Grant Thornton Hungary Newsletter

TAX RELIEF AND THE AMENDED RULES OF SUBSIDIES RELATED TO REDUCED WORKING TIME

The Government promulgated some new provisions in connection with the Economy Protection Action Plan and the subsidy available to employment in reduced working time (Government Decrees 140/2020 and 141/2020). In the following, we discuss the most important taxation-related rules of these new provisions of law.

• From 1 July 2020, the rate of the social contribution tax (szocho) will be reduced from 17.5% to 15.5%.

• From 1 January 2021, the rate of the small business tax (kiva) will be reduced from 12% to 11%.

• Full-time low-bracket taxpayers choosing the itemised tax of small businesses (kata) will be considered insured. From 1 July 2020, the basis of the calculation of benefits will be HUF 102,000 per month in the normal case or HUF 170,000 if opting to pay the higher amount of itemised tax.

• The deadline for filing “annual” tax returns and paying the related taxes is postponed until 30 September 2020. Companies have until 30 September 2020 to perform their tax assessment, filing of tax returns and payment obligations with respect to corporate income tax, local business tax, innovation contribution, as well as the income tax of energy companies that would normally become due between 22 April 2020 and 30 September 2020, and also to perform their obligations to determine and file returns for their tax advances normally due together with the annual returns. If a company chooses to exercise this option, the amount of the tax advances for which no tax returns have been filed yet will have to be determined and paid on the basis of the last available tax advance for which a tax return was filed.  (An application to reduce the amount of the tax advance may also be submitted.)

• The deadlines for preparation, publishing, depositing and disclosing, as well as filing (submitting) the financial reports is postponed until 30 September 2020, provided that they originally fell on a date between 22 April 2020 and 30 September 2020. (Exceptions include publicly listed companies, banks, insurance companies and investment firms, but it is also sufficient for these to file their tax returns and pay the taxes by 30 September.)

• For benefits provided via SZÉP Cards in the period between 22 April and 30 June 2020, employers do not have to pay social contributions, which means that the amount of taxes and public charges will be reduced from 32.5% to 15%. In addition, the maximum amounts of the individual “pockets” will also be increased significantly (also in case of publicly funded bodies and other employers).

• In the period between 22 April 2020 and 31 December 2020, no tourism tax is to be collected and paid after guest nights, only the tax return must be filed. The state will pay to the local authorities, as non-refundable aid, the amount calculated on the basis of the tax returns.

• In addition to those already announced, two further payment facilities were also introduced by the government. It is important to note that in case a taxpayer uses one of the following options, the other one is no longer available.
  • Based on a taxpayer’s request submitted within 30 days after the lifting of the state of alarm, the tax authority may grant, on one occasion, for a maximum tax amount of HUF 5 million, free of any surcharges, either a payment delay of maximum 6 months or the option of paying the tax in instalments over a maximum period of 12 months, provided that, simultaneously with the application, the taxpayer documents or demonstrates as likely that the payment difficulty is attributable to the state of alarm. Requesting the payment facility is exempted from fees, and the decision is made within 15 days.
  • At the request of a non-natural person taxpayer, submitted within 30 days after the end of the state of alarm, the tax authority may reduce the amount of the tax owed, on one occasion, by a maximum of 20% or HUF 5 million, whichever is less, if the payment of the tax owed would render the operations of the applicant untenable for reasons attributable to the state of alarm. The tax reduction may only be requested for one tax type. Requesting this payment facility is also exempted from fees, and the decision is made within 15 days.

• The reliable taxpayer status may not be cancelled during the state of alarm and within 30 days afterwards with reference to an enforcement proceeding or tax difference. Furthermore, the taxpayer will not lose the reliable status also in case of failing to meet the condition of not owing a debt over HUF 500 thousand or having a positive tax performance in the given tax year.

• In the course of determining a company’s status as a risky, or unreliable taxpayer, the tax authority will ignore any tax differences established as owed by the taxpayer due to the breach of a tax-related obligation during the state of alarm and 30 days thereafter.

• It is an easement of the rules related to EKAER that taxpayers are exempted from the obligation to provide a risk deposit until the 30^th day after the end of the state of alarm.

• A moratorium on the inspection of the online cash registers, as well as food and beverages vending machines was also introduced.

• In case of unpaid leave, from 1 May 2020, it is not the employee, but the employer who must file returns for and pay the healthcare service contribution (HUF 7,710 per month) until the 12^th day of the following month. Employers may also submit a request to pay this health service contribution by the 60^th day after the end of the state of alarm.

• From this point forward, the subsidy is no longer available only for 50, 60 and 70% part-time work starting after 11 March, but to any part-time work that is at least 25%, but not more than 85% of the original working time.

• The employer’s obligation to maintain the employee headcount is now restricted to the original employee with whom the joint application was submitted.

• The absentee fee will be replaced by the base wage as the basis of the calculations. (Hence in the course of those calculations, the performance-based wage, wage supplement and flat rate in lieu of supplements will no longer be taken into consideration.) Therefore, the amount of the subsidy will be 70% of the proportionate part of the base wage for the lost working time, and in the determination of the monthly amount of the subsidy, it is also the base wage that must be used when calculating the available subsidy.  (The maximum subsidy based linked to twice the amount of the minimum wage remained unchanged.)

• The rules also changed on several points in connection with the individual development time. On the one hand, on the basis of the amended definition, the development time may be used during the term of the subsidy or within two years afterwards. On the other hand, the employer and the employee are only required to conclude an agreement for the development time if the reduced working time exceeds half of the working time before the amendment of the employment contract. In other words, if the working time is reduced by at least 50%, then it is only a possibility (and not an obligation) for the parties to conclude such an agreement. Further, in such cases, in order to receive the subsidy, the employer is not obligated to pay wages for this development time, even if the net amount of the wage, including the subsidy, received by the employee does not reach the net amount of his or her base wage.

• In the future, the only employees for whom the subsidy cannot be requested will be those with respect to whom the employer receives a subsidy in the framework of the Economic Protection Action Plan as employees engaged and research and development activities, or an EU-funded wage-type subsidy with the aim of job preservation or job creation.

• The subsidy can now also be provided for employment through temporary staffing, and businesses in difficult circumstances can also apply for the subsidy.

• The amendments make it clear that the subsidy is also available for remote working and for work performed in home office.

• On the basis of the text of the previous version of the law, no overtime work could be ordered during the period of the subsidy. On the basis of the amendment, this rule only applies to subsidized employees.

• In the future, the following are no longer set as conditions of receiving the subsidy:
  • that the application should present the economic circumstances serving as the grounds for employment in shorter hours, their direct and close relationship with the state of alarm, as well as the measures already taken and still expected to overcome the economic difficulties;
  • that the possibilities available for rescheduling working time have been exhausted by the time of the submission of the application;
  • that the employees are not employed in a working time banking system.

• If the employer submits a joint application for several employees working at the same business premises, these must be submitted at the same time. An application for a single business premises may only be submitted once.

• The amendment also provides that the employment contracts are to be amended for the duration of the subsidy, effective from the date of the decision, in accordance with the parameters set in the application, in terms of the reduced working time and the individual development time, except in case the parties have already amended the employment contract prior to submitting the application.

• If the employer fails to satisfy certain conditions, the amount of the subsidy must be repaid. Exceptions from this rule (also on the basis of the original provision of law) is if the employer can certify that the employment ended as a result of the termination of the employer without a legal successor or by notice given by the employee. Termination by the employer with immediate effect was now added as a third possibility to the above two.

• As a result of the amendment of the law, the agreement between the employer and the employee (on the reduced working hours and the development time, if such an agreement is concluded) must no longer be enclosed with the applications.

Timea Zednik

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