The proposal doubles the level of revenue above which taxable persons have to pay 40 percent tax instead of the lump sum tax. The former 6-million-forint KATA cap increases to 12 million forints. In addition, the proposal shortens the period during which taxation under KATA cannot chosen again to 12 months (from 24 months).
According to the proposal a new obligation will apply to taxable persons as, if the small taxpayer enterprise has income from the leasing of real estate, it will have to report the acquisition of income from this activity within 15 days to the tax authority as in this case, it may not choose this form of taxation.
The proposal also changes the definition of small taxpayer in full-time employment. From 2017, the persons also in employment as a foster parent will not qualify as small taxpayers in full-time employment. According to the commentary, this change is necessary because pursuant to the Act on Social Security Services (Social Security Act) in force from 16 June 2016, employment as a foster parent will qualify as full-time employment the change was therefore required in order to harmonize the two regulations.
The proposal increases the level of revenue above which entities cease to be subject to KIVA from 500 million to 1 billion forints but does not change the 500-million-forint limit in terms of eligibility for KIVA taxation. In contrast to the rules currently in force, according to the proposal in the future the taxpayers not obliged to register with the court of registration may also register for KIVA purposes in paper-based form.
Local business tax
The proposal narrows down the application of the so-called tax base aggregation rule applicable for the local business tax base calculation of related parties exclusively to related party relationships established by way of separation after 1 October 2016. According to the commentary to the proposal, this is necessary because it is often difficult to determine which enterprises are related parties.
According to IFRS, the revenues and expenditures of discontinuing and continuing operations have to be presented separately. Accordingly, for the companies applying IFRS the proposed amendment will mean that (unlike above) they will have to consider all elements concerning the tax base, i.e. both continuing and discontinuing operations when assessing their local business tax base.
Income from insurance contracts will be introduced as a new tax base increasing item in the Act on Local Taxes. The commentary points out that not only the legal relationships based on traditional insurance contracts will fall in this category but also legal relationships containing certain insurance elements like, for example, the ones used the undertaking warranty obligations.
The proposal also regulates cases in which taxable persons converting to IFRS commit accounting errors. If the error relates to the period before the conversion and its accounting is different from the accounting prescribed in the Act on Accounting, the difference arising as a result of the correction of the error shall be taken into account for the assessment of the tax base of the tax year of identification of the error.
The proposal contains a specification regarding cases in which the local business tax amount payable before the conversion to IFRS is higher than the amount payable in the tax year of conversion. In this case (as the tax advance payable for the period after the conversion is identical with the tax amount paid for the period before the conversion),according to the proposal, from 1 January 2017, the tax advance amount will have to be assessed, declared and paid for the tax advance payment period concerned in two equal instalments.
The proposal changes the rules of duty payment obligation in respect of the real estate acquisitions of real estate trading companies. Instead of the 2 percent duty payable under the rules currently in force (representing a duty allowance of 50 percent),these entities would have to pay 3 percent duty if they undertake in a declaration submitted before the effective date of the payment warrant to re-sell or lease the real estate in question within two years. The duty on the acquisition of property will remain 2 percent if the transfer of ownership of the property is fulfilled (realized) by way of the re-sale or at the end of the lease term.
The proposal eliminates the 6 percent health contribution on interest incomes and deposit yields of long-term investment accounts and the 20 percent health contribution on accommodation services.
Social contribution tax
The provisions concerning social contribution tax will be extended. Subsequent payments and benefits which are made or granted with regard to periods in which the individual concerned was not insured under the Social Security Act will not be considered in the tax base. The new regulation makes it clear that the payment or benefit shall be treated identically with the incomes of the relevant period irrespective of the actual date of making the payment or granting of the benefit.
Vocational training contribution
The headcount that companies may take into account for the purpose of reducing their vocational training contribution liability will decrease from 45 to 30 persons. According to the commentary, this change may prompt businesses to integrate a higher number of their own employees in their training systems.