Taxpayers subject to Act LXXXI of 1996 on Corporate Tax and Dividend Tax („Tao Act”) must submit their corporate tax return for 2024 by 2 June 2025. When determining the tax base for the Tao, it is worth considering the possible tax optimisation options available, which can be exercised even before the end of 2024. The purpose of this article is to present some of these options, in addition to tao, for local business tax, global minimum tax and transfer pricing - without, of course, claiming exhaustiveness.
A good source of investment is the creation of a development reserve
Taxpayers planning to make new investments in the coming years may want to consider setting up a development reserve. This facility can be considered as a „depreciation in advance” for corporation tax purposes: taxpayers can reduce their pre-tax profit by the amount of the depreciation in the year of the creation. It is important to know that in subsequent years, depreciation under the Tao. tv. cannot be deducted as a reduction of pre-tax profit on assets acquired against the development reserve, up to the amount of the development reserve.
In order to reduce the tax base, the amount of the development reserve must be transferred from the profit and loss reserve to the reserve required in the year of formation. In the following four tax years, the development reserve may be used for investment; it may not be used for any other purpose: it may not be used for non-cash contributions, assets received free of charge, or for investment accounted for in connection with tangible fixed assets for which depreciation cannot or may not be charged (except for monuments and buildings and structures under special local protection).
Another important aspect is that the entire amount of the development reserve must be used for investment by the end of the fourth tax year following the year of training. Otherwise, taxpayers will be liable to assess and pay the related corporate income tax on the unused part plus a late payment penalty.
The transfer price may need to be adjusted
In the case of taxpayers who engage in tied transactions, it is worth checking as soon as possible whether the consideration used in such transactions has been constructed in accordance with the arm's length principle. According to Section 18 (12) of the Tao. tv., as a general rule, the median value of the arm's length range is to be taken into account as the arm's length price if the consideration applied by the taxpayer falls outside the arm's length range.
Therefore, if the transfer price in a related party transaction is lower than the arm's length price, the taxpayer supplying the goods or services must adjust the corporate tax base at the end of the year: the difference between the median arm's length price and the consideration in the related party transaction must be recorded as an increase. If, however, the taxpayer can demonstrate that a value within the arm's length price range other than the median best reflects the transaction under consideration, it may take this into account as the arm's length price instead of the median.
However, it cannot be stressed strongly enough that the use of a value other than the median requires a high degree of caution: it is always advisable to support such cases with well-developed documentation, detailing both the main features of the transaction and the functional profile of the parties.
The above-mentioned rules of the Tao Act primarily provide for the adjustment of the tax base, but taxpayers may also choose to account for the amount of the transfer pricing adjustment.
In this respect, we note that with certain modifications, the consideration applied may take on a value within the arm's length price range. This is the case, for example, where a taxpayer amends an invoice for a previous supply of goods or services, or for a purchase of goods or services, or for a purchase of services, or for a purchase of goods or services, or for a purchase of services, or for a purchase of goods or services, and the taxpayer issues or receives an additional invoice for 2024, and the pricing of the goods or services involved in the related transaction changes as a result.
R&D discounts that can be applied retroactively
R&D is supported by the tax authorities through a number of incentives, including corporate tax base tax, local business tax, innovation levy base tax and social contribution tax relief.
According to Section 7 (1) (t) of the Tao Act, the direct costs of basic research, applied research and experimental development carried out within the scope of the company's own activities reduce the pre-tax profit. The relief is available in the tax year in which it is incurred or, at the taxpayer's option, if the cost is included in the inventory as the capitalised value of experimental development (as an intellectual product), up to the amount of depreciation charged in the tax year in which the depreciation is charged.
If the taxpayers' activities meet the conditions for qualifying for R&D tax credits, these credits can be claimed retrospectively, even by self-control, for corporate tax and other taxes - subject, of course, to other restrictions on their use.
Tax base adjustments related to unrealised exchange rate differences
Pursuant to Section 7 (1) dzs) of the Tao Act, the profit before tax may be affected by changes in the exchange rate of financial assets and liabilities denominated in foreign currency. The legislation gives the taxpayer the possibility to reduce its pre-tax profit by the increase in value of its non-hedged financial assets denominated in foreign currency and the decrease in value of its long-term liabilities. To do so, it must account for the change in the foreign exchange rate on an asset-by-asset, liability-by-liability basis at the balance sheet date. It is important to note that the application of this point of the legislation has a retroactive effect: the amount recorded as a decrease in the value of financial fixed assets or an increase in the value of long-term liabilities will increase the pre-tax profit.
Given the volatility of the forint exchange rate in 2024, taxpayers with fixed financial assets and long-term liabilities denominated in foreign currency may want to consider applying the tax base adjustment. It should not be lost sight of the fact that opting for this option may result in a deferred tax liability: when the related asset/liability is eliminated, the pre-tax profit/loss needs to be adjusted proportionally by the amount recognised as a reduction/increase in previous years.
Take advantage of the tax relief for energy efficiency investments and renovations!
The energy efficiency tax credit, which can be claimed in connection with energy efficiency investments and renovations, continues to provide a favourable opportunity to reduce the corporate tax payable. Its main advantage is that it can be used in municipalities not eligible for the development tax credit and regional aid, including Budapest. The taxpayer can claim the relief either in the year of the investment or renovation and for the five years following the year of commissioning, or in the year following the year of commissioning and for the five years following the year of commissioning.
An important rule is that the energy savings achieved through investment or renovation must be assessed and verified by an energy auditor. As the taxpayer must have the energy auditor's certificate in the first year of claiming the tax credit by the time of filing its corporate tax return, it is not too late to reconsider whether there was an investment or renovation in 2024 that qualifies for the tax credit.
If tax advice, then Moore Hungary
To summarise the above, taxpayers should consider what tax optimisation options are still available for the year 2024. However, taking into account that the conditions for claiming corporate tax base and tax relief are often complex, it is advisable to consult tax experts before applying for such relief.
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