Tax & Legal Alert PwC Hungary Issue 580 July 2017

Transcription

1 Tax & Legal Alert PwC Hungary Issue 580 July 2017 On 13 June 2017, the Parliament passed Act LXXVII of 2017 on the amendment of various tax laws. This newsletter summarises the most important changes proposed by the bill. Content Changes related to tax proceedings...2 Changes related to personal income tax, social security contributions, and the social tax...2 Changes related to value added tax...3 Changes related to customs regulations...3 Changes concerning corporate tax...3 Changes concerning local taxes...5 Changes affecting the special tax on financial institutions...5 Changes related to excise duty...5 Changes related to accounting...6 Changes concerning corporate tax in connection with the transition to IFRS...7 Changes concerning local tax in connection with the transition to IFRS...7 Changes concerning the innovation contribution in connection with the transition to IFRS...7

2 Changes related to tax proceedings Reporting bank accounts kept at foreign financial institutions From 1 January 2018 corporate taxpayers will be required to report, within 15 days, the account numbers of all bank accounts kept at foreign financial institutions, including the name(s) of the relevant financial institution(s) and the date on which such accounts were opened and, if applicable, closed. Taxpayers failing to report the above may be subject to a default fine of up to HUF 600,000. Tax bond From 1 January 2018 persons who intend to participate in a new company or enter an existing company while holding or having held a position of decision-making authority in a company that has or was dissolved due to having outstanding tax liabilities, will be obliged to post a tax bond, even if they are not subject to restrictions for tax registration purposes. Disclosure of details of taxpayers who have defaulted on their VAT filing obligations Effective from the day following the date of entry into force of the amending Act, the national tax authority will disclose on its website the details of taxpayers who have defaulted on their VAT filing obligations for more than two filing periods. Changes related to personal income tax, social security contributions, and the social tax Tax exemption of employer provided housing assistance The amount of tax-exempt housing assistance provided by employers for labour mobility purposes will increase from 40% to 60% of the minimum wage in the first two years of employment (which, however, must be calculated from 2018). This means that in 2018 employers will be able to provide up to HUF 82,800 per month of tax-exempt housing assistance to employees who commute to work from a distance of more than 60 km. Tax allowance for families with two children From 1 January 2018, the tax allowance available to taxpayers with two children will further increase: from HUF 15,000 to HUF 17,500 per child. Changes to the definition of dividend The definition of dividend specified in the Personal Income Tax Act will be the same as the definition found in the Accounting Act. This change became necessary as a result of the 1 January 2016 amendment of the Accounting Act. According to the 2016 rule, in the case of negative retained earnings, businesses will only be able to pay dividend if the operating profit for the given financial year exceeds the value of negative retained earnings. The relevant tax rules have now been brought in line with this requirement. Tax Alert 2

3 Taxation of Airbnb rental income The taxation of rental income earned by private individuals will be more favourable: from next year, the 14% healthcare tax will no longer have to be paid on annual rental incomes exceeding HUF 1 million. Another change is that if the taxes on the rental of real property jointly owned by a married couple are paid by one spouse, they will be able to deduct bills (e.g. overhead expenses) issued to the name of the other spouse. Persons renting out their room, house or apartment on Airbnb will be able to choose the annual itemised flat-rate tax of HUF 38,400 per room for up to three apartments, not just one apartment. Changes to the definition of own car A favourable change that affects private individuals sent on business trips is that they will be eligible to receive, according to the simplified rules pertaining to assignments, reimbursement for using not only their own or their spouse s car, but also a car registered to a close family member. For example, this means that private individuals using their parents car for a business trip will not be liable to pay company car tax. Lump-sum tax payable by small taxpayers Pupils and students in full-time education will no longer be treated as full-time small taxpayers. As a result, they will have to pay a lump-sum tax of HUF 25,000 per month (rather than HUF 50,000); however, they will not qualify as insured. Another favourable change is that business owners subject to the lump-sum tax for small businesses (KATA) excluded by the tax authority from the scope of small taxpayers because of unpaid public dues exceeding HUF 100,000, will be able to keep their KATA status if they pay off their debt by the time the tax authority s decision becomes final. Healthcare services contribution The amount of the healthcare services contribution, which is primarily payable by non-insured adults, will increase from HUF 7,110 to HUF 7,320 per month from 1 January Changes related to value added tax Extending the scope of the reduced VAT rate The scope of goods subject to the reduced VAT rate will be extended. From 1 January 2018, the VAT rate on internet access services and on fish for consuming purposes will be reduced from 18% to 5% and from 27% to 5% respectively. Furthermore the VAT rate on the edible by-products and meat offal of domestic swine will also be reduced to 5%. issued using invoicing software and have a VAT content of at least HUF 100,000. In order to allow the affected taxable persons to prepare, the recent amendment - based on the wording of its explanation - provides a 1 year voluntary probation period regarding these obligations. Consequently, the threshold of the domestic recapitulative statement will remain HUF and the online data supply will only be mandatory from 1 July Changes related to customs regulations Customs representation for the purposes specified in Article 22 of the Community Customs Code must be reported electronically using the EGYKE form designated for this purpose (available from the National Tax and Customs Authority s website). If a person subject to post-release control has used an indirect customs representative during a customs procedure, the indirect customs representative will be liable for the customs debt, and will have the same rights and obligations as the person subject to the control, irrespective of whether or not the customs representation is still valid at the time the post-release control is conducted. Accordingly, if more than one taxpayer is liable for payment of a customs debt, the customs authority will, on the same day, send each affected taxpayer a copy of its decision on the payment obligation. Changes concerning corporate tax Changes to the definition of reported shareholding The bill has introduced changes to the definition of reported shareholding: from 1 January 2018, it will be possible to treat an ownership interest as a reported shareholding regardless of size, provided that such shareholding is reported to the tax authority within 75 days of acquisition. Tax incentive for rental housing construction for labour mobility purposes From 1 January 2018, corporate taxpayers will be able to reduce their pre-tax profit by the investment cost and the cost increment of permanent buildings constructed for the purpose of providing rental accommodation to employees in the tax year in which the relevant construction or renovation is completed. Online data supply According to last year s tax law amendments as of 1 July 2017 the threshold of domestic recapitulative statements would have been reduced to HUF and the taxable persons would have been simultaneously required to forward data to the tax authority through an online connection on invoices that are 3 Tax Alert

4 Tax incentive for instalment of basic charging infrastructure required for the use of electric vehicles From 1 July 2017, taxpayers will be able to deduct the investment cost of charging stations for electric vehicles from the pre-tax profit. The amount of tax base reduction applied per charging station may not exceed the HUF equivalent of EUR 20 million calculated using the corporate tax rate currently in effect. The tax incentive can first be used in connection with investment projects started after 30 June Interest payment obligation related to deferred tax payment In line with relevant EU legislation, the bill prescribes an interest payment obligation, effective from the 30th day following the bill s promulgation, for taxpayers applying the tax deferral scheme aimed at promoting the growth of enterprises. The interest is calculated for each calendar day at 1/365 of the base rate of the Hungarian National Bank. Taxpayers who have previously used the tax deferral may pay the interest at their own discretion. Changes to the definition of controlled foreign company From the day following the bill s promulgation, the foreign permanent establishments of resident taxpayers will no longer qualify as controlled foreign companies if the taxpayer concerned is owned by a listed company. Furthermore, the amendment made to the provisions with respect to controlled foreign companies stipulates that the existence of shares prescribed by law should be regarded as fulfilled if such shares are being held in the greater part of the taxpayer s financial year. Changes to the tax base increase related to controlled foreign companies In order to transpose the relevant EU law into national law, the bill stipulates that, effective from the day following the bill s promulgation, income from a controlled foreign company must be calculated as part of the tax base in proportion to the taxpayer s shareholding in that company. Taxpayers may apply the new provision at their discretion in the tax year beginning in 2017; as regards tax base increasing items for income earned prior to 2017, taxpayers may choose to apply the Corporate Tax Act s provisions as in effect on 31 December Changes to tax incentives provided to business start-ups Effective from the day after its promulgation, the bill removes the requirement that business start-ups have at least one person employed in a research and development role in order to be eligible for the tax incentive. The qualification of volleyball as a popular team sport Effective from the day following the amending bill s promulgation, volleyball qualifies as a popular team sport from Corporate Tax Act point of view. Tax Alert 4

5 Changes concerning local taxes Determining the local tax rate for a fixed period According to the bill, if the local tax rate is fixed for a given period, local authorities will not be able to increase local taxes for the first two years of that period; from the third year, such an increase will only be permitted if local tax revenues decrease by a specified percentage during the period in which the fixed rate is applied. The local tax rate may not exceed 130% of the fixed rate, even after an increase. Changes affecting the special tax on financial institutions From 1 January 2018, entities subject to banking tax may deduct from their payable taxes (up to 50% of their banking tax) the amount of financial support provided for certain qualifying purposes, if on the basis of such support they would be entitled to claim tax relief under the Corporate Tax Act, but choose or have chosen not to claim corporate tax relief. Qualifying purposes include supporting amateur sports organisations and junior sporting organisations. Advance payment of local taxes From the day after its promulgation, taxpayers will be able to comply with their local tax payment obligation before it becomes due. In such cases, taxpayers must submit a tax return on the advance payment, indicating the tax or tax advance to be paid. These tax returns cannot be corrected by self-revision. Filing returns for local business tax advance top-ups From 1 November 2017, returns for local business tax advance top-ups can also be filed with the national tax authority. Transferring company information From 1 January 2018, the national tax authority will electronically transfer company registration data received from the Court of Registration to the competent local authorities of the municipality in which the company is based, which enables taxpayers to meet their obligation to report a new company to the local tax authority at the same time ( single window ). Changes related to excise duty Act LXVIII of 2016 on Excise Duty (the core provisions of which will enter into force on 1 July 2017) will be amended to reflect the following: For the purposes of procedural law, the Act on the Rules of Taxation will serve as background legislation for the new Act on Excise Duty. Goods falling under tariff headings , , and will no longer be regarded as controlled energy products. The regulations on excise guarantees will be amended as follows: ºº The definition of financial guarantee will include cover notes, in addition to bank guarantees as well as promissory notes issued on the basis of an insurance policy. ºº Guarantees to be provided by tax warehouse operators pursuing manufacturing activities may be decreased under more favourable terms than before. ºº Excise guarantees will be capped at HUF 200 million for tax warehouses supplying aircraft, regardless of whether the warehouse concerned supplies aircraft engaged in private aviation activities. Tax Alert 5

6 It will be clarified that, as a general rule, goods exempted from tax are not subject to the regulations on excise goods transported under a tax suspension arrangement or on the transportation and supply of excise goods released for free circulation. Fuel retailers will be affected by the following changes: º º natural gas fuel may only be supplied at filling stations; º º reports on the quantity of fuels supplied to end users must be submitted on a monthly basis, within a period of 12 rather than 5 days following the last day of the month concerned; º º filling stations must store fuel, with the exception of natural gas fuel and LPG, in tested and certified storage containers. For the purposes of reclaiming tax on tobacco products, the retail selling price of cigarettes, cigars and cigarillos will mean the lowest retail selling price published by the national tax and customs authority between the date of data reporting after such products are affixed with a tax stamp in Hungary or released for free circulation and the date of filing the tax reclaim application. The bill proposes a limit for the amount of excise duty that can be reclaimed by tax warehouses supplying vessels engaged in commercial shipping and by persons engaged in passenger rail transport or movement of goods by rail. According to the bill, the annual beer production limit up to which breweries are regarded as small breweries will be raised to 200,000 hectolitres. Changes related to accounting Accounting final amendment of tax authority findings made until balance sheet preparation The Accounting Act will be supplemented by a provision that the effect of tax authority findings accounted in a reporting year but amended finally by the competent authority or court by the balance sheet preparation date following the reporting year, must be included in the accounting of that reporting year. This provision must be applied first time to financial years starting in 2018, but may already be applied to the financial year starting in Derivative delivery transactions The bill stipulates that derivative delivery transactions must be accounted at the time of their closing and in accordance with the rules for spot transactions. Assets purchased in derivative delivery transactions must be revalued to fair value as at the date of recording (purchase) regardless of their classification. Revaluation must always be accounted through other income from or other expenses of financial transactions. This provision must be applied first time to financial years starting in 2018, but may already be applied to the financial year starting in Tax Alert

7 Deferring mandatory transition to IFRS for cooperative credit institutions According to an amendment of the Accounting Act effective from 1 January 2017, mandatory application of IFRS is deferred for the banking sector from 2017 to The current amendment introduces a less stringent rule for cooperative credit institutions and other credit institutions involved in the integration of cooperative credit institutions. Under the amendment, mandatory transition to IFRS is deferred from 2018 to 2019 for these institutions, with an option to apply IFRS to the financial statements for the financial year starting in Changes concerning corporate tax in connection with the transition to IFRS Applicability of depreciation calculated under IFRS If the amount of depreciation that can be taken into consideration in the tax base cannot be determined on the basis of Schedules 1 and 2 of the Corporate Tax Act, the depreciation calculated under IFRS must be considered for purposes of calculating the tax base. Changes concerning local tax in connection with the transition to IFRS IFRS 15 Revenue from contracts with customers taking effect The amending bill lays down the changes required due to the new standard taking effect on 1 January Considering that the regulation in effect earlier refers to IAS 18 Revenue and IAS 11 Construction contracts, which will be replaced by IFRS 15 Revenue from contracts with customers as of 1 January 2018, the relevant provisions needed to be amended to ensure consistency of reference. This change will enter into force on 1 January Tax base-adjusting item related to the transition to IFRS 15 Revenue from contracts with customers The regulations require a special tax base adjustment for the firsttime adoption of IFRS 15 Revenue from contracts with customers to ensure that the new standard will not result in double taxation or that taxpayers will not fail to include certain net sales revenues in their tax bases. This means that the tax base must be adjusted on transition for all items that must be considered as net sales revenues in the tax base at a different date under the new standard than under the earlier rules. This change will enter into force on 1 January Changes concerning the innovation contribution in connection with the transition to IFRS Clarification of the relationship between innovation contribution and local tax The amending bill clarifies the relationship between innovation contribution and local business tax for taxpayers applying IFRS. Taxpayers applying IFRS must determine their innovation contribution liability in accordance with the special provisions on tax base adjustment required for local business tax. It has become clear from the amendment that the rules on taxpayers obligation to make a one-time adjustment to the tax base in relation to the transition to IFRS will also be applicable to the innovation contribution. Taxpayers will be required to apply the current amendment to the tax year 2018, and will have an option to apply it to the tax year Therefore, for taxpayers adopting IFRS in 2017, it may be worth examining which rules offer more advantages for This change will come into effect 30 days after the bill s promulgation. Tax Alert 7

8 Contact Lőcsei Tamás, Tax and Legal Services Leader Tel.: tamas.locsei@hu.pwc.com Paul Grocott Tel.: paul.grocott@hu.pwc.com David Williams Tel.: david.williams@hu.pwc.com Máthé Dóra Tel.: dora.mathe@hu.pwc.com Burján Ákos Tel.: akos.burjan@hu.pwc.com Réti László Tel.: laszlo.reti@hu.pwclegal.com Antall György Tel.: gyorgy.antall@hu.pwclegal.com Mekler Anita Tel: mekler.anita@hu.pwc.com Deák László Tel.: laszlo.deak@hu.pwc.com Réti, Antall & Társai PwC Legal Tax & Legal Alert PwC Magyarország Issue 580 July 2017 Legal disclaimer: This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. If you no longer wish to receive Tax & Legal Alert, please write to the following address: tax.alert@hu.pwc.com 2017 PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.