Finance Ministry releases new tax package, special tax would also be rewritten

The Finance Ministry's draft already contains the detailed rules for the two-step doubling of the family tax relief, which the government has promised previously. As the draft shows, depending on the number of dependants, the family allowance would rise

• to HUF 133,340 for one dependent,
• HUF 266,660 for two dependants
• and HUF 440,000 per month of eligibility for three or more dependants.

If the dependent is permanently ill or seriously disabled, this amount is increased by a further HUF 133,340.

Under the current rules, the monthly allowance is HUF 66,670 for one child, HUF 133,330 for two children and HUF 220,000 for three children.

The ministry has also attached a separate impact assessment sheet to this passage, according to which this item will impose a total burden of HUF 901 billion on the budget in the period 2025-2028.

The rules on the taxation of self-employed persons and farmers would also change under the draft Finance Ministry proposal: the proportion of expenses deductible from income would vary for self-employed persons and farmers, depending on the activity they carry out.

For example, the expense ratio for both entrepreneurs engaged exclusively in retail activities and farmers will be 90%.

The amendments also include a new tax option for those carrying out catering activities, whereby

they can opt for a flat-rate taxation for up to three properties, provided that these properties are private accommodation.

Another important element is the new regulation on the tax exemption of listed buildings, according to which

the minister responsible for the protection of cultural heritage will issue a decree establishing the tax exemption of income from the sale of listed buildings.

Extra profit tax rules would also be revised

The draft also repeals a paragraph of the previous government decree on extra-profit taxes, under the provisions of which the financial transaction tax was based on the amount of cash payments exceeding HUF 50,000 initiated through the institution operating the Postal Settlement Centre.

Under the new draft, this will change and will apply to cash payments made through the Postal Settlement Centre for amounts exceeding HUF 20,000.

Likewise, the decree on the different application of certain provisions of the law on social contribution tax, which provided for special rules during the emergency, in particular in the light of the armed conflict in Ukraine and its consequences, would also be repealed. The decree originally amended certain conditions of employment, such as the definition of entry into the labour market, and provided for various benefits for workers.

Then, the relief - which would now be phased out - was that Hungarian citizens with up to 92 days of insurance within 365 days of entering the labour market were covered by the social contribution tax. Importantly, the duration of social benefits, such as childcare allowance, did not count towards the period of compulsory insurance. A further concession was that during the first year of beneficiary employment, the benefit to the employee was based on gross wages, which was 100% of the minimum wage, while for the following six months of employment the benefit was 50% of the minimum wage - this would be abolished now.

Tax authority operations would also be overhauled

Changes affecting the organisation of the National Tax and Customs Office (NAV) would mainly introduce new rules in the areas of redress procedures, payment discounts, and administrative and law enforcement tasks.

One important change would be that

instead of the Appeals Directorate, the Central Management would act as the superior body for certain large payment discounts exceeding HUF 1 billion. In this way, the assessment of large payment reductions would be directly in the hands of the central authorities.

In addition, the NAV would be given new tasks in the areas of road transport control and metal trade, and would also be responsible for the control of cash entering or leaving the EU.

It is proposed that in the case of offences falling under the remit of the NAV investigating authority, the tax authorities would work more closely together, including the use of sniffer dogs when searching private homes. The video recordings made could also be used for educational purposes in a non-personally identifiable way, which could provide new tools for training of law enforcement staff.

It is also proposed that personal data from the EU Customs Information System could be retained for up to five years, with a maximum of two additional years in exceptional cases.

Customs procedures to be revamped as well

The amendments to the law on the implementation of EU customs law affect customs procedures and related rules on several points. They also affect the

management of confiscated means of transport, which may be transferred to law enforcement agencies instead of being sold, provided that the conditions are met.

Businesses that meet certain conditions, such as not being in debt to the customs authorities and not being in liquidation, may be exempt from the obligation to insure for VAT. Firms applying for such exemption must comply with these conditions on an ongoing basis and the authorisation issued by the customs authorities will be valid for an indefinite period.

The legislation also specifies the content of the audit reports, in particular the name and signature of the auditor and electronic authentication. Other amendments concern excise duty and the assessment of duty deficits, as well as the rules on publication on the customs website, which the legislator intends to make more transparent.

Audit rules to be rewritten too

The amendments concerning accounting and auditing aim to further strengthen the financial transparency and the legitimate functioning of companies, in particular with regard to sustainability reporting. The changes to the law clarify the audit and disclosure requirements on several points and introduce new rules on the verification of sustainability reports.

One important new feature is that a third party can initiate a legal supervisory procedure before the company court if a company has failed to comply with its filing and disclosure obligations, including audit obligations. Another new rule is that

any contractual provision requiring a company to choose a specific auditor or audit firm, thereby limiting the choice of the company, is considered null and void.

In the area of sustainability reporting, the supreme body of companies is obliged to choose a member of the Chamber of Auditors who is certified in sustainability if the sustainability report for the financial year is mandatory or voluntary. If an audit firm provides assurance in relation to the sustainability report, a specific, personally responsible Chamber member auditor must also be appointed.

Furthermore, for companies required to prepare a sustainability report, members with at least 5% of the voting rights may request that another member auditor of the Chamber prepare a report on certain elements of the sustainability report. This proposal may be submitted to the supreme body, which will provide additional transparency under the draft legislation.

To comply with EU directives, the law amends the size criteria for micro, small, medium and large enterprises and increases certain financial thresholds, such as the ceilings on total assets and turnover.

Another law governing auditing is also changing, with particular attention being paid to the possibility for the public oversight authority to cooperate with other authorities in its procedures, if necessary.

Auditors of public-interest entities will be required to inform the authorities annually of their activities, in particular in relation to the examination of sustainability reports.

The new rules also allow for court actions to be brought if there are grounds to terminate the engagement of an auditor or audit firm. Finally, by 31 March, the public oversight authority will publish the quality control questionnaires for audit engagements in the previous financial year, which will be used in the quality management systems of audit firms.

Amount of goods allowed in luggage also changes

A detailed amendment regulates the exemption from VAT and excise duty of imports of goods contained in travellers' personal luggage and clarifies some related concepts and provisions. In part, these are not new, but simply codify the system already in place.

The first important change concerns the exemption of non-commercial imports. The exemption applies to imports of an occasional nature where the imported goods are for the personal use of the traveller or a member of his family or for the purpose of making a gift. The quantity and nature of the imported goods must not be such as to indicate that they are imported for commercial purposes and the exemption can be claimed once a day. A special rule applies to residents and workers in the border area and to the crew of vehicles coming from third countries.

The exemption for these categories of persons applies only if they can prove that they have crossed the border zone or do not return immediately.

The new rules on tobacco products will determine how much combustible tobacco products can be imported duty-free. For air travellers this is 200 pieces and for other passengers 40 pieces.

The tax laws include clarifications on the definition of border zones and workers in border zones.

A border zone is an area which may extend up to 15 kilometres from the border of an EU Member State, while border workers are persons who have to cross the border regularly in the course of their work.

The amendments to the excise duty law concern, among other things, fuels and diesel used by farmers. The definition of fuel and other energy products has been clarified, including new types of fuel such as HVO, which is made from plant or animal oil. In addition,

a new possibility for rail freight operators to reclaim electricity tax used for traction and shunting (as previously announced).

In addition, under certain conditions, farmers can claim back 90-90.5% of the tax on diesel used for agricultural, forestry or fisheries activities.

Cover photo (for illustration purposes onyl): Getty Images