1. General characteristics of the changes

The rules for extrapofit taxes, introduced in summer 2022, have changed several times. Most recently, a major amendment to Government Decree 197/2022 (4.VI.) on extraprofit taxes was published in the Hungarian Gazette on 31 May 2023, under which the sectors specified in the decree will have to pay the extra taxes in 2024. These amendments entered into force on 1 June 2023.  

The changes have affected different sectors differently. For some sectors, the basis and/or rate of the special tax has been changed. Some sectors will have to pay the extra tax in 2024 at the same rate as in 2023. These include airlines and telecommunications companies.  

The more detailed provisions of the Government Decree for each sector were included in our previous newsletter.

2. Special taxes, the amendments to which have already been incorporated into sectoral laws

Following the above amendment, the 2023 summer package of laws introduced certain extraprofit taxes previously regulated by the Emergency Government Decree into the sectoral laws with effect from 1 August 2023. As a consequence, these extra taxes will not be abolished in 2025, but will be permanent under the current legislation.

These changes will affect the following tax categories:

Contribution of airlines

The airline tax will act as a "green tax" to ensure that aviation contributes to the prevention and reduction of environmental pollution.

The tax is payable by groundhandling companies that provide passenger and baggage handling services. The contribution is based on the number of domestic departuring passengers served by the entity. The rate of contribution varies according to the emission value per seat and the destination.

Income tax on energy suppliers

The emergency provisions are raised to the level of a law. A new rule is that if the taxpayer also carries out an activity outside the taxable activity, he must apportion his taxable amount in proportion to the turnover of the taxable activity in relation to his total turnover. Records of the apportionment must be kept.

According to the amendment, the definition of energy supplier has been changed, so that a producer of crude oil products, a wholesaler of crude oil products and a trader of crude oil products who sells these products purchased from abroad in Hungary is considered a taxable person.

The following amendments to the following tax categories have been incorporated unchanged into the sectoral laws from the Government Decree on Extra Profits Taxes:

• - special bank tax,  
• - financial transaction tax,  
• - public health product tax
• - excise duty 

3. More changes

Shortly after the announcement of the summer tax package, on 17 July 2023, the Government promulgated a new amendment to the Government Decree on Extra-Profit Taxes (Government Decree 317/2023 (17 July 2023)), which affected the special tax on crude oil products producers, the extra-profit tax on pharmaceutical companies, the special tax on the pharmaceutical industry and the mining tax.

In principle, the provisions entered into force on 18 July 2023.

Specail tax of crude oil product producers

• The tax rate will be reduced to 1 % in 2024 from 2.8 % in 2023.
• Taxpayers must self-assess and declare the tax for the 2024 tax year by the last day of the fifth month of the 2024 tax year. The tax must be paid in three instalments (the first instalment by the 20th day of the sixth month of the tax year 2024, the second instalment by the 20th day of the ninth month of 2024 and the third instalment by the 20th day of the twelfth month of 2024).

Extra profit tax of pharmaceutical companies

One relief is that in 2024, pharmaceutical manufacturers will be able to reduce their tax liability by new items: the cost of the investment in the acquisition or production of a tangible asset in Hungary, and the direct costs of basic research, applied research and experimental development in the health sector carried out in the tax year.

• The maximum amount of the tax deduction that may be applied is 50 per cent of the total special tax payable, excluding the deductible item.

Special tax of pharmaceutical distributors

• The holder of a marketing authorisation for a pharmaceutical product subject to tax at the rate of 40 per cent in 2023 and 2024 may reduce its tax liability by the amount of the tax shown in the annual accounts (accounts of consolidated companies) for the tax year preceding the tax year in question, the increase in the cost value of the investment in the acquisition or production of tangible goods in Hungary and the direct costs of basic research, applied research and experimental development in the health sector carried out in the tax year in the tax year in question, as shown in the annual accounts for the preceding tax year (including the accounts of undertakings included in the consolidation).
• This deduction can only be applied to the same amount of research and development expenditure of a single contributor for the undertakings concerned included in the consolidation.
• The maximum amount of the tax reduction is 50 per cent of the special tax rate of 40 per cent, calculated without the reduction. A further condition is that the liability to pay cannot be lower than the liability that would have arisen if the rate had been 20 per cent. 

Mining fee

• In the past, several tax rates were set for the quantities extracted. After the current amendment, from 1 September 2023, the individual tax rates will be adjusted to the specific values of mineral raw materials and geothermal energy, in accordance with the methods of calculation of the specific values set out in Government Decree 54/2008 (20.III.) on the determination of the specific value of mineral raw materials and geothermal energy and the method of calculation of the specific value.