Who are exempted?
These taxpayers are exempted from the duty to supplement the advance corporate tax and the advance local business tax:
- whose annual sales income in the tax year preceding the current tax year did not exceed MHUF 100;
- upon termination;
- if the returns are filed on account of the completion of the company registration procedure (pre-company period)
- non-profit companies, foundations, and public trusts
IMPORTANT! All taxpayers, who are subject to innovation contribution are obliged to supplement this type of tax!
From the innovation contribution supplementation taxpayers cannot be exempted, not even those, who could be exempted from the duty to supplement the advance corporate tax and the advance local business tax (for example based on previous year’s sales revenue figures).
Steps to follow:
- Preparing a mid-year report, dated as the 30th of November.
- During the data calculation of December please pay attention to include all income, cost and expenditure figures of December and the business year of 01.01.2015-31.12.2015, regardless of financial performance (e.g. revenue or cost to be invoiced in 2016 concerning the year 2015), and the year end revaluation.
- Please be informed, that according to the Act on Corporate Tax, if the higher of the taxpayer’s profit before taxation or tax base is less than the 2% of the adjusted amount of the total income, the taxpayer must decide whether to submit a supplementary form to the tax return or to calculate the corporate tax on the basis of the 2% of the adjusted total income, that is, the profit minimum.
Adjusted total income:
+ Total income
- Purchase value of goods sold
- Value of mediated services sold
+ 50 % of the sum by which the daily average of loan from private
individual members exceed its opening sums of the current tax year
= Adjusted total income
Profit minimum = 2% of the adjusted total income
Important! From 1st of January, 2015. purchase value of goods sold and value of mediated services gold must not be deducted from total income
These taxpayers are exempted from the calculation on the basis of profit minimum:
- whose are in pre-company period;
- foundations and public trusts.
Those, who submit a supplementary form, can expect an inspection from the Tax Authority. The supplementary form will have to be filed with the tax authority by the same deadline as the final corporate tax return. The form must include information concerning the previous 3 business years.
- Preparing the return about the amount of the tax advance supplementation to the Tax Authority and the relevant local council(s).
- Transfer of tax advance supplementation.
If the supplementation of the advance tax is not paid to the Tax Authority by 20th December, the Tax Authority can be expected to impose a default fine at a rate of 20% of the tax shortfall, which is the difference between the actually paid tax advance - including the tax supplementation – and 90% of the actual year’s final tax liability.
In order to avoid this please ensure that all conditions for the transfer (authorized signatory of the Company entitled to proceed at the bank, the receipt by the bank of the transfer order, availability of the funds on the bank account) are met in time, but at the latest by 20th December. Please also bear in mind the opening hours of your bank while taking care of the bank transfer.
GROWTH TAX CREDIT – A NEW OPPORTUNITY YOU MAY OPT FOR EVEN WHEN MEETING THIS YEAR’S TOP-UP OBLIGATION:
Until the deadline set for compliance with the advance tax topping up obligation (20 December), eligible taxable persons have the option to make a statement to the effect whether they want to meet their tax obligation (in the current and following two tax years) in line with provisions applicable to growth tax credit.
Why is it beneficial?
In case of opting for this tax credit, when topping up corporate tax, there is no need to pay the amount of advance tax corresponding to the amount of growth tax credit. This amount needs to be paid only later in instalments, and you may even enjoy tax benefits! In terms of liquidity this provides businesses with an advantage, as they have significantly more time to meet their tax obligation.
Who can opt for this?
- In order to be eligible, the taxable status of affected taxpayers had to be declared three or more years before the current tax year, and
- the affected taxpayer could participate in transformation, merger or demerger in neither the current, nor in the three preceding tax years, and
- the part of the profit before taxation of the affected taxable person in the previous tax year exceeding profit before taxation in the current tax year (hereinafter: growth tax credit) amounts to or exceeds five times the absolute value of profit before taxation of the taxable person in the previous tax year.
It is not possible to opt for this opportunity in the tax year ending on the day preceding the start date of dissolution or liquidation, during the period of dissolution or in the last tax year (provided the business is terminated without a legal successor by means of other than dissolution or liquidation).
Can only taxable persons affected by the top-up obligation opt for this?
It is important to stress that, in case terms and conditions stipulated in the act are met, taxable persons not obliged to top their advance tax up to the amount of their expected tax for the year until 20 December can also opt for this opportunity.
In case of companies not obliged for top-up, the deadline for making this statement is also 20 December.
In the course of calculating the amount of growth tax credit, the following items cannot be taken into account:
- the amount of dividend received (to be paid),
- the amount of interest received (due),
- the amount of aids and benefits received in the tax year by the taxable person from their affiliate without a repayment obligation and the amount of permanently received funds,
- the value of assets received free of charge, the amount recognised in the tax year of liabilities taken over by the taxable person from their affiliate free of charge.
The declaration and advance tax payment obligation:
- Regarding the expected amount of growth tax credit, the affected taxable person assesses and declares the amount of advance tax until 20 December (either in the tax return about the top-up amount – if obliged for top-up, or in the specific form published by the tax authority – if not obliged for top-up).
- In the first and second quarter of the next tax year, the taxable person pays (in two equal instalments) 25% of advance tax corresponding to growth tax credit.
- In their corporate tax return the taxable person assesses and declares the amount of tax liability corresponding to the amount of growth tax credit and pays, in six equal instalments, the amount of tax corresponding to the amount of growth tax credit (excluding the amount of tax corresponding to negative profit before tax in the tax year preceding the subject tax year) in the third and fourth quarter of the tax year following the subject tax year.
If the taxable person opting for and applying the provisions applicable to growth tax credit is no longer covered by this act for any reason, effective as of the day on which the affected tax person is excluded from the scope of this act, the amount of growth tax credit not paid before will fall due in one amount.
There is another benefit the taxable person can enjoy with regard to growth credit:
Regarding investments realised by the taxable person during two tax years following the tax year in which the statement was made, the not yet due amount of their tax corresponding to growth tax credit may, at their discretion, be decreased by 19% of so called preferential investment value but by no more than 70% of the not yet due amount of tax corresponding to growth tax credit.
Preferential investment value:
It is the cost value of tangible assets not yet brought into use. However, this amount cannot exceed the product of growth in average headcount multiplied by HUF 10 million. Assets for which no ordinary depreciation can be calculated, or for which it is forbidden to calculate ordinary depreciation cannot be taken into account. Increase in staff must be calculated on the last of the tax year in comparison with staff on the last day of the previous tax year with the proviso that in the course of calculating reduction, expected increase in staffing level can also be taken into account during the year. If, however, reduction is opted for because of expected increase in staffing level, but on the last day of the tax year average headcount fails to be higher than headcount on the last day of the previous tax year, within 30 days of the commencement of the tax year following the tax year in which the tax reduction was applied, the taxable person repays, as corporate tax, 19% of the product arrived at by multiplying headcount reduction by HUF 10 million.
New jobs must be maintained for at least 2 years; otherwise the proportional part of the preference must be repaid. If, however, in the tax year in which the statement was made the taxable person opted for not using a tax benefit in connection with their investment, it is not possible for the taxable person to enjoy the above benefit.
Act LXXXI of 1996 on Corporate Tax and Dividend Tax, §26(11), and see footnote 7
4 Act LXXXI of 1996 on Corporate Tax and Dividend Tax, §6(5)
5 According to Act on rules of taxation the date of payment of tax shall be the day when the taxpayer’s domestic payment account is debited by the payment service provider carrying the account.
In all other cases, the date of payment of tax shall be the day when it is credited to the account of the tax authority, so in case of transfers from foreign accounts or by foreign currency payments please consider the longer timeframe of these bank transfers and initiate the payment by that time prior to the deadline to enable its arrival within the given deadline. /Act on rules of taxation section 37 (2)
Section 26/A of Act LXXXI of 1996 on corporate and dividend tax. Effective from 25 June 2015