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Emergency Tax Measures in Hungary in Response to COVID-19

Emergency Tax Measures in Hungary in Response to COVID-19

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Protecting workplaces and businesses is of foremost importance amidst fighting COVID-19. In order to so, Hungary – like most of other developed countries – also introduced numerous emergency tax measures in the past few weeks, as follows:

  1. Exemption from social contributions. Employers and employees in sectors most effected by COVID 2019 (hospitality, tourism, taxi, sport, etc.) are exempted from payment of social contributions. This means that qualifying employers are relieved of contributions of 19% on the gross salary of their employers, while their employees, as a general rule, should see a rise of their net salary with at least 15%. Given the emergency, however, in practice the distribution of the gains from the exemption might be up to the agreement between the parties to retain the workplace, at all.
  2. KATA relief. Hungary implemented a specific exemption from the so-called KATA (‘Fixed-rate tax of low tax-bracket enterprises’) in the concerned sectors. The scope of the exemption also includes hospitality, tourism, taxi, sport and construction industry services.

Both social contribution and KATA exemptions apply to businesses with at least 30% of their income from the specified sectors and temporarily, for periods between March – June 2020.

  1. Tourism development contribution. Taxpayers – restaurants and accommodation providers – are exempted from tourism development contribution of 4% for the period for periods between March – June 2020.
  2. Procedural rules. Enforcement of outstanding tax debts has been suspended indefinitely, until the end of the emergency plus 15 days.

Additionally, in accordance with the general rules taxpayers with liquidity problems can apply for payment facilitation (deferral or installments). The Hungarian tax authority declared their intention of taking greater account of those suffering the effects of COVID-19 most.

There have been already indications of additional sector specific taxes, for instance contribution required from banks and financial institutions. The details of those measure, however, are yet to be published. 

This is a busy period for tax developments with rapidly emerging tax and fiscal policy to be expected. Those measures will be crucial to many businesses directly impacting their day-to-day operations.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

KCG Partners at a Glance

KCG Partners is a Hungarian business law firm providing a comprehensive range of legal services to international and local clients seeking local knowledge and global perspective. The firm comprises business-minded lawyers with sector-specific expertise, creating value for clients by applying a problem-solving approach and delivering innovative solutions.

The firm has a wealth of knowledge in corporate law, M&A, projects and construction, energy, real estate, tax, employment, litigation, privacy and forensics, securitization, estate planning and capital markets.

To address clients’ regional and international concerns, the firm maintains active working relationships with other outstanding independent law firms in Central and Eastern Europe, whilst senior counsel Mr. Blaise Pásztory brings over 40 years’ of US capital market and fund management experience.

KCG Partners Law Firm is the result of the teamwork of passionate and talented lawyers guided by the same principles and sharing the same values: 

  • Our most valuable asset is our people. They are the engine of our business and the key to our success.
  • We push boundaries by looking for innovative solutions that can empower our clients to achieve greater results.
  • We place our experience, commitment and professionalism to your service.
  • We are driven by our vision to shape and lead the Hungarian legal market and become a first choice law firm in our practice areas.

Firm's website: http://www.kcgpartners.com