Important Tax Changes Approved by Hungarian Parliament, Including Global Minimum Tax

Published: November 21 2023

Recently, the Hungarian Parliament approved a package of tax changes submitted by the government. These changes include modifications to personal income tax, the taxation of sole proprietors, the utilities tax, the advertising tax, and the adoption of electronic receipts. Additionally, the parliament voted to transpose the European Union directive on the global minimum corporate tax rate into national legislation.

The new legislation simplifies the rules on personal income tax and contributions. This streamlines the taxation process for sole proprietors and eliminates their previous classification as "quasi-companies."

Starting from 2024, communications networks will be exempt from the utilities tax and this tax will be completely rolled back from 2025. The suspension of the advertising tax will be extended for another year.

The legislation paves the way for the widespread use of electronic receipts. It also includes modifications necessary due to the termination of the double taxation avoidance treaty between the United States and Hungary.

In an effort to encourage public participation in lottery-like gambling games, the legislation exempts gambling prizes from personal income tax. Additionally, imports of certain artworks from outside the European Union will be subject to a preferential 5 percent VAT rate. Furthermore, bottled wine with protected origin, offered as business presents, will be exempt from tax.

The Hungarian Parliament also voted to adopt the global minimum corporate tax rate, as outlined in a European Union directive. This applies to companies with an annual turnover of more than 750 million euros recorded in at least two of the previous four years. If a company's total tax paid does not reach 15 percent of profits, additional taxes will be collected. Tax allowances will also be introduced for new research and development projects starting from next year.

These tax changes aim to simplify tax regulations, encourage public participation, and align Hungary with international standards for corporate taxation.

What tax changes were recently approved by the Hungarian Parliament? The Hungarian Parliament recently approved a package of tax changes which include simplifying rules on personal income tax and contributions, streamlining taxation of sole proprietors, exempting communications networks from utilities tax, extending the suspension of the advertising tax, adopting electronic receipts, modifying tax regulations due to the termination of the double taxation avoidance treaty between the United States and Hungary, exempting lottery-like gambling prizes from personal income tax, providing preferential VAT for certain artworks imported from outside the European Union, and exempting bottled wine with protected origin offered as business presents from tax. The Parliament also voted to transpose a European Union directive on the global minimum corporate tax rate into national legislation.

How did the Hungarian Parliament vote on the tax changes? The package of tax changes passed with 116 votes in support, 47 against, and 7 abstentions. The legislation on adopting the global minimum tax received a vote of 152 for, 6 against, and 12 abstentions.

Which companies will the global minimum tax rules apply to in Hungary? The global minimum tax rules apply to companies with annual turnover of more than 750 million euros recorded in at least two of the previous four years.

What is the purpose of the exemption of lottery-like gambling prizes from personal income tax? The exemption of lottery-like gambling prizes from personal income tax is an effort to encourage public participation in such games.

Will there be tax allowances for research and development projects in Hungary? Yes, tax allowances will be introduced for new research and development projects starting from next year.

When will communications networks be exempt from the utilities tax in Hungary? Communications networks will be exempt from the utilities tax starting from the beginning of 2024. The tax will be rolled back from the beginning of 2025.

Has the double taxation avoidance treaty between the United States and Hungary been terminated? Yes, the double taxation avoidance treaty between the United States and Hungary has been terminated, and as a result, tax regulations have been modified accordingly.

What is the purpose of extending the suspension of the advertising tax in Hungary? The suspension of the advertising tax has been extended to provide relief and support to businesses in the advertising industry for another year.

Will certain artworks imported from outside the European Union be subject to preferential VAT in Hungary? Yes, certain artworks imported from outside the European Union will be subject to a preferential 5 percent VAT rate.

Will bottled wine with protected origin offered as business presents be subject to tax in Hungary? No, bottled wine with protected origin offered as business presents will be exempt from tax in Hungary.