State of emergency declared in Hungary:
I. 11.03.2020. - 17.06.2020.
II. 03.11.2020. –
1. Tax payment relief for the most affected sectors
Supported main activities:
To compensate disbursers engaged in a supported main activity, they
Supported main activity shall be the activity which forms major part of the disburser’s or small business taxpayer’s income in the six months preceding the government decree, but at least 30% of its income.
To claim the benefits disbursers shall pay wages according to employment contracts already in force and do not terminate them by dismissal in November 2020 pursuant to the Labour Code.
The precondition of the benefit is that:
2. Wage subsidy
Disbursers with supported main activity (listed above) may also apply for wage subsidy up to 50% of their employee’s gross wage under the following conditions:
Employers shall submit their applications for wage subsidy at the government office of their seat or establishment. The government office shall assess the applications within eight working days. Wage subsidy can only be granted for November 2020.
3. Provisions relating to accommodation services
The Government pays compensation to accommodation service providers up to 80% of the net income calculated from bookings registered at National Tourism Data Supply Centre not later than on 8 November 2020.
Beneficiary main activities:
The compensation shall be subject to the condition that
Personal Income tax
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government had announced new economic measures in November 2020 related to the second State of emergency.
The government had created new, flexible rules around working from home. Employers and employees can temporarily reach agreements independent of certain aspects of the existing labour code. Up to a maximum of 10% of the minimum wage, HUF 16100 (EUR 45), can be given to employees to help with the additional costs of working from home, such as higher utility expenditure. This is not compulsory, however.
Social Contribution rate was reduced from 17.5% to 15.5% as of 1 July 2020. Social Contribution will not be levied on benefits paid to Széchenyi Holiday Card by 31 December 2020, so these benefits will only be subject to 15% personal income tax. The overall benefit amount that can be paid with preferential rate is raised from HUF 450,000 to HUF 800,000 in 2020 with the following allocation: HUF 400,000 to the accommodations account, HUF 265,000 to the food and beverages account and HUF 135,000 to the recreational account. The overall benefit amount that can be paid with preferential rate is raised from HUF 200,000 to HUF 400,000 for State Institutions in 2020.
Guests shall not pay Tourist Tax for the remainder of 2020, but hotels’ reporting obligation remains in effect (without payment obligation).
SZÉP card incentive
From the date of entry into force of the decree until 31 December 2020, the benefits granted to the SZÉP card will be taxed differently and the annual limits will also change.
The overall benefit amount that can be paid with preferential rate by State Institutions in 2020 is the following:
a) HUF 400,000 per year, if the employee's employment lasts throughout the whole year;
b) the proportion of the amount of HUF 400,000 in line with the number of days spent by the employee with the given employer in the tax year on which the benefit is based, in case the employee's employment lasts only part of the year;
c) HUF 400,000 per year, if the employment of the individual is terminated due to the death of the individual.
The overall benefit amount that can be paid with preferential rate by other employers in 2020 is the following:
a) HUF 800,000 per year, if the employee's employment lasts throughout the whole year;
b) the proportion of the amount of HUF 800,000 in line with the number of days spent by the employee with the given employer in the tax year on which the benefit is based, in case the employee's employment lasts only part of the year;
c) HUF 800,000 per year, if the employment of the individual is terminated due to the death of the individual.
The employer does not pay social contribution tax on the amounts qualified as fringe benefits transferred to the SZÉP card between 22 April and 31 December 2020.
The amount of HUF 800,000 can be divided between the individual pockets in order to qualify the given amount as fringe benefit as follows:
a) to the accommodation sub-account of the SZÉP card up to HUF 400,000 per year;
b) to the food and beverages sub-account of the SZÉP card up to HUF 265,000 per year;
c) to the recreational activity sub-account of the SZÉP card up to HUF 135,000 per year.
The amount provided in excess of the limit is taxed as specific benefit.
Cash-flow Savings via Development Reserve
In series of COVID-19 measures the Hungarian financial administration had introduced favourable amendments to the so-called development reserve incentive.
Accordingly, whilst previously the amount of development reserve (capped at HUF 10 Billion) tied down by taxpayers for future investment could be offset against 50% of their pre-tax profits now this limit has been dismissed for any corporate tax declaration periods started after 1 January 2019 retrospectively.
The advantages of setting up a development reserve that is deductible from pre-tax profits up to HUF 10 Billion are twofold since by this means corporate taxpayers can significantly reduce:
Even if it is only a possibility for deferring corporate tax liability because the value of investments put into operation from development reserve cannot be expensed for future tax purposes, these more favourable rules on development reserve provide for excellent opportunity even for significant cash-flow savings which appears very helpful in these critical days.
Employment scheme for reduced working time
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government had announced an economy plan in April to maintain jobs in companies facing difficulties due to the COVID-19 outbreak. The subsidy was available from the 16th of April till 31st of August. The original regulation was amended making it significantly easier to apply for and administer the job retention subsidy.
According to the modified regulation the reduced-time employment subsidy was available at the joint request of the employee and the employer, at the competent government office where the employee is employed.
Only one application per employee could be submitted on the standardized form during the so-called emergency situation or within 1 month after the emergency situation ended.
The basic criteria of the subsidy was that the employer and the employee agree on reduced working hours and – if the reduced working time exceeded half of the working time under the employment contract prior the amendment – on individual development time beyond the reduced working hours.
Subsidy could be requested if the part-time work reaches at least 25% of the working time but could not exceeds 85% compared to the prior employment contract calculated in a three months average.
The employer could submit an application together with the employee if
The subsidy was available for employment, including distant-working, and home-office, employees working in allocated cumulative working hours and for hired labour force as well.
The benefit could not be paid for unpaid leave.
If the reduced working time did not exceed half of the working time under the employment contract prior to the amendment, the employee and the employer might agree on individual development time. If it exceeded, an individual development time must have been agreed. In practice, that may meant that if an employee had been originally employed for 8 hours and further employed for 6 hours, it was mandatory to agree on an individual development time of 3 months. If, on the other hand, a worker has been originally employed for 8 hours and further employed for 2 hours, then individual development time was not mandatory, but an option. Trainings for the individual development time could be organized within two years of receiving the subsidy.
In respect of the same employment relationship, the employee may not receive other state or EU funded part-time employment related incentive, nor may the employer receive job-creating, job-maintaining or R&D headcount employment incentives.
The monthly subsidy amounted to 70% of the base salary and reduced by personal income tax advance and contributions. The maximum base that could be taken into account was twice the mandatory minimum wage reduced by taxes and contributions in force at the time of application. Thus, the maximum amount of the subsidy could be HUF 112,418 per employee per month (HUF 214,130 * 75% * 70% = HUF 112,418).
Employment scheme for research and development employees
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government had announced an economy protection planin April, with a focus on maintaining research and development jobs. The original regulation was amended by Government Decree 141/2020. (IV. 21.). The subsidy was available from the 16th of April till the 31st of August.
According to the modified regulation if an employer employed R&D employees, one subsidy application per corporate site may could be submitted to the government office (defined by the geographical location of the employer’s headquarter/registered site) during the so-called emergency situation or within 1 month after the emergency situation ended.
The subsidy may have been used for a period of max. 3 months after the submission of the application, for max. HUF 318,920 per month per R&D employee, which was paid monthly posteriorly. If the employee's monthly gross salary was less than HUF 670,000 on the date of the declaration of the emergency situation, the maximum subsidy amount may have been applied according to the ratio of the employee's monthly gross salary and HUF 670,000.
An important provision was that no other job-creating, job-maintaining or reduced-time employment support could have been claimed for the same employee in addition to the wage subsidy for R&D employees.
Social security incentives
Modified social security rules was applied for the period of March-June 2020 to the following sectors:
The rules for social security contributions in the above sectors had been amended as follows:
The disclosure deadline of annual financial report was postponed to 30 September 2020. As a result, the deadline for annual tax returns related to these financial statements was also postponed. The annual financial report deferral did not apply to taxpayers of public interest.
Corporate Income Tax
Corporate Income Tax return filing (and tax paying) deadline was postponed to 30 September 2020. Taxpayers didn’t have to pay corporate tax advance in accordance with the tax advance obligation set in the latest tax return until the tax return for 2019 was filed. A taxpayer could request a reduction in the tax advance payments (before these became due) if the taxpayer calculated that the projected tax for the tax year beginning in 2020 did not reach the amount of the tax advance. The same applied to Small Enterprise Tax advance, Energy Suppliers’ Income Tax advance, Innovation Contribution advance.
Local Business Tax
Local Business Tax return filing (and tax payment) deadline was also postponed to 30 September 2020. However, taxpayers still had to pay tax advance by 15 September 2020. If the taxpayer did not submit annual Local Business Tax return by 15 September 2020, thereby did not declare an advance payment amount, the amount of the previously declared business tax advance must have been paid. A taxpayer could request a reduction in the tax advance payment (before it became due) if the taxpayer calculated that the projected tax for the tax year beginning in 2020 did not reach the amount of the tax advance.
Small Enterprise Tax
Small Enterprise Tax return filing (and tax payment) deadline was postponed to 30 September 2020. For details of tax advance payment obligation, please see the section on Corporate Income Tax. Small Enterprise Tax rate is reduced from 12% to 11% as of 1 January 2021.
Taxpayers' reliable tax classification could not be revoked due to default payment of taxes during the state of emergency (or within 30 days thereafter).
Taxpayers could request tax payment reliefs due to the pandemic:
Road transporters did not have to pay risk guarantee for their Electronic Public Road Trade Control System (“EKÁER”) reports until the thirtieth day after the end of the state of emergency (17.06.2020.), and previously paid guarantees will be refunded.
Software review and on-site inspection did not need to be performed for online cash registers and vending machines during the state of emergency. These activities should have been carried out within 120 days of the end of the state of emergency (17.06.2020.).
Employees on unpaid leave are still entitled to public health care. The HUF 7,710 health care contribution will have to be paid by the employers as of 1 May.
Simplified lump-sum taxation amendments
Special rules were applicable for entrepreneurs who opted for simplified lump-sum taxation (known as ‘KATA’ in Hungarian). Based on the amendments such entrepreneurs were not obliged to pay lump-sum tax in the March-June 2020 period.
Simplified decision-making procedures for companies during the COVID-19 epidemic
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government had announced a new government decree (Government Decree No. 102/2020. (IV.10.) that provided generally applicable flexible rules on the decision-making procedures for the companies.
The purpose of the regulation was to simplify the decision making process, to provide alternative decision-making methods instead of personal meetings (i.e. written decision-making, or holding meetings through electronic devices) even if such methods had not been previously regulated in the governing documents of the company.
The regulation applied to all legal persons regardless of their corporate form (associations and foundations as well), however did not apply to those legal persons, that already had implemented sufficient regulation on written decision-making or holding meetings through electronic devices prior to the outbreak of the epidemic, and consequently were able to operate without breaching the curfew restrictions.
The regulation applied to all types of decision-making bodies, including general shareholders’ meetings, management meetings and supervisory board meetings as well.
If the alternative decision-making methods were of no help for securing the continued operation of a company, the company’s management may have taken over the following decision-making competences from the general shareholders’ meeting under certain limitations:
However, the management’s decision-making authority was limited in multiple ways, e.g. amending the articles of association, decreasing the registered capital of the company, or terminating the company without legal successor were excluded from the management’s decision-making options. Furthermore, shareholders having majority influence may have prevented the decisions of the management in any of the above listed matters by way of written objection. Also, the supreme body may have amended or annulled the decisions made by the company’s management upon the upcoming meeting of the supreme body convened until the 90th day following the termination of the state of emergency (17.06.2020.).
Suspension of procedures during the first sate of danger
Pursuit and termination of private entrepreneurial activities