Four of the Economy Protection Action Plan’s seven points have already taken effect. The reduction of the rate of the small business tax (kiva) and the VAT on hotel and accommodation services will alleviate the burdens of businesses from 1 January 2020. Rules relating to the simplification of taxation, too, will enter into force, with the proviso that the Ministry of Finance will start assisting businesses affected by the phasing out of the simplified tax of businesses with the changeover already from the end of September, Minister of State for Tax Affairs Norbert Izer told the Hungarian news agency MTI.

The Hungarian economy has performed well recently: The rise in the GDP has been several times that of the EU average; last year and also in the first two quarters of this year, the growth rate was above five per cent. The goal of the government is to ensure that the Hungarian economy’s performance exceed the EU average by minimum two percentage points also in the long run; this is why they developed the Economy Protection Action Plan, the Minister of State stressed.

He recalled that the rules relating to the extension of development tax benefits and the elimination of the requirement of preliminary tax replenishment entered into force on 24 June.

Regarding the elimination of the mandatory preliminary replenishment of tax liabilities, he highlighted that this change will improve the situation of some 40,000 businesses as they will be able to use a sum of HUF 150 to 170 billion for their own purposes for five months longer. From now on, the businesses concerned will not be required to make a tax advance payment on 20 December; they will be required to pay the totality of their tax liabilities five months later, in May, simultaneously with the preparation of their tax returns.

At the same time, with the extension of the development tax benefit, even more investments could be implemented in Hungary as from 24 June the investment limit was reduced from HUF 500 million to HUF 300 million in the case of small businesses and to HUF 400 million in the case of medium-sized enterprises.

Mr Izer also spoke about another two points of the Economy Protection Action Plan which took effect on 1 July. The suspension of the advertising tax until 1 January 2023 ensures that not a single business will be required to pay advertising tax. Based on the 2018 return data, some five hundred companies will be exempted from the payment of the advertising tax and the related administrative duties. At the same time, the reduction of the social contribution tax will leave HUF 450 billion with businesses over a period of one and a half years, the Minister of State observed.

From among the three points of the Economy Protection Action Plan that will enter into force next year, Mr Izer first mentioned the reduction of ‘kiva’. Small businesses will save HUF 5 billion with the tax reduction; however, according to the Ministry’s preliminary estimates, this amount could increase significantly as in response to the even more favourable tax rate and the Ministry’s information campaign to start late autumn, the number of companies taking advantage of this form of taxation could increase by several thousand, the Minister of State observed.

The reduction of the VAT on hotel and accommodation services will ensure that from 1 January 2020 businesses active in tourism will be able to charge the lowest VAT rate (5 per cent). Next year, even in combination with the 4 per cent tourism development contribution, businesses operating in the sector will have to pay exactly half the tax they are paying at present which currently stands at 18 per cent, Mr Izer said, adding that in 2020 this measure will leave HUF 20 to 24 billion with market players active in the sector.

“The significance of the point of the Economy Protection Action Plan which seeks to simplify taxation lies not only in the government’s goal to reduce the number of tax types by one third by the end of the term, but much more in that, with the reduction of bureaucratic burdens, businesses could save a great deal of money and time,” Mr Izer underlined.

Next year therefore another four taxes will be abolished. The pension contribution, the health insurance contribution in cash and kind and the labour market contribution will merge into a single tax, while the fourth tax to be phased out will be ‘eva’, the simplified tax of businesses.

Both the Ministry of Finance and the National Tax and Customs Administration will help ‘eva’ taxpayers with the changeover. He pointed out that the Ministry had published detailed information and an ‘eva’ calculator already on 25 September. Up until Friday morning, more than five thousand persons downloaded the latter. At the same time, on 27 September, the tax authority sent a half-a-page communication to all ‘eva’ taxpayers which also contained the link to the ‘eva’ calculator, Mr Izer said.