Itemized tax of enterprises with a small tax base
Below we provide a brief summary of the most important information regarding the itemized tax of enterprises with a small tax base, the new tax type introduced by the Act on the Itemized Tax of Enterprises with a Small Tax Base and Small Enterprise Tax accepted by the Parliament on 1 October 2012.
Taxable persons, commencement and termination of taxability
The tax applies to private entrepreneurs as defined in the Act on Personal Income Tax, single member companies, limited partnerships having only private person members and general partnerships having only private person members who have announced to the state tax authority on the form prescribed for this purpose that they intend to fulfil their tax obligations according to the rules of the itemized tax for enterprises with a small tax base.
Taxability under this tax type commences on the first day of the month following the submission of the announcement to the state tax authority. The cases of termination of taxability are specifically listed in the regulation on which we report in more detail in our blog.
Rate of tax
The enterprise with a small tax base shall pay HUF 50,000 itemized tax on the small taxpayer in full-time employment and HUF 25,000 itemized tax on the small taxpayer not qualifying as a full-time employee.
In addition to the itemized tax, the taxpayer qualifying as an enterprise with a small tax base throughout the calendar year shall pay 40 percent tax on the part of its income realized during the calendar year exceeding HUF 6,000,000. The taxpayer not qualifying as an enterprise with a small tax base during the entire calendar year shall apply this 40 percent tax rate on the part of its income exceeding the product of the number of months to which the itemized tax applies and HUF 500,000.
The taxpayer may also chose to fulfil his local business tax payment obligation on a simplified basis assessing its tax liability on a tax base of HUF 2.5 million each for the municipalities of its seat and site, which, assuming a tax rate of 2 percent, means an amount of HUF 50,000 for the entire year. The taxpayer may apply apportionment in the case of local business tax if his obligation to pay the itemized tax of small taxpayers is suspended.
Replaced tax types
By the payment of the itemized tax, the taxpayer is released during the period of taxability under the new tax type from:
the assessment, declaration and payment of the entrepreneur's personal income tax and the tax or flat-rate tax on the entrepreneur's dividend base;
the assessment, declaration and payment of corporate income tax;
the assessment, declaration and payment of personal income tax, contributions and healthcare contribution;
the assessment, declaration and payment of the social contribution tax, healthcare contribution and training fund contribution.
The full-time employee small taxpayer qualifies as insured during the period of his small taxpayer status and is eligible for unemployment benefits which shall be calculated on a monthly base of HUF 81,300. The part-time employee small taxpayer receives no social security entitlements.
HUF 1 million limit, data supply, simulated employment
Other taxpayers may account for the invoices accepted from enterprises subject to the itemized tax of enterprises with a small tax base as expense.
However, in order to prevent the issuing of fictitious invoices, both the small taxpayer and the party accepting his invoices will have a reporting obligation if the aggregate amount of the invoices issued by the small taxpayer for the same taxpayer exceeds HUF 1 million at annual level. Also, if this limit is exceeded, the small taxpayer will have to prove that the relationship of the parties is not a simulated employment.
According to the rules of the VAT Act, the small taxpayer must always indicate "small taxpayer" on its invoices issued in line with the provisions of the VAT Act, otherwise a default penalty may be imposed by the state tax authority.
Source: RSM DTM Hungary