will be raised from 1st July 2020 to 22.800.-HUF/1000 pieces.
E-cigarette liquids will be subjects of excise duty.
Short-term rental (mini-hotel) activity from 2020
There will be a completely new legislation regarding to the short-term rental activity. Mini hotels should be registered at the National Tourist Data Exchange Center (NTAK – www.ntak.hu). The use of a specialized software will also be mandatory.
VAT will be decreased to 5% from 2020, unfortunately in parallel, short-term rental will be the subject of tourism improvement contribution which will be 4%.
The government also introduced the term of private mini-hotel which is a minim hotel that is operated either by a private person or by a private enterprise. In this case, usually, there is no need to reclassify the property and to pay the parking contribution fee.
If you have further questions or would like to request and inquiry, please feel free to contact us.
Tel: +36 20 548 4103