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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

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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