CLIENT ALERT – HUNGARY: New law on small business lump-sum tax, Changes in energy price caps for domestic consumers

New law on small business lump-sum tax

The new law n°XIII of 2022 on small business lump-sum tax (in Hungarian: “2022. évi XIII. törvény a kizadózó vállalkozók tételes adójáról”, hereinafter referred to as: “New KATA law”) was published in the Hungarian National Gazette on 18 July 2022.

The New KATA law will enter into force on 1st September and from then on, those choosing this fiscal scheme may not issue invoices to companies – this change excludes about three quarters of the approximately 400 000 Hungarians who have been paying their taxes this way from continuing to do so.

The New KATA law also limits the scope of taxpayers allowed to choose this scheme – from 1st September2022, only individual entrepreneur with major occupation can continue to choose the KATA taxation. Companies, law firms and lawyers previously paying their taxes this way will have to choose a different fiscal scheme, which will – most likely – result in an increase of their prices and fees as their fiscal burdens will become more important.

Since the submission of the proposed amendment of this taxation, multiple protests have been held throughout the country. However, the government has not shown any inclination so far to modify the New KATA law, despite concerns raised by The Budapest Chamber of Commerce and Industry (in Hungarian “BKIK”) and the Hungarian Bar Association (in Hungarian: “MÜK”).

Changes in energy price caps for domestic consumers

On 13 July 2022, the Hungarian government declared an energy state of emergency and announced that the energy price caps in effect for households will only be applicable to the average consumptions from 1 August 2022.

The Governmental decree n°259/2022 on the setting of certain universal service tariffs has been published on 21 July 2022. According to the said governmental decree, households will be eligible for the current capped power price (36 HUF per kWh, about 0,0885 EUR per kWh) on electricity usage up to 2 523 KWh per year, but will pay about double of that (70,1 HUF per kWh, about 0,1724 EUR per kWh) for power consumed above the said limit.

For natural gas consumption, the annual usage limit where the capped price (102 HUF/m³, about 0,2508 EUR/m³) will be applicable is 1 729 m³ per year, above which a price seven times greater than the capped one will apply (747 HUF/m³, about 1,8368 EUR/m³).

As according to the new decree, only domestic consumers will be able to buy electricity and gas on the capped prices, it is expected that the 30,000-40,000 micro and small businesses that have so far benefited from the reduced prices will face significant difficulties and will be forced to make important price increases in order to avoid going out of business.

Restriction of the HUF 480/liter regulated price for motor fuel to private individuals 

According to the Governmental decree n°278/2022. on the modification of the decrees related to regulated fuel price, as of 30 July 2022, the regulated (caped) motor fuel price does not apply anymore to vehicles with foreign license plate, nor to vehicles that are not operated by a natural person according to the vehicle’s traffic license (excepting vehicles providing passenger taxi services). As a consequence, vehicles operated by businesses must pay the market price for motor fuel (except taxis).

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