Economy & Policy

COVID impact in Hungary: Tax cut of HUF 1 trillion

In addition to the subsidies, credit moratorium and restoration of the 13-month pension, the government decided to reduce taxes by about HUF 1 trillion in response to the coronavirus crisis.

The parliamentary secretary of state at the Ministry of Finance, András Tállai, said the tax cuts introduced in March 2020 could play a significant role in relaunching the economy.

The measures of the first wave helped to preserve the jobs and businesses of more than 360,000 people, plus help save HUF 50 billion for those affected. More than 151,000 low-tax companies were exempted from taxation for four months, Tállai said. 

To further protect human lives and preserve jobs, the government decided on additional tax breaks in November 2020. For seven months, the employer tax exemption has been available to companies that were hard hit by COVID-19. Eventually, it covered about 200,000 workers in 56 sectors, and in 2021, 155,000 small companies were again exempt from tax for March and April.

He recalled that the tourism sector was helped by a number of tax measures. The taxation on the Széchenyi Pihenő Card (Szép Leisure Card) was reduced by around one-half to 15 percent, while the amount that can be transferred to the card has doubled. Hospitality professionals have been helped as well by lowering the VAT on take-away food and beverages to 5 percent, he added. 

In 2021, the maximum business tax rate for small and medium-sized enterprises (SMEs) was halved to one percent, noting that this affects about 800,000 companies. He also mentioned the acceleration of VAT refunds, which is a major liquidity aid for SMEs. The 20-day VAT payment period can provide a significant competitive advantage for domestic businesses, as it is one of the fastest in the European Union. 

With regard to the coronavirus epidemic, the social contribution tax rate was reduced to 15.5 percent as early as July 1, 2020, leaving HUF 160 billion with employers last year and HUF 300 billion this year.

The reduction of the tax on labor will continue in 2022, as the social contribution tax will be reduced by another half percentage point from July 1, 2022, and the vocational training contribution will be abolished starting on that same date. Furthermore, there has been a massive simplification of the administration surrounding taxes, the state secretary concluded.

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