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Sectoral special taxes in 2022

Similarly to 2010, the Hungarian Government has once again decided to impose additional taxes on certain profitable industries in order to support a balanced government budget, to maintain the utility cost reduction and to provide funding for the military.

However, the package (which, for the time being, is planned to cover two years, i.e. 2022 and 2023) surpasses previous expectations. The largest tax revenue is to be generated by the energy sector for an annual amount of HUF 300 billion, with the banking and retail sectors coming in second and third with planned tax revenues of HUF 250 billion and HUF 60 billion, respectively. The financial transaction tax and the insurance sector are tied in fourth place with projected tax revenue of HUF 50 billion each, followed by the telecommunications sector, airlines, and distributors of pharmaceutical products with planned special tax revenue of HUF 40, 30, and 20 billion, respectively. Advertising tax, to be reintroduced in 2023, is expected to generate a revenue of HUF 15 billion. In addition, public health product tax will also increase, just like an excise tax on alcohol and cigarettes and company car tax, for a total of around HUF 100 billion. The majority (HUF 700 billion) of the projected additional tax revenue of HUF 900 billion is to be spent on establishing a utility cost fund, while the rest is intended for the military fund.

Even the special tax revenue to be generated through these "excess profits" taxes won't be enough to stabilize the government budget, and a significant portion of the budget adjustment will come from curbing government spending, imposing purchasing limits, delaying investment projects, and lay-offs.

Let's look at the detailed tax rules published so far.

On a tight schedule

A mere one day after the Government declared a wartime state of emergency, news surfaced that "excess profits" taxes would be introduced, made possible by the Government's power to rule by decree as witnessed during the COVID crisis. The technical details are expected to be announced in a few days, and in some cases, the tax for the entire year could be collected in advance during the year, although, of course, certain special taxes will be payable monthly or quarterly.

Sectoral "excess profits taxes"

1. Tax on banks and insurance companies

The tax will be levied on the net interest income of banks (including various fees and commissions) and will be proportional to the interest margin.

The cap for the financial transaction tax will increase from the current amount of HUF 6 thousand to HUF 10 thousand, and from now on the duty will apply to securities transactions as well.

2. Tax on the energy sector

The additional tax will come from increasing mining fees.

3. Tax on the retail sector

The progressive tax rate of the retail tax on net revenue introduced in 2020 will increase: the 2.7% tax rate in effect since 1 February 2022 that applies to the part of revenue in excess of HUF 100 billion will increase to 4.1%, while the tax rate for the bracket between HUF 30 and 100 billion will change from 0.4% to 1%. The rate of tax imposed on the part between HUF 500 million and HUF 30 billion will remain 0.1%, while annual revenues below HUF 500 million will remain exempt from tax.

4. Tax on the telecommunications sector

A new tax will be levied on turnover.

5. Tax on airlines

The plan is to charge airlines 10 to 15 euros for each outbound passenger leaving Hungary as a form of tax.

6. Tax on the distribution of pharmaceutical products

The social security contribution payable to the government will increase.

7. Tax on the advertising industry

After being suspended in 2019 (the tax rate was reduced to zero per cent),the advertising tax is planned to be reinstated in 2023. The tax rate would be 7.5%.

Benefits of a healthy lifestyle

The details are yet to be published, and all we know is that the Government is planning to generate a revenue of around HUF 100 billion per year by fine-tuning existing taxes. In particular, increasing the chips tax and excise taxes on tobacco and alcohol products is on the cards.

An increase in company car tax has also been discussed in this regard, though this measure is not expected to encourage a large number of employers to switch to the healthier alternative of providing company bicycles. Another aspect of mobility that's worth mentioning is that the booming fuel tourism near the borders is coming to an end as only cars with a Hungarian licence plate number will be eligible for discounted fuel prices as of Friday.

The detailed rules on special taxes will be laid out in the soon-to-be-published decree.

tax consulting

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