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