2016 will be the year of simpler and lower taxes in Hungary which will leave more money at families. From the aspect of law-abiding enterprises, 2016 will also be a year of recognition, as companies that qualify as “reliable taxpayers” will enjoy a number of advantages.

The fact that the rate of personal income tax is lowered from 16 percent to 15 percent as of January 2016, involves 4.5 million people. Thus, the Hungarian personal income tax rate becomes the lowest within the European Union. Thanks to this measure, the amount of tax paid will fall by HUF 30 000 per person.

The family tax allowance for parents with two children rises by 25 percent next year, thus families with two children will have HUF 60 000 more per year. Taking into account the combined effect of tax rate cut and the higher family tax allowance, HUF 120 thousand more will be added to the budget of a family with two breadwinners of average wages.

In order to combat the black economy and assist those with low incomes, the VAT rate on pork will fall, as of 1 January 2016, from the current 27 percent to 5 percent.

As of 2016, it will be even more reasonable to purchase an environmentally friendly electric car as these will be exempt from car registration tax, transfer duty, motor vehicle tax and company car tax.

The National Tax and Customs Administration (NAV) will assist in the filling out of tax returns of almost 1.5 million people. To this end, so-called taxpayer declarations will have to be submitted to the NAV or employers by taxpayers who only earn taxable income in Hungary from employers determining the tax advance and who also comply with other conditions set forth by the law.

As of 2016, a taxpayer qualification system will assist law-abiding enterprises. The NAV will conduct a quarterly review of companies’ tax compliance. Those with the best marks will qualify as reliable and be given a number of advantages. For example, tax controls will be limited to 180 days, the tax penalty or default penalty may not exceed 50 percent of the fine which can be levied under ordinary regulations; in case of incompliance with certain reporting requirements or delay the tax authority will – without imposing a fine – call upon the taxpayer to comply with the requirements and they can only issue a default penalty in case the warning goes unheeded.

(Ministry for National Economy)