The special tax of retailers was reestablished in Hungary as on 14 April 2020 the Government Decree on the rules of the special retail tax during the COVID-19 crisis was published. However, the new legislation extended its scope to foreign seated e-commerce companies as well.
As per the Government Decree, Hungarian retailer activity is considered to be taxable in Hungary, the tax liability extends to foreign retailers as well where the goods are dispatched to Hungary. The regulation highlights that even those foreign resident companies are subject to the special retail tax, which do not perform their business activities through a registered branch in Hungary so are arguably without a permanent establishment as well. As a result, the popular online webshops could also become taxable entities during the period of the COVID-19 crisis.
Generally, the basis of assessment equals to the total sales revenue derived from goods dispatched to Hungary with some adjustments.
Progressive taxation applies for both domestic and foreign entities, where retailers with the tax base of less than HUF 500 million (approx. EUR 1.4 million) are tax exempt. The additional tax rates are determined as follows:
The tax payable is the proportionate amount of the special retail tax calculated for the whole financial year covering only the days of the crisis period (as defined by the Hungarian Government). Currently Hungary is deemed to be in a crisis period from 11th of March for an undefined period. The tax return has to be submitted within 30 days following the end of the financial year or the last day of crisis period (whichever comes earlier).
Taxpayers are also obliged to pay tax advances on a monthly basis with the first advance payment due on 31 May 2020. Going forward, the tax advance payments have to be fulfilled by the last day of each month during the crisis period. The amount of the tax advance payments equals to 1/12 of the annual special retail tax calculated based on last year’s figures. Note that in case the total taxable sales revenue of the taxpayer has fallen by at least 40% (e.g. due to the COVID-19 crisis) compared to the same period of 2019, the value of the monthly tax advance payments might be decreased accordingly by the Hungarian Tax Authority.
Companies with a tax base not exceeding the HUF 500 million (approx. EUR 1.4 million) (exempt) threshold will not be obliged to submit the monthly and annual tax returns.
At the current stage it is not clear from the legislation how foreign seated companies with no Hungarian VAT number should be registered in Hungary in order to comply with the rules of the special retail tax. Moreover, calculating the advance payments for those who become liable for the tax (i.e. calculating their implicit taxbase for the 2019 period) could create a tough administrative burden. Last but not least, arguably, this tax is not covered by the existing double tax treaties of Hungary.
Service Line Leader
PR Manager, PwC Hungary