Local Business Tax Changes from 1st January, 2010
Many tax regulations will be modified with effect of 1st January, 2010.
Modifications regarding tax base assessment
Two changes will enter into force on 1st January, 2010 regarding the tax base:
· The local business tax base may be reduced by the direct cost of basic research, applied research and experimental development recognized in the tax year.
· Based on the current regulation, in case of an entrepreneur having a foreign site, the part of the entrepreneur’s tax base deriving from the activity performed at the foreign site is only exempt from tax if the entrepreneur pays the tax equivalent to the Hungarian local business tax on this part of the tax base abroad to the foreign municipalities. This restriction will be eliminated from 2010 and the part of the tax base attributable to foreign sites will always be exempt from local business tax.
Registration of business activity, tax return filing and tax payment
The introduction and the definition of the rate of the local business tax still falls within the authority of the municipalities but the relating tax administration tasks are taken over by the state tax authority.
In the future, the business activity will have to be reported to the state tax authority, not the municipality. The deadline for reporting is 15 days from the commencement and the termination of the business activity performed on a continuous basis and the day of commencement of the activity for temporary business activities.
From 2010, local business tax will have to be declared and paid to the state tax authority. In the future, companies will have to file only one tax return and the local business tax will also be payable to one central account. This regulation is a major relief of administrative burdens for the companies that have several sites and so far had to file separate tax returns to each municipality and pay taxes to their respective accounts separately.
A further change is that, from 2010, the tax advance will not be assessed by the tax authority; instead, taxpayers will have to indicate the amount of the tax advance payable in the next year in their tax returns. The tax advance due on 15th March, 2010 is the last one payable to the municipalities on the basis of the resolutions of the municipality tax authorities. Similarly, the tax return for the 2009 tax year is the last tax return to be submitted to the municipalities.
The tax advance will be payable in two instalments, until 15th March and 15th September in the future also. The due date of the first local business tax advance already payable to the central account of the state tax authority is 15th September, 2010.
Changes concerning the natural gas and electricity sector
In the case of electricity and gas traders, universal electricity and gas service providers and electricity distribution network license holders, a permanent establishment is only created in the territory of the municipality where the place of consumption/distribution is located if at least 75% of the net sales revenue of the entity comes from sale, distribution to final consumers.
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