Hungary: first tax package adopted by Parliament

The first of the year’s anticipated tax changes have been adopted by Parliament and will mostly come into effect from 1 July 2009.

Among the most significant are:

• increasing general VAT to 25% (from 20%) and introducing a new 18% rate for socially sensitive products and services. There are some transitional rules for these changes
• a 5% decrease in employers’ social security (and similar) contributions up to twice the official minimum base salary
• detailed rules for taxpayers on how to reclaim input VAT on goods financed by state subsidies following Hungary’s accession to the EU (originally non-deductible until the ECJ’s judgment in the PARAT case). Taxpayers only have 180 days from 23rd April 2009 to reclaim these amounts
• a slight increase in the upper limit of the lowest personal income tax bracket applicable to income from employment (and similar income). This applies retroactively to income earned from 1 January 2009 onwards

Details of further and more ambitious changes, to take effect from 1 January 2010, will be provided in the next few weeks, as soon as they are available. In the meantime, please contact us if you require more information on these changes or related issues.