The parliament of Hungary approved a bill on 17 November 2015 establishing some additional amendments to the country’s current tax system.
According to the approved bill a classification system will be introduced and companies will be classified as “trustworthy”, “average” or “risky” for tax purposes. Taxpayers classified as “trustworthy” will be subject to reduced penalties in case of missing or incomplete tax return filings and tax underpayments, with additional beneficial deadlines in the case of tax audits and VAT refunds. On the other hand, the tax audit deadlines will be extended and non-compliance and tax underpayment penalties will be increased for “risky” taxpayers.
Under the bill municipalities will be entitled to reduce local business tax imposed on income from business activities performed on the territory of a given municipality, by 10% of the direct research and development (R&D) expenses incurred in a tax year.
Companies which are registered on a stock exchange of a European Economic Area (EEA) country and whose consolidated financial statements are prepared by the parent company according to International Financial Reporting Standards (IFRS) will be able to choose to prepare their financial statements in accordance with IFRS standards. But from 2017 the IFRS reporting standards will become mandatory for those companies. However, the requirement will remain optional for insurance companies, companies under the supervision of the Hungarian National Bank, companies subject to mandatory audits, and branches.
