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Law360 (April 22, 2020, 6:06 PM EDT ) Hungary will extend filing deadlines for a range of business income tax returns and lower its payroll tax rate by 2 percentage points in coronavirus-mitigation moves that the government said would provide businesses and households 200 billion forints ($606 million).
In a decree issued Tuesday, the Hungarian Finance Ministry said annual returns for income taxes on corporations and energy suppliers, as well as local business taxes, will be due Sept. 30 rather than May 31. The later deadlines will affect about 600,000 companies, the ministry said.
The social tax rate paid by Hungarian employers will decrease to 15.5% from 17.5% as of July 1, according to the decree, which was issued under a state of emergency declared to contain the spread of the novel coronavirus. The reduction is based on an agreement reached in 2016 among the government, employers and unions to align minimum-wage increases with payroll tax cuts.
"Unlike left-wing crisis management, which is built on tax increases and austerity, the national government helps protect jobs, businesses and families with tax cuts and targeted subsidies," the ministry said in a statement Wednesday following the decree.
Companies will be required to make any outstanding tax payments by Sept. 30. Publicly traded companies, banks, insurers and investment companies will still be required to file annual reports by their spring deadlines, which are staggered, the decree said.
In addition, Hungary's small-business tax will be reduced as of Jan. 1 to 11% from 12%, a measure that's expected to save about 51,000 businesses a total of 10 billion forints, the ministry said.
The decree further allows companies whose businesses have been directly harmed by the pandemic to apply for tax deferrals or tax holidays up to 5 million forints. For the hard-hit lodging industry, the decree provided an exemption from the country's tourism tax until the end of 2020.
The tax rate that employers pay to top up in-kind benefits on SZÉP voucher cards — used by workers to pay for catering, hotel stays and recreation — will be slashed to 15% from the current 32.5%, while thresholds on top-ups of the card will be increased.
The decree ensures that employees who are on unpaid leave maintain their access to health care services by requiring their employers to pay a monthly contribution of 7,710 forints.
Hungary has already implemented coronavirus-related tax measures, including a higher tax burden on banks and a special turnover tax on the retail sector.
The hard-right government of Prime Minister Viktor Orbán has come under criticism for its handling of the pandemic, particularly over Orbán's exercise of emergency powers granted to him by Hungary's Parliament, which his party dominates. Among other measures, Orbán has denied mayors from opposition parties substantial tax revenues in the name of new coronavirus funding controlled by the central government.
Earlier this month, the European Commission, the European Union's main executive body, redirected €37 billion ($40 billion) in structural-aid funding to help newer and poorer EU members cope with the pandemic. Hungary, despite having a relatively low incidence of COVID-19, the respiratory disease caused by the novel coronavirus, got €5.6 billion, compared with just €2.3 billion for pandemic-ravaged Italy. The funding total for Hungary, which has one-sixth Italy's population, is equal to 4% of its gross domestic product.
As of Wednesday, Hungary had reported 2,168 confirmed COVID-19 cases; Italy, which is third in the world behind the U.S. and Spain, had 187,327 cases.
"This windfall of funding for a leader who keeps attacking the EU and the principles on which it is based reflects a broken system of European solidarity," the European Stability Initiative, a Brussels-based think tank, said in a report released over the weekend.
A Hungarian government representative wasn't immediately available to comment.
However, Justice Minister Judit Varga said in a Twitter post Saturday that EU officials and legislators had made "false accusations" against Hungary and were continuing to apply "double standards" in assessing the country's adherence to the rule of law.
--Editing by Neil Cohen.
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