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Expected Changes on Local Business Tax

Expected Changes on Local Business Tax

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The National Competitiveness Council held a meeting on 4 February 2020 about the possible future changes of the local business tax.

Mihály Varga, Minister of Finance outlined that there is a strong need for simplification and reduction of local business tax, which has not changed significantly since its introduction in the early 1990’s. According to the Council’s proposal, the amendments could result in an increased number of investments and on the long term it could lead to the decrease of territorial inequality. This is expected to be achieved though decreasing the tax rate of the local business tax, thus the overall tax burden, while implementing incentives for further research and development measures.

Mihály Varga stated that there is no decision on this specific topic yet, however, one of the biggest possible change would be from January 2021 the abolishment of the obligation of the advance payment in the last month of the tax year. This measure solely could result in the expansion of investments and would strengthen efficient businesses, as it would help the cash-flow status of these organizations. A possible further change would be that five times of the amount spent on research and development would be deductible from the tax base, as well as depreciation.

The proposed changes would affect at least 850,000 Hungarian businesses positively and at least one third of the municipalities negatively. The latter are concerned, since the primary income of municipalities is local business tax. According to the proposal, the Ministry of Finance will initiate consultations with the larger local municipalities to discuss the details.

By Gabriella Galik, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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