New special taxes in Hungary to improve state revenues
On June 4, 2022, the Hungarian government issued a decree introducing special taxes affecting several sectors, including banking, insurance, energy, telecommunications and airlines.
According to the decree, the government will impose special taxes from July 1, 2022 to overcome the financial difficulties triggered by the Ukrainian crisis. The objective of the new taxes is therefore to improve state revenues and the stability of the national economy. Below, we’ve summarized the key elements of the new taxes.
1. Special tax for banks
A special tax is payable by banks on their net turnover. The tax rate in 2022 is 10% and in 2023 it will be 8%.
2. New transaction rights
Banks and investment companies must pay a transaction fee after purchasing a financial instrument with an ISIN code issued by KELER Central Securities Depository Limited Liability Company. The rate of the transaction fee is 0.3% of the basis (i.e. the purchase price of the financial instrument credited to the securities account), but not more than 10,000 HUF per purchase . Investment services provided by the Hungarian State Treasury or the institution operating the postal clearing center are exempt from duties.
The decree further widens the scope of the obligation on financial transactions by making it applicable to providers of payment, credit and money lending, foreign exchange and foreign exchange intermediation services in Hungary by as cross-border services.
3. Special tax for the insurance sector
Insurers must pay the insurance surcharge for the period between July 1, 2022 and December 31, 2023. The surcharge is based on the amount of the insurance premium. In the case of certain affiliated companies (for example if the affiliation was created by demerger or separation after June 1, 2022), the tax base will be added together and the amount of tax payable will be allocated between them.
The rate of the additional tax varies according to the amount of the insurance premium of
- casco insurance, damage insurance and compulsory motor third party liability insurance
- in 2022 is between 4% and 14%;
- in 2023 is between 2% and 7%;
- insurance services in the branches of life insurance:
- in 2022 is between 2% and 6%;
- in 2023 is between 1% and 3%.
4. New taxes in the energy and mining sector
Producers of petroleum products (including MOL) will be subject to a tax based on the price difference between the average monthly purchase price of oil from the Russian Federation and Brent crude oil realized in 2022 and 2023. tax base will be either the price difference multiplied by the quantity of oil delivered from Russia and the applicable tax rate is 25%.
Electricity generators producing electricity from renewable energy sources and eligible to participate in the compulsory off-take/feed-in tariff scheme (KÁT) or the METÁR scheme will be subject to a new tax if they leave or do not fall under the above subsidy schemes. in 2022 or 2023. According to our understanding, the new tax is practically a complementary rule to the government’s decision at the end of May 2022 to prohibit subsidized producers from leaving these subsidy schemes and entering the free market. The ban left some loopholes in the applicable legislation potentially allowing producers to circumvent this prohibitive tax.
If an electricity producer becomes subject to the tax, it will have to pay taxes on the difference between the higher electricity prices available on the open market and the lower off-take or strike prices. The tax base will be the price difference multiplied by the amount of electricity produced with an applicable tax rate of 65%. The new tax will not apply to production units with an installed capacity of less than 0.5 MW.
The new law changes the rules for energy supplier income tax, commonly known as the Robin Hood tax. In 2022 and 2023, Robin Hood tax payers will also include bioethanol producers, producers of starch, starch products and sunflower oil producers. The Robin Hood tax rate is 31%.
Also amended are the rules regarding the mining royalty, which with respect to the extraction of crude oil and natural gas will increase significantly in 2022 and 2023. In addition, mining license holders are required to maintain the amount of resources natural resources extracted for these years at at least the same level as in 2021.
5. Tax imposed on the telecommunications sector
A new extraordinary tax has been introduced on telecommunications service providers. This turnover tax should apply to, inter alia, providers of telephone, internet and cable television services, but the range of taxpayers must be clarified in rules or guidelines more detailed implementation.
The relevant tax base will be the turnover of service providers in 2022 and 2023 respectively. The applicable tax rate will be
- 0% for turnover below HUF 1 billion;
- 1% for turnover above HUF 1 billion and below HUF 50 billion;
- 3% for turnover above HUF 50 billion and below HUF 100 billion; and
- 7% for turnover over HUF 100 billion.
6. New departure tax
A special tax will be payable by ground handling companies depending on the number of passengers departing from Hungary, except transit passengers. Although the subjects of this tax are the ground handling companies, they will naturally impose more tax on the airlines.
The rate of the new special tax will depend on the passengers’ final destination.
- 3,900 HUF if the passenger’s final destination is within the European Union, as well as Albania, Andorra, Bosnia and Herzegovina, North Macedonia, Iceland, Kosovo, Liechtenstein, Moldova, Monaco, Montenegro, United Kingdom, Norway, San Marino, Switzerland, Serbia and Ukraine;
- 9,750 HUF for other destinations.
In the retail sector, replacement taxes will be due in 2022 and new tax rates will be applied in 2023. During the tax year including 1 July 2022, taxable persons in the retail sector retail must pay a one-time replacement tax equal to 80% of annual income. amount of sales tax calculated on the basis of the tax due for the tax year 2021. The substitution tax is due no later than November 30, 2022. From the tax year beginning in 2023, the new sales tax rates will be:
- 0% after tax base [i.e. the net sales revenues of the taxpayer] not exceeding HUF 500 million;
- increased from 0.1% to 0.15% after the tax base exceeds HUF 500 million but does not exceed HUF 30 billion;
- increased from 0.4% to 1% after the tax base exceeds HUF 30 billion but does not exceed HUF 100 billion;
- increased from 2.7% to 4.1% after the tax base exceeds HUF 100 billion.
For 2022 and 2023, distributors in the pharmaceutical sector will be forced to pay a high tax rate of 28% for pharmaceutical products exceeding a producer price of 10,000 HUF instead of the current 20% tax. If the producer price of the pharmaceutical product does not exceed HUF 10,000, the tax rate will remain at 20%.
Other tax changes
The new rules also concern the tax on public health products levied on certain sweet and savory products and the vehicle tax levied on company cars, the rates of which will be increased. The Hungarian government is also increasing the rate of excise tax on several alcoholic and tobacco products.
However, the new decree does not contain any provision on advertising tax, although it was previously announced. It is assumed that this last tax will only be effective from January 1, 2023.