According to the government decree published on 22 December 2020, two types of tax relief entered into force regarding the fiscal years ending in 2021 in Hungary:
- LBT rate is reduced to 1 % in the case of those municipalities where the effective tax rate is higher than 1 %.
- Tax advances are halved for 2021.
The reliefs are not only applicable for the operating SMEs but also for those who commence their activities following 1 of January with a financial year that differs from the calendar year. However, the tax relief does not apply automatically, it shall be requested by the companies.
Which companies are eligible for the LBT allowance?
The Government Decree partly sets its own conditions and partly refers back to the SME Act concerning the eligibility. Therefore, not every SME is entitled to use the LBT allowance.
- Tax allowance is available to the enterprises if they qualify SME according to the SME Act and their revenue or balance sheet total does not exceed HUF 4 billion. Thus, the Government Decree reduces the revenue and the balance sheet total limit comparing to the SME Act (where the revenue limit is EUR 50 million and the balance sheet total limit is HUF 43 million),excluding the 3.000 largest Hungarian taxpayers from the scope of beneficiaries. Consequently, the vast majority of SMEs will be entitled to the LBT allowance.
- The Government Decree does not provide headcount conditions. Therefore, the 250 staff limit is applicable pursuant to the SME Act.
- In case of enterprises having a partner or linked enterprises, the above figures shall be determined based on the consolidated annual accounts with regard to the LBT allowance.
Which financial years are affected by LBT relief?
- In the case of the operating companies, the financial years ending in 2021 have to be considered regarding the annual LBT liability. This could be a financial year that ends in 2021 but does not coincide with the calendar year or a normal financial year ending by 31 December 2021. Consequently, the LBT allowance is not applicable to the financial year ended by 31 December 2020 and to those which ended in 2020.
- The allowance concerns both the LBT advance which is due in 2021 based on the tax liability of 2019 and the one calculated under the tax liability of 2020.
The companies which commence their activities with a financial year that differs from the calendar year are eligible for the LBT allowance in 2021.
How should we calculate?
- The above-mentioned limits shall be determined on the basis of the annual account/consolidated account available on 1 January 2021 (it is the account for 2019 in general). In the lack of the above account, the estimated figures shall be applied.
- In the case of the companies which were established newly or following 2019, the available business plan, records, estimated figures have to be considered.
How can we claim the LBT allowance?
Attention! Apart from the above-mentioned conditions, the companies have to comply with difficult cumulation and other rules. Even if they meet the criteria, the tax allowance does not apply automatically.
The claims must be submitted to the respective local tax authority by 25 February 2021 on the form of 21NYHIPA.