Tax changes in Hungary - do they effect your plans?

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BudaRich

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VAT changes +5% as of 1st July.

The rate of corporate tax will be upped to 19% from the current 16% up until 2011 and tax allowances will be curtailed as well. The 4% special tax for corporates will be scrapped. (For those with property companies)

The government also plans to levy a 30% withholding tax on income from offshore activities.

The Hungarian government is to impose a new, value-based real estate tax of 0.25% on properties worth more than HUF 30 million as of 1 January 2010, local news portal index.hu reported on Wednesday, citing the quasi final package of tax change proposals to be submitted to Parliament on Friday.

The new real estate tax would replace other existing property taxes above the HUF 30 m mark. The rate of the tax is to be 0.5% on properties worth more than HUF 50 million. The existing real estate taxes below the HUF 30 m level would remain in force.

From my perspective the 5% additional VAT was rather depressing since I am about to complete on 2 apartments - and considering how long the banks are taking at the moment it is likely to be after 1st July. From my understanding of things any amount paid thereafter is subject to the tax increase, for me that is likely to be 4k Euro!!!

Has anyone come across a different take on the situation?
 
For the most part, the tax changes are positive steps. The government is moving the tax burden away from income tax, which is difficult to really supervise properly, to consumer taxes, e.g. the increase in VAT.

By far the most significant step is that they plan to lower the personal income tax bracket from 18% -17% and the upper limit of the bracket would increase to HUF 5 million from HUF 1.9 million. This will mean that over 90% of local earners will be paying tax at the lower level. It's a huge step in terms of trying to whiten the economy and bring more people into the tax net.
 
Getting earners fully into the tax net is one of the most important tasks facing the government in Hungary. As I understand it, a lot of companies are actually vehicles by which ordinary working people get paid, with consequent tax losses to the exchequer.
Romania has recently introduced a flat tax on companies in an attempt to deal with this issue (as well as making a desperate attempt to get more money into government coffers). The Romanian initiative should help to drive ordinary workers out of the black economy.
 
Great news for the Irish economy increased difference between Irish CT rate and Hungarian rate show reduce the incentive to move base from Ireland.

Also this should affect Hungary with less overseas investment.
 
The corporate tax rate is being reduced overall though and a lot of expenses are allowed in Hungary. Purely speaking from this limited financial perspective, it is one of the best places in the world to locate a company.
 
No doubt it is an attractive location from a tax perspective, but is the OP saying CT rates are increasing?

Certainly alot of foreign investment that might have come to Ireland in recent years has instead located to Hungary because of the cost and tax advantages. So from an Irish perspective it is good news if rates of corporate tax increase in Hungary.
 
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