As year end is coming so develop next year tax guidelines. Recently the government put through a bill in the Parlianemt about some major changes in taxation. Let’s see what are the most important changes in taxation for 2017.
KATA (fixed-rate tax of low tax-bracket enterprises)
Small taxpayers with smaller turnover favor this taxation method. Up till 2016 the turnover threshold for opting for KATA taxation was HUF 6 million. Tax is fixed amount, and it depends on if the small taxpayer had full-time employement elsewhere or not. For those KATA tax payers who have full time employment elsewhere the fixed rate tax is HUF 25,000 a month. While those who are employed only in their KATA enterprise they pay HUF 50,000 a month. This tax covers quite a few taxes:
- corporate tax
- personal income tax
- social security contribution tax
- health fund contribution
- pension fund contribution
- vocational training contribution
From 2017 the recently passed bill increases the turnover threshold up to HUF 12 million a year. This truely opens favourable taxation alternative for small entrepreneurs.
Turnover exceeding the above mentioned threshold is taxed at 40%.
Not to forget that besides KATA the local tax is still payable. Optionally KATA taxpayers may choose from normal, simplified or fixed rate local tax. This latter is HUF 50,000 a year.
KIVA (small company tax)
This tax payment method can be attractive for small companies with turnover up to HUF 500 million a year. Up till now the taxpayer had to leave this taxation if they exceeded the HUF 500 million revenue threshold. While from 2017 companies may maintain KIVA taxpaymer status up to HUF 1 billion sales income.
Tax base calculation is complex, and according to our estimations it looks it is favourable only for a minor number of companies.
From 2017 the minimum wage will increase by 15%, while the increase to skilled employees will be as high as 25%.
HUF 127,650 will be the minimum gross wage, and it goes up to HUF 161,250 for skilled workers – compared to 2016 year’s HUF 111,000 and HUF 129,000.
Some researches and estimations suggest this increase can have dramatical effect on small enterprises as they won’t be able to generate the necessary extra income that could cover their increased expenses.
Social security contribution tax
In exchange for the exceptionally increased minimum wages the government offers lowered rate of social security contribution tax. This will decrease from 27% in 2016 to 22% in 2017. Companies who already pay higher than minimum wages will surely benefit.
Small businesses with turnovers below HUF 6 million may requested for exemption status in 2016, this threshold shall grow up to HUF 8 million.
Vat rate of internet service goes down from 27 to 18 percent from 1 January. Poultry, egg, and fresh milk will be taxed at 5 percent.
Restaurant industry will see a major change. Current 27 percent vat rate on food gets lowered to 18 percent from next year, just as non-alcoholic drinks produced in place (learn that it isn’t applicable to packaged or bottled beverage). Very important to know that reduced rate is applicable only in case of consumption in the restaurant. Takeaways will be still taxed at the current 27 percent vat rate.
Need to pay attention to that from 2017 sellers shall include in invoices buyer’s tax number in case the vat amount exceeds HUF 100,000. Tax office will collect data of these invoices from 1 July 2017 as part of vat returns.