The threshold of VAT exemption may be raised from the current HUF 4 million annually to HUF 12 million next year, Minister for National Economy Mihály Varga told public news agency MTI.

Concerning this issue, the Government has already begun negotiations with the European Commission, as the size of the increase requires the approval of the European Union.  This year, the Government has already doubled the amount set as threshold for those who pay the so-called fixed-rate tax of low-bracket enterprises (KATA) from HUF 0.5 million of monthly revenues to HUF 1 million, and the lower limit for VAT exemption has been lifted to HUF 8 million per year. Through these two measures, small enterprises can save more than HUF 24bn this year, the Minister pointed out.

“However, we do not stop short here, red tape cuts will continue. We want to have a tax regime that is compact, very simple and gives taxpayers the highest possible amount of savings,” Mihály Varga was quoted as saying.

More than 605 thousand taxpayers are seen to benefit from the raising of the threshold of VAT exemption from the current HUF 8 million to HUF 12 million. This amount will be the same as the revenue threshold for those who opt for KATA, and this simple low-tax model for small enterprises may set an example even in the EU, the Minister stated. In case Brussels approves the measure, it may only take a single declaration once a year for enterprises with annual revenues of less than HUF 12 million (EUR 38 700) to fulfil their taxpayer obligations.

As Hungary had agreed to an upper limit of HUF 8.8 million for VAT exemption in the accession treaty with the EU, the Government has submitted a derogation request to the European Commission.

As Mihály Varga stressed, the Hungarian Cabinet has asked for nothing more than a raise that had already been granted for Luxembourg, Latvia, Slovenia, Romania and Italy. If approved, the new regulation may enter into force as early as 1 January 2019, he said. In this case, the measure will help small enterprises save HUF 25bn per year and complete all tax administration tasks in 10-15 minutes every year, he added.

(Ministry for National Economy)