Hungary Considers Tax Package for 2013

Hungary Considers Tax Package for 2013

Recently the Hungarian Minister of National Economy submitted a bill introducing the 2013 tax package to the Parliament.

The bill is aimed to simplify the tax system, implement a flat rate of individual income tax, support families with children and resolve some tax and legal issues.

The key features of the bill are as follows:

1) Individual income tax. Social security and health service contribution fee.

The current gross-up rule, which is applied when income exceeds HUF 2,424,000 and implements a tax rate of 20.32%, will be removed. The tax rate will be flat and fixed at 16%.

Individuals being members of private pension funds will be able to enter into a contract with the Administration of National Pension Insurance for voluntary contributions. The health service contribution fee will be increased from HUF 6,390 to HUF 6,660 per month.

2) Corporate tax.

The definition of reported intangible assets now will also cover the self-created intangible assets. Thus, the current capital gains exemption will apply in case of self-created intangible assets as well. Currently the exemption applies only to acquired intangibles. Now the proceeds from the disposal of self-created intangibles will be tax exempted, if certain conditions are met (these are 60-day reporting obligation and holding for one year).

The definition of controlled foreign companies will be clarified. If a foreign state applies various tax rates, the smallest tax rate shall reach the 10% threshold (this 10% threshold will determine if a taxpayer is subject to low taxation).

50% of the increase made during last tax year in the debt owed by a company to its members will be added to the minimum corporate income tax base.

3) Value added tax.

In case of Intra-Community long-term (more than 30 days) leasing of transport to non-taxable persons the income will be taxed in the Member State of establishment of the customer.

4) Inheritance, gift and transfer tax.

Inheritance and gift taxes will be levied at 18%, except for acquiring immovable property: 9% tax rate will be applicable to real estate. Inheritance of an estate by the spouse will be exempted from tax.

The transfer tax will be levied at 4%. The property transferred to descendants or ascendants will be exempt from taxes.

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