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The Threshold of Tax Exemption for Low Tax-Bracket Enterprises may be Increased in Hungary

The Threshold of Tax Exemption for Low Tax-Bracket Enterprises may be Increased in Hungary

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From 2019 the turnover threshold of tax exemption may continue to rise which would allow more micro and small business to issue VAT-exempt invoices in the framework of the low tax-bracket scheme. Tax-payer companies under the low tax-bracket will benefit most of the change, even though the regulation does not directly affect the legislation applicable on them.

The benefit of tax exemption is that a taxpayer can issue a VAT exempt invoice. The threshold of tax exemption was first increased in 2017 from HUF 6 million (2017) to HUF 8 million (2018). If the Hungarian Government’s deregulation proposal is upheld by the European Union, businesses could benefit a tax exemption up to HUF 12 million from 1 January 2019. 

Although the threshold was increased to HUF 12 million by the Hungarian legislation in 2017, for companies with private individual clients, the HUF 8 million threshold is applicable. In case of exceeding this limit, the companies’ service fee is still subject to 27% VAT. However, with the proposed change, the thresholds of tax exemption under the low tax-bracket scheme will coincide from 2019. 

It seems that those micro and small companies will benefit from this modification who are subject to the low tax-bracket scheme and who have private individual customers.

By Gabriella Galik, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa, and Asia Pacific. This positions us to help clients with their legal needs around the world.

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