Hungary: New crisis tax adopted

On Monday, the Hungarian Parliament adopted the bill on the new crisis taxes hitting the energy, retail and telecom sectors. The new taxes, worth a combined annual total of HUF 161 billion (approx. EUR 575 million) over three years starting from the present year, will ensure Hungary meets its deficit target. According to the government’s current plans, the crisis taxes would remain in effect for three years.

The crisis tax for 2010 is payable on the net sales revenue of 2010, however, the tax advance for 2010 is to be calculated on the basis of the net sales revenue from 2009. (Tax advances paid in excess of the actual tax burden are reclaimable.)

According to the bill, telecommunications companies have to pay 2.5% tax on their annual net sales revenues between HUF 100 million and HUF 500 million, 4.5% on revenues between HUF 500 million and HUF 5 billion and 6.5% on the excess. The tax base up to HUF 100 million is tax exempt.

Retail companies will also be subject to a progressive tax, at 0.1% on net sales revenues between HUF 500 million and HUF 30 billion, 0.4% between HUF 30 billion and HUF 100 billion, and 2.5% above that level. Revenues below HUF 500 million are not taxed.

Energy companies that are already subject to a special surtax, the so-called "Robin Hood" tax (which is levied at 8% on the adjusted net profits in addition to the standard corporate income tax rate), are obliged to pay an additional (flat) 1.05% of their net sales revenues.

Due to the mostly progressive nature of these new taxes, the legislator introduced an anti-avoidance measure, whereby related parties should pool their tax bases, and compute the tax accordingly.

These new taxes may be booked as an expense, i.e. they will reduce the net profit of the affected entities, and as such, the corporate income tax base.

Due to the extraordinary nature of these taxes, and the way in which they were introduced, they may be prone to challenges before various international and domestic judicial fora.