2017 tax package proposal: personal income tax, KIVA, KATA and ART changes

Bill no. T/10537 for the Amendment of Certain Tax Laws and Act CXXII of 2010 on the Hungarian Tax and Customs Authority is already available on the Parliament’s website. The bill contains important changes regarding the Personal Income Tax (PIT Act).

From 1 August 2016, the definition of assignment and term of sport event will modify. The provisions of the bill also concern the rules of distance work and commute to work. The amount employers may pay tax free according to the government decree increases from HUF 9 to HUF 15 . The proposal also includes an extension of the group of dependents effective from 1 January 2017, thatpersons having a legal relationship in higher education. The rules relating to certain specified benefits and fringe benefits may also be applied to students attending dual training based on a student employment contract. The changes effective from 1 January 2017 concerning pension insurance mostly represent specifications of existing rules and reliefs for the eligible persons.

The rules concerning tax advance declaration and regulation of the method of determining the value applied for the acquisition of movable property would be supplemented also. According to the changes proposed, the Hungarian Tax and Customs Authority would also be able to include income from controlled capital market transactions in the tax return draft.

The changes concerning long-term investment accounts are mostly modifications specifying the content of former regulation. The capital increase of a company that is realized from unpaid profit shall not be regarded as income of the individual. The provisions taking into account lapse of time for purposes of income from the transfer of real property and property rights. The proposal would make the mobility housing support provided by employers exempt from tax and would extend the term of workers’ accommodation. The proposal integrates the definitions of equitable housing need, family members moving together, modernization and transformation ensuring accessibility for the disabled (previously regulated in a government decree) into Annex 1 to the PIT Act.

The 2017 tax law proposal includes important changes concerning the tax types KIVA and KATA. The amendment modifies the definition of the income of small taxpayer enterprises KATA (small taxpayers’ itemized lump sum tax). Some items are not considered in the future for the purpose of the HUF 6 million income cap applicable for KATA taxpayers.

The amendment changes the maximum and minimum limits regarding the headcount of employees (average statistical headcount) for which the enterprise may choose to pay taxes under KIVA. The proposal eliminates the requirement of proportioning for the enterprises starting their activities during the year in respect of the balance sheet total value limit applicable. The proposal will change the calculation of the tax base and modify several relevant partial rules as well. The proposal contains a relief regarding the use of loss carried forward, the rules relating to the payment of the tax advance change also.

Key Changes in the Act on the Rules of Taxation (ART)

Based on the tax law amendment three years of continuous operation will no longer be a precondition for becoming a reliable taxpayer for public limited companies starting from 1 July 2016. Moreover, public limited companies classified as reliable taxpayers will enjoy further benefits as the value added tax reclaimed by them will have to be refunded within 30 days starting from 1 January 2017. From 1 July 2016 in respect of the condition of reliable and risky taxpayer classification associated with the amount of the tax difference is that the total amount of the tax difference assessed in favour of the taxpayer shall be deducted from the total amount of the tax difference assessed against the taxpayer. As of 1 July 2016, risky taxpayers will be enlarged on the basis of specific considerations. These entities will first be classified as risky taxpayers in the course of the Q3 classification process.

As of the date of the enactment of the amendment if the taxpayer has failed to complete and return the KOCKERD questionnaire within the deadline the suspension and cancellation of the tax number rules will change. It is an important transitional provision that, prior to entry into force, for tax numbers finally cancelled due to the failure to submit the completed KOCKERD questionnaire, if the Registry Court has not yet declared the taxpayer to be terminated, then it is possible to request the withdrawal of the resolution on the cancellation of the tax number until 31 December 2016.

A new type of audit is introduced under the name of audit of the facts serving as the basis for a binding ruling. NAV will have an opportunity to conduct a specific audit to find out whether the facts serving as the basis for a binding ruling genuinely exist and thus whether such ruling is indeed binding on the tax authority. During this audit, NAV may request the taxpayer to submit any documents that were required to prove the existence of the facts described in the resolution containing the binding ruling. It is a key rule that the tax authority is obliged to issue a resolution after the completion of the audit in all cases, which will be binding upon NAV and the tax authority will not be allowed to deviate from it during any subsequent audits at the taxpayer. The tax law amendment proposed for 2017 contains an important transitional provision also in relation to the above type of audit.

Starting from 1 August 2016, an EKAER disclosure is required if non-hazardous goods are transported with a vehicle that is not subject to toll payment, but the total laden weight of the vehicle exceeds 3.5 tons. Starting from 1 August 2016, in cases where the quantity of goods notified to the EKAER system exceeds the actually transported quantity (or if the truck is completely empty) then a default fine up to 40 percent of the value of the goods not actually transported may be imposed. Currently, in order to ensure the identicalness of the goods, NAV may apply a seal if the taxpayer involved in the transport refuses to disclose the data associated with the EKAER number and the transport or if it is justified by enforcement proceedings or other risk factors. According to the proposed amendment, starting from 1 August 2016 it will be the haulier's responsibility to keep the seal intact.

The term of limitation applicable to tax debt is reduced from 5 to 4 years and the cancellation limits of uncollectable tax debt will change. For mortgage on property, NAV may refrain from the enforcement of the property if the tax authority's claim is not likely to be satisfied from the proceeds of the sale. In such cases, the taxpayer's property may be mortgaged.

As of 1 January 2017, the threshold for invoices subject to a recapitulative VAT statement will be further reduced. Instead of the former HUF 1 million, invoices equal to or higher than HUF 100 000 will need to be disclosed. As of 1 July 2017, the above disclosure will only apply to invoices issued in hard copy. From 1 January 2017, it will be possible to provide on-line access ensuring direct data queries to NAV in respect of the data content of invoices issued with an invoicing software. However, starting from 1 July 2017, all taxpayers will be required to provide real-time access and direct data queries for the tax authority.

The operator taxpayer already has a disclosure obligation in respect of automatic food and beverage vending machines. Starting from 1 January 2017, automatic vending machines must be equipped with an automatic control unit ("AFE"). The taxpayer will have a regular data disclosure obligation in this regard that will be implemented by the tax authority through direct data queries, similarly to invoicing software.

    The Newsletter contains general information. Therefore, the content of the Newsletter may not be regarded as professional advice or comprehensive information for decision-making. This information – due to its nature – may not address all details, especially all circumstances of a certain transaction. Although we used every effort for our Newsletter to be comprehensive, we cannot assume liability for the outlining and interpretation of the relevant regulations.

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