2014. December 18.

Tax Act changes in 2015 - Part I.

Tax law changes concerning retail trade

The tax package adopted by the Parliament for the next year will not introduce new tax type – the internet tax was withdrawn – and neither have to we calculate with radical tax law changes; but, with numerous new provisions and amendments. Out from these we firstly call the attention to the main changes affecting the retail trade sector.

1.Corporate Income Tax Act (the CIT Act) will tighten the concept of the income- / profit minimum

Cost of goods sold and the cost of mediated services cannot be taken into account – that is divided from total revenues - in the calculation of the so called revenue – (profit -) minimum relevant for the preparation of the corporate income tax report (however, the local revenues of foreign premises can still be taken into account).

Thus based on the above the CIT Act practically defines the income minimum as 2 % of the adjusted total revenue, not including the special adjustments – namely this calculation must be taken into account from now on as the corporate income tax base (10%, 16%) by companies, which choose taxation according to income- (profit-) minimum.

Nonetheless, we note that in certain cases the company may not decide on the taxation according to the above calculated income minimum (neither according to the current regulations):

Thus for example, if the pre-tax profit or the corporate tax base pursuant to the general provisions is higher than the profit minimum; or such tax year is concerned when functioning as a pre-company that is in the first year of the undertaking founded without predecessor; or if in the tax year or in the previous tax year natural disaster had sustained the company, and nor in the case, when a special organizational form (for example association, foundation, charitable non-profit organization etc.) excludes the applicability to that effect.

2.Changes pertaining to local taxes

According to the amendment act the municipalities will have authorization to introduce municipality taxes in their administrative area to subjects, which are not already levied by a public burden, in addition, taxable person can be a private individual, not entrepreneur, business association or organization. This way the amendment will spare stores.

Nevertheless, determination of the base of the local business tax (HIPA) is tightening as of 2015 as the consequence of the amendment act.

Combined tax base determining rules during the calculation of HIPA of affiliated companies have to be used proportionately for the period of existence of the affiliated companies.

Pursuant to the Act on Local taxes, taxable persons qualifying to be affiliated companies according to CIT Act may determine their local business tax base in a way that the total net revenue of affiliated companies and the total net revenue decreasing expenditure positive difference.

During the calculation of the tax base the amount of the cost of the goods sold and the cost of mediated services shall be taken into account as well according to the net revenue of the taxable person; however, pursuant to the amendment act by the increase of the revenue it can be deducted in a decreasing extent progressively (expressed in %).

Therefore, whilst according to the currently effective rules when determining the revenue of affiliated companies the above adjustment items can be taken into account without restriction, afterwards only proportionately in line with the existence of the affiliated relation and to % extent according to the net revenue

  1. Establishing progressively and increasing the supervision fee payable by food traders

Stores and chain stores selling daily consumer products according legal provisions currently pay uniformly 0,1% food chain supervision fee upon the net revenue arising from the payable activity from previous year. The fee must be reported for the subject year and its base can be reduced with the amount of the already paid excise duty and the public health product tax.

Significance of the fee is that the food-chain supervising organ ensures the income of the National Food Chain Safety Office (NFCSO) and the governmental offices for the ensurance of the official supervisory activities pertaining to food chains. Authorities pursue hundreds of thousands of supervisions annually, and examinations of millions to the products of food stores.

As a result of the amendment of legal provisions the amount of the food chain supervision fee will increase and will be established progressively upon the net revenue of the business association according to the below:

  • up to HUF 500 million: no fee payment obligation;
  • up to HUF 500 million – HUF 50 billion: 0,1%;
  • above HUF 50 billion: the amount of the fee increases by 1-1% after each 50 billion;
  • above HUF 300 billion: 6% (this is the maximum extent).

The increase of the food supervision fee can mean additional burden of the value of billion to the food store chains, based on which it is likely that they will be forced to increase the consumer retail trade prices.