Small business tax regulations - KIVA - 2021

The upper threshold for the income/balance sheet total of companies wishing to apply for the small business tax scheme will be increased from HUF 1 billion to HUF 3 billion, while the exit threshold will be raised from HUF 3 billion to HUF 6 billion, which will result in an increase in a number of businesses falling under the scope of the tax. In addition, the tax rate of the small business tax will be reduced to 11 percent in 2021. 

Due to its simplicity, this tax type was already a favorable option for businesses with higher staff costs or under certain conditions, companies with a need for investment; however, due to the low entry threshold and the high upper limit, only a small group of companies fitting the strict specifications were able to access it. Because of the special tax base calculation rules of the small business tax, it is not a more favorable alternative to corporate tax in the case of all companies. The planned amendment will make this option available to numerous businesses that could benefit from choosing small business tax.

The change in the regulations, which states that a tax debt calculated to exceed a net value of HUF 1 million will no longer result in the taxpayer status being immediately withdrawn, will also help businesses stay within the scope of small business tax since taxpayer eligible for this status will be entitled to pay their tax debt before the resolution abolishing their eligibility becomes final and enforceable, thus preserving their taxpayer status. The bill also details the rules on switching to corporate tax. (RSM)