Filling-up obligation and reporting deadlines in december
As the end of the year approaches, companies once again have to meet the filling-up obligation, i.e. the obligation to supplement until December 20 the tax advances paid so far in various tax types to the expected total annual amount of the tax liability. The filling-up obligation applies basically to all enterprises keeping double entry books as well as companies subject to the Act on Simplified Entrepreneurial Tax. However, in certain cases the act grants exemption from this obligation.
Corporate income tax, local business tax and income tax of energy suppliers
Pursuant to the new regulation, the taxpayers subject to corporate income tax who do not declare and pay to the Hungarian Tax Authority their corporate income tax advance filling-up obligation until December 16, 2010 (which would otherwise be due on December 20, 2010), will assess the amount of this obligation under the more favourable new tax advance filling-up rules. Under the former rules, the corporate income tax and local business tax advances had to be filled-up until December 20 to the expected total amount of the tax liability by all companies whose sales revenue exceeded HUF 50 million in the tax year preceding the current year (i.e. basically in 2009). According to the new rules, the HUF 50 million sales revenue limit increases to HUF 100 million. As a result of this modification, the companies which realized net sales revenue between HUF 50 and 100 million in 2009 but do not file tax returns on their filling-up obligation until December 16, 2010 and do not pay the difference, will be released from the obligation to filling-up both their corporate income tax and local business tax advances in 2010.
The deadline for the fulfilment of the filling-up obligation is December 20. Accordingly the tax advance and the filling-up have to be paid until December 20.
For the purposes of the filling-up, the companies have to estimate the expected revenue and expenditure data of the tax year. They have to pay the difference of the total tax liability established on the basis of this estimation and the tax advances paid during the tax year as tax advance filling-up obligation. The difference is payable to the state tax authority in the case of corporate income tax and to the municipality tax authority in the case of local business tax.
The filling- up of the income tax of energy suppliers is different from that of the two other tax types mentioned above in the sense that there is no interim tax advance payment obligation in this case and only 90 percent of the expected tax liability calculated on the basis of the estimated revenue and expenditures figures is payable until December 20 to the state tax authority. Another difference is that in the case of the filling-up of income tax of energy suppliers the date of filing of the tax return is irrelevant and only those taxpayers are exempted from the filling-up obligation who did not realize annual sales revenue exceeding HUF 50 million in the previous tax year.
The tax return form no. 1046 must be filed on the filling- up of corporate income tax and the income tax of energy suppliers until December 20. It is new that from this year a tax return also has to be filed until December 20 on the amount of the local business tax filling-up obligation using the form prescribed for this purpose by the tax authorities of the municipalities.
Simplified entrepreneurial tax
Companies subject to simplified entrepreneurial tax must – without regard to a sales revenue limit – supplement their SET advances to the amount of their annual SET liability until December 20. No special tax return has to be filed on the fulfilling of the filling-up obligation and the amount of the filling-up only has to be shown in the annual tax return.
Special tax of certain sectors
The entities engaged in activities attracting sector specific tax in 2010 must assess, declare and pay to the state tax authority until December 20, 2010 the amount of the sector specific tax advance on the basis of the net sales revenue from their taxable activity in 2009. The entities commencing activity in 2010 have to assess the tax advance on the basis of the net sales revenue expected from their taxable activity in 2010.
Legal sanctions
If taxpayers fail to meet the filling-up obligation by the relevant deadline or if the amount paid in does not reach 90 percent of the actual tax liability, the tax authority may impose default penalty of up to 20 percent on the difference of 90 percent of the actual tax liability and the tax advance paid by the deadline.
Please note also that a delay of just of few days or a difference of only a few percentages higher than allowed may already imply the charging of default penalty. The current practice of the tax authority is not to waive the imposition of the default penalty.
Reporting of changes in taxition to be fulfilled in the last month of the tax year
There are a number of deadlines in the last month of the tax year by which the taxpayers may alter or confirm their previous choices regarding certain aspects of taxation. This is done by way of reporting the change to the tax authority and most of the reporting options relate to value added taxation. Below we list the most important areas in which the reporting of such alterations may have a fundamental effect on taxpayers’ operation in the coming year and for a longer term also.
Option relating to real properties and land
The entities subject to value added tax have the right until December 31 to opt for taxability from next year in respect of the otherwise tax exempt sale and letting of their non-built-on real properties and built-on real properties with an effective use permit issued more than two years ago. VAT-payers may decide for both the sale and the letting of property if they choose VAT-ability for all property types or for real properties not qualifying as residential property only.
If, as described above, the taxpayer chooses VAT-ability, he must stick to this choice for five years. Therefore, utmost care should be used in this decision as the value added tax on the acquisitions of property, land, buildings will become entirely deductible if these are acquired or built by the taxpayer for the purpose of resale or letting.
We must note that the sale of construction sites or (parts of) real properties with the relating plot of land the first use of which under normal conditions has not yet taken place or the use permit of which has not been effective for two years will remain taxable under all circumstances based on legal regulations irrespective of the taxpayer’s choice.
Choice of exchange rate applied for the conversion of tax base to HUF
Value added tax must be established in Hungarian forints even if the tax base is otherwise denominated in foreign currency. In this case, taxpayers have the right to choose the conversion exchange rate they intend to apply. Taxpayers may either choose the sell exchange rate published by a domestic credit institution licensed for currency exchange or, provided that they reported this choice to the tax authority upon the start of the tax liability or before the tax year, the official exchange rate published by the National Bank of Hungary (NBH).
Please note that by default the exchange rate of the chosen credit institution is applicable for the HUF-assessment of the tax base and no special notification of the tax authority of this is necessary. If, at the time of becoming subject to VAT, the taxpayer forgot to indicate on the registration sheet that he intends to apply the NBH exchange rate, he may only apply the NBH exchange rate from the next calendar year provided that he notifies the state tax authority of this choice until December 31.
Variance from the application of the NBH exchange rate is not possible for one year. Accordingly, a switch from the NBH exchange rate to the exchange rate of a chosen credit institution is only possible based on a notice to the tax authority until December 31 of the previous year. Yearly switching from one exchange rate to the other is not a good practice either because it contradicts the matching principle and the principle of consistency provided in the Act on Accounting. This choice not only affects the conversion of the tax base to Forints but it may also make bookkeeping easier if the same exchange rate – that of NBH or the chosen credit institution – is applied for the purposes of both VAT tax base assessment and accounting.
Opting for tax exemption
Entities may apply for exemption from tax if their annual sales revenue does not reach HUF 5 million in either the current year and in the previous year. Taxpayers must notify the state tax authority of this choice until December 31. However, if they exceed the value limit mentioned above during the tax year they must also report the termination of tax exemption within 15 days.
Choosing and ending of the use of special tax assessment methods
Resellers selling used movables, works of art, collection pieces and antiques may, subject to the notification of the state tax authority until December 31, choose to apply from next year
* the method based on global registration instead of the one based on specific registration for the assessment of the tax payable,
* the rules pertaining to taxation based on the price margin in respect of the direct importation of works of art, collection pieces or antiques or the acquisition of works of art directly from the artist or the successor in title of the artist or
* the general rules of taxation for the whole of their activities.
In making the above choice, resellers must note that variance for the option to use the global registration method is not possible for one calendar year and variance from the two other options is not allowed for two calendar years. When opting for taxation under the general rules attention must be paid to the rule that if, until the end of the second calendar year, the reseller does not notify the tax authority of his intention to continue applying the general rules of taxation, he will have to apply price-margin-based taxation again from the following year.
The taxpayer engaged in agricultural activities subject to special tax rules may, based on the notification of the tax authority until December 31, choose to fulfil value added tax liabilities under the general rules from next year. This choice comes with an obligation not to vary from the chosen form of taxation for a period of two calendar years.
The producers, sellers and mediators of investment gold also have the right, subject to sending a notice to the state tax authority until December 31, to make their sales of investment gold to other taxpayers taxable from the coming tax year. A variance from this choice is not possible for five years.
If the taxpayer subject to special tax rules intends to apply, instead of the above listed special choices, taxation under the main rule again – after expiry of the period of the variance ban – he must notify the state tax authority of this decision until the last day of the year before the year of returning to normal taxation (with the exception of resellers paying tax according to the general rules).
Obligations of taxpayers subject to simplified entrepreneurial tax
The taxpayers who fulfil the conditions prescribed for SET-taxation may report to the state tax authority until December 20, 2010 that they intent do apply simplified entrepreneurial taxation from the 2011 tax year.
If an entity subject to simplified entrepreneurial tax does not fulfil the SET criteria as of December 20 or decides voluntarily not to pay taxes under the SET system in the future, he must report this to the state tax authority until December 20. Simultaneously with the reporting of this choice the entity must also make a declaration in respect of his value added tax options and obligations described above. An important criterion is that in the four tax years following the termination of taxation under the SET system the entity may not apply for re-entry to the SET system.
We must note that entities paying tax under the SET system also have the right until December 31 to choose the exchange rate used for the HUF-assessment of value added tax as SET taxpayers may also be subject to value added tax in respect of most intra-Community acquisitions or reverse charge taxation transactions and they must pay value added tax on acquisitions of this kind.
www.rsmdtm.hu
