A new year has started, and again tax regulations are updated and clarified in Hungary. There are no major tax changes this year, but make sure to read our overview and ask your accountant if there is anything you should pay special attention to this year.
Corporate tax and global minimum tax
Corporate tax in Hungary is 9%, which is the lowest in the European Union. This is not changing in 2024, not even with the introduction of the global minimum tax at 15%. That pertains only to international corporations with a yearly revenue above EUR 750 million.
In relation to the introduction of the global minimum tax in Hungarian legislation, various small details change governing the taxation of companies. One of the most conspicuous changes is the introduction of a new tax benefit related to R&D activities, and the relevant change to the application order of tax benefits (the new R&D benefit will be the first in the order).
Changes to KIVA, the small business tax
KIVA is an alternative to regular corporate tax (TAO), intended for small businesses. This tax regime is available to joint stock companies only if they are private. Once they get listed on the stock exchange, they lose their KIVA status on the day before listing.
Of course, there are other ways for a company to lose their KIVA status, and up till now that meant the company cannot choose KIVA again for 2 years. From 2024, this limit is decreased to just 15 days.
Local business tax (HIPA)
The rate of the local business tax (HIPA in Hungarian) stays the same: at most 2% of the net revenue (it may be less, depending on the local municipality where your Hungarian company is registered). However, definitions are harmonized with those used for calculating net income in the case of the corporate tax.
Please note that municipalities are allowed to publish the data of companies with a HIPA debt. However, the threshold for this is now increased to HUF 500,000.
Controlled foreign corporations: CFC laws in Hungary
The definition of Controlled Foreign Corporations is updated starting from 2024 to include everyone whose permanent establishment is tax-exempt or not taxable in their country of residency. CFCs are taxed less favorable than other companies, and in some cases they require special registration.
The definition of affiliated companies is extended to sister companies
When considering affiliates, holding 25% of the shares is required for establishing affiliation between parent companies and subsidiaries. From 2024, the definition is extended to sister companies in certain cases. Learn more about taxes for affiliated companies here.
Tax relief for energy efficiency investment and renovation
In 2024, the system of tax reliefs for energy efficiency investments and renovations will be updated, including clarifications to some definitions and details. A new category is introduced for “alternative investments and renovations”. The ceiling of the energy efficiency tax relief is increased from EUR 15 million to EUR 30 million, while energy efficiency must improve by at least 20% as a result of the investment.
VAT reporting becomes easier
The Tax Authority is now introducing a new system called eÁFA (e-VAT) that will make reporting easier and more straightforward. It includes various features for automation, while reports can only be submitted after you (or rather, you accountant) have reviewed and approved of it.
Some definitions are clarified to ensure easier compliance. These include guidelines for determining the place of delivery in case of virtual events, as well as some clarifications connected to the work of dentists and the transport of patients.
Standard VAT continues to be 27%. While VAT rates remain mostly the same, there are slight changes. More types of baby formulae are now available at the 5% rate, while dairy based desserts are moved to the 18% category (prominently, this will include “túró rudi”, a Hungarian specialty).
Navigate Hungarian tax changes with your trusted ally
Every year brings tax changes, some smaller, some bigger. Here at Helpers Finance, we stay on top of the updates and can help you navigate your business through recent modifications. Stay tuned for updates, or let us know if you need help with anything related to company operation in Hungary, including accounting or HR solutions.
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