Page 3 - 20140114_PS-Newsletter_On-Changes-of-Taxation

PS Newslett er

14 January 2014

III Corporate income tax Donations
The period available for entities to utilize the tax
Non significant error allowance claimable for sport donations will be extended.
Taxpayers are no longer required to revise their previous The tax allowance can be claimed in the tax year of the
tax reports for tax discrepancies due to non significant donation and in the following six years. Therefore the
errors provided that the discrepancy is to the credit of the supporters’ risk of not being able to utilize the allowance
taxpayer. The discrepancy can be presented in the tax will decrease significantly.
year when the error is discovered. The list of beneficiaries of the supplementary sport dona-
tion has also been modified.
Allowable business expenses
The obligation to make supplementary donations will
In the future simple receipts (instead of an invoice for also be introduced for film and arts donations, and the
VAT purposes) for restaurant services paid with a credit period available for the utilization of tax allowances will
or debit card will be deductable for CIT purposes if the also be extended for 6 years.
service qualifies as business representation.
Transfer pricing
Tax base deductions New regulations clarify that transfer pricing rules shall be
Companies will be allowed to claim the R&D tax bene- applied not only for subscribed capital payments but also
fits unutilized by their related parties. As a pre-condition, for the non-monetary contributions made to the capital
the taxpayer has to possess a declaration issued by the reserve.
related party indicating the amount of direct R&D costs
incurred during the tax year and the amount available for IV Value added tax
tax benefit. Moreover, the R&D project itself has to be
connected to the main business activity. Tax date of periodic settlements

Participation exemption The regulations applicable to periodic settlements (‘con-
Share acquisitions as low as 10% (down from the current tinuous performance’) will change. The tax date of busi-
ness transactions subject to the rules of periodic settle-
30%) will be eligible for the participation exemption ment will be the closing day of the settlement period as
regime. The deadline to report such acquisition to the opposed to the currently applicable due date of payment.
Tax Office will be extended to 75 days (from the current Nevertheless, the current rules will remain in effect for
60 days). public (utility) service contracts. The new regulation will
Real estate holding company have to be applied for settlement periods commencing
from 30 June 2014. As the definition for ‘periodic settle-
th
When determining whether an entity in possession of ment’ will also be re-defined, it is advisable to review all
properties qualifies as real estate holding company or business transactions treated previously in compliance
not, the book value of the property will have to be con- with the rules of ‘settlement for a fixed period’ or ‘instal-
sidered instead of the fair market value. ment payment’ to ascertain they still fall under the rules
Small and medium enterprises of ‘periodic settlement’ also in light of the new concept.
The ratio of tax allowance available to SMEs regard- Subsequent reduction of the taxable amount
ing the interest paid on loans received after 1 January The amendments attempt to consolidate and simplify the
st
2014 in respect of the acquisition or production of tangi- treatment of changes subsequently made to the tax base
ble assets will be increased to 60% from 40%. Further- (e.g. due to discounts, price changes and other subse-
more, the range of tax base decreasing items available quent changes) by defining a general rule for the events,
to SMEs will be extended to include the acquisition cost which will no longer call for a self revision – replacing
of software licences. most of the previous itemized listing of eligible business

Place of business transactions.
A foreign entity shall be regarded as having a place of The possibility to account for the credit note in the period
of its delivery will also be introduced.
business in Hungary not only in the case of utilization,
but also in the case of sale of any real estate property. The regulation also specifies two new events when the
tax base can be reduced subsequently:
Losses in case of merger • credit notes issued at the end of the settlement period
Losses incurred by the predecessor in the tax year of the to settle the difference between the invoiced and actual
merger will be allowed to be first utilized by the succes- purchase value; in case of flat rate fee agreements
sor in the same year. This regulation is already applica- • money refunds provided in consumer incentive pro-
ble for 2013. grams.

On changes Of taxatiOn 3