Next year all fringe benefits save for SZÉP card as well as many other tax-free allowances will be dissolved. Social and health-care contribution taxes will be aggregated which will cause an increase e.g. to the dividend tax, and from January the default penalty rate will be higher too. On the other hand, more companies will be eligible for the beneficial SME tax and some benefits related to R&D activities will be introduced.
Continuing the cutback of the fringe benefits system, from 1 January 2019 only the three pockets of SZÉP card (values remaining the same) will be available. The tax burden on fringe benefits will rise slightly as the current tax burden will increase from 34.22 % to 34.5 %. On the other hand, this will be countervailed by the change that transfers to SZÉP card will no longer be subject to transaction fee.
According to the above the 100 thousand HUF cash benefit introduced last year will also be abolished. Beneficial taxation of housing purpose employer aid which in specific circumstances currently allows employers to offer their employees tax free aid for housing purposes up to 5 million HUF, will be cancelled as well. Benefits for distribution of tickets to sport and cultural events, mobility purpose housing aid, aid regarding risk insurance fees and student loan repayment aid will also be cancelled.
A number of technical details will change in corporate taxation, two of which is worth to highlight. From 2019, the amount of recognisable development reserve per tax year will rise from 500 million HUF to 10 billion HUF, thus it will significantly raise the amount of the enforceable early depreciation. Current tax rules maximise the amount of tax base reduction in 20 million HUF when investing in start-ups, from 2019 this limit will be applicable not in total but per investments per enterprises.
As it was expected social and health-care contribution taxes will not decrease and will remain 19.5%. As per the wage agreement from 2016, a decrease in the social and health-care contribution can be expected earliest in Q3 2019. Social and health-care contribution taxes will be aggregated from 1 January 2019, therefore the incomes currently taxed with 14 % tax rate will be taxed with 19.5 %. Currently, regarding these incomes such as dividend income, health-care contribution to be paid is capped at 450 000 HUF per year. According to the act the cap will be amended so that social contribution tax shall be paid to the extent the total amount of incomes subject to social contribution tax reaches twenty-four times the minimal wage. Amendments regarding social contribution tax state that tax relief of companies operating in free business zones and tax relief for the employment of employees under 25 or over 55 years will be abolished, however, new tax relief will be introduced for employing researchers and for loss related to R&D activity that has not been accounted in corporate tax.
From 2019, more companies will be entitled to SME tax. According to the regulation, the eligibility thresholds pertaining to the balance sheet total and turnover will increase from current 500 million HUF to 1 billion HUF. At the same time, the current turnover threshold of 1 billion HUF referring to the automatic dissolution of SME tax status will increase to 3 billion HUF.
From 1 January 2019, significantly more companies could be subject to the innovation contribution because the previous regulation has been reinstated which qualified SMEs, taking into account the so-called two-year-rule, on a consolidated level. Thus, companies who qualify as SMEs based on their individual indicators but the group-level indicators exceed the minimum thresholds for medium or large enterprises, will be subject to the payment of innovation contribution.
Concerning all tax liabilities, the law stipulates that from next year the default penalty shall be the interest rate of the Central Bank of Hungary plus 5 percentage points (currently the penalty is twice the central interest rate). So, if the current interest rate will not change, a default penalty of 5.9 percent is expected). Of course, if the tax administration is in delay with its payments, the taxpayer may also claim this higher default penalty and it shall apply to cases when the taxpayer is entitled to a refund because the tax administration’s decision was found to be unlawful.