The Hungarian government proposed several tax amendments for the year 2016. The proposal is currently awaiting acceptance by the Hungarian Parliament. Below we have summarized selected changes. Further, the increase of the minimum share capital of limited liability companies will become effective in 2016.
Reliable and unreliable taxpayers. As of 1 January 2016, the terms “reliable” and “unreliable” taxpayer shall be introduced. Accordingly, full compliance with the tax legislation (reliable taxpayer) would trigger favorable treatment (e.g. with respect to the duration of potential tax audits and VAT reclaims as well as the amount of potential tax penalties). In comparison non-compliance (unreliable taxpayer) would trigger a stricter treatment.
A taxpayer would qualify as a reliable taxpayer if the following criteria are entirely met:
- the taxpayer is operating or is registered for VAT purposes for at least 3 years continuously,
- the tax authority did not assess a tax shortage exceeding 3% of the total taxes levied from the taxpayer during the current tax year and the 5 previous tax years,
- the state tax authority did not initiate a legal enforcement procedure (excluding the transfer between tax accounts and exercising retention rights) against the taxpayer and the taxpayer has not been subject to bankruptcy, liquidation or cancellation procedure during the current tax year and the 5 previous tax years,
- the taxpayer does not have an outstanding tax payment liability exceeding a net amount of
HUF 500,000 (approx. EUR 1,600) on the first day of the affected quarter,
- the taxpayer has not been subject to a tax number suspension or cancellation procedure and the taxpayer has not been placed under an enhanced tax authority supervision during the current tax year and the
5 previous tax years,
- the tax authority did not impose a default penalty (due during the 2 years prior to the current tax year) more than twice on the taxpayer.
Tax registration procedure. Several rules for the tax registration procedure shall become stricter. For example, the scope of individuals investigated during a tax registration procedure shall be broadened to also include the company director and every board member of the affected company. In addition, the period subject to the investigation shall be extended and it also shall be investigated whether the respective individual is permitted to act as an executive officer of the company.
Increased minimum share capital. With the new Civil Code which entered into force on 15 March 2014, the minimum share capital of Hungarian limited liability companies was raised to HUF 3 Mio. (approx. EUR 9,600). In this respect, a two-year grace period was granted by the legislator to companies existing at that time, allowing them to comply with this obligation. Accordingly, companies with a share capital below HUF 3 Mio. shall increase their share capital to HUF 3 Mio. before 15 March 2016; at the same time, they shall pass a decision on continuing operation under the Civil Code and shall amend their articles of association accordingly. Should they not wish to do so, they have the option to transform the company into a different legal form, merge with another company, or terminate the company without succession. The registration of mandatory amendments effected to ensure compliance with the Civil Code is exempt from procedural duties and fees, provided that it involves only the decision to continue operation in accordance with the provisions of the Civil Code, or only the increase of the share capital in accordance with the new provisions of the Civil Code. The fees for the registration of any other changes are subject to the general rules.
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