Full corporate tax exemption for reinvested profits

English2020. jún. 15.Növekedés.hu

The government is reducing the economic impact of the coronavirus pandemic, helping to save jobs and the economy. This tax exemption ensures that the amount of the development reserve can be written off from the entire pre-tax profit. It also contains tax relief measures that provide meaningful help to businesses only if they remain in force after the end of the emergency, the Ministry of Finance told MTI.

According to the statement by the Ministry of Finance, the government’s new investment incentive will make it possible for companies planning to invest in Hungary in the next four years to receive full corporate tax exemption for the reinvested profit.

Under the current legislation, the so-called development reserve can only be applied for half the amount of pre-tax profits. According to the new amendment, it can be used for the total profit, but the upper limit of HUF 10 billion must still be observed. All Hungarian companies can take advantage of the allowance, but the new rule will enable even multinational companies based abroad but operating in Hungary to decide not to take last year's profit abroad, but to invest it in Hungary. Now they have to make the decision, but they have four years to complete the investment, the ministry statement said.

Although the government extended the deadline for submitting reports till September 30, many companies are already working on closing their accounts for the last year. Therefore, so that the new rule can be applied as simply as possible already for the tax year 2019, a government decree amending the rules of the development reserve will also be published soon. This will allow the favourable new legislation to be applied as quickly as possible during the emergency, the statement claimed.

The bill also ensures that the government's decision to reduce the rate of the social contribution remains valid and effective even after the end of the emergency. ’Ekho’ and ’kata’ payers also benefit from the two percentage point reduction of the social contribution tax.

From July 1, the rate of the simplified public contribution (’ekho’), which affects 40,000 individuals, will be reduced to 15.5 per cent from the current 17.5 per cent. The social security cover of ’kata’ payers will also increase from July 1.

’Kata’ payers who pay a fixed tax of HUF 50,000 will have their social benefit base (the basis for calculating social security and jobseekers’ allowances) increased from HUF 98,100 per month to HUF 102,000. Those who pay HUF 75,000 per month will have it increased from HUF 164,000 to HUF 170,000 per month.

Also contains regulations for the refund of the extra tax imposed on banks due to the pandemic. In addition to their general public burdens, banks have been contributing to budget revenues with a special tax since 2010. This year, according to the calculations of the ministry, a total of more than HUF 270 billion will be paid by financial institutions through financial transaction fees and bank tax,

The extra tax of about HUF 55 billion will be paid by banks in addition to that.

Credit institutions will receive back this amount, as it can be deducted from the bank tax in five equal parts over the next five years, the Ministry of Finance said.