Next year the small business tax (KIVA) will become even more favourable: its rate will decrease to 11 percent; its eligibility limit will triple; and the Finance Ministry will provide a KIVA calculator to help businesses decide about this form of taxation.
State Secretary for Tax Affairs Norbert Izer said that according to calculations by the ministry more than 70-80 percent of businesses eligible for this tax construction, i.e. tens of thousands of companies, would benefit from choosing KIVA.
Most tax advisers promote KIVA to their clients as a new success story in taxation, which could reduce the tax burden on employment by more than 30 percent
Norbert Izer said.
KIVA is almost certainly the best choice for businesses whose personnel costs are expected to be higher than the profit or whose profit will be ploughed back into the business.
With the help of a KIVA calculator, businesses can work out in 10 minutes whether it is worth choosing KIVA, the most competitive form of tax in the European Union, the state secretary said.
The number of businesses paying KIVA instead of corporate tax was almost 53,000 on October 30, he added.
The state secretary also noted that
next year this type of tax will become even more favourable not only because of the reduction of the tax rate from 12 to 11 percent, but also because of a Finance Ministry proposal that will increase the eligibility limit of the balance sheet total from 1to 3 billion, and the maximum yearly revenue from 3 to 6 billion forints.
The 11 percent KIVA substitutes for corporate tax (9%), social contribution tax (15.5%) and vocational training contribution (1.5%) liabilities and at the same time leaves the generated profit within the businesses without further tax liability.
These features make KIVA the most competitive type of tax in the EU, encouraging investment and employment, Norbert Izer pointed out. The choice of KIVA is worth considering for companies with significant personnel costs, such as businesses operating in IT, engineering, consulting, education and healthcare, as well as companies ready to grow by ploughing back their profit into the business.