New retail tax in Hungary among governmental COVID-19 measurements

With regard to the COVID19 epidemic the Hungarian Government has prog­ressively implemented certain restrictive measures that may have an impact on the use of commercial stores. Let us provide you a brief summary below on the implemented measures and the affects thereof on non-residential lease agreements.

The scope of the retail tax does not only concern domestic retailers, but it is also applicable to foreign retailers under certain circumstances, expanding its application by empathising that the foreign persons or entities which do not have a Hungarian registered branch office are also fall under the introduced tax obligation in relation to the goods sold to their customers in Hungary, meaning that the e-commerce activity is also taxable under the new Decree. The Decree lists the activities considered as retail activity based on the Hungarian TEÁOR’08 classification system.

The basis of the retail tax is generally the net sales revenue deriving from the taxable activities with special provisions on the adjustment of the basis thereof.

The retail tax is progressive in nature, the retailers with the tax base of less than HUF 500 million are exempted from the retail tax. The additional rate of the retail tax increases progressively as follows:

  • for the part of the tax base exceeding HUF 500 million but not exceeding HUF 30 billion the tax rate is 0.1%;
  • for the part of the tax base exceeding HUF 30 billion, but not exceeding HUF 100 billion the tax rate is 0.4%;
  • for the part of the tax base exceeding HUF 100 billion the tax rate is 2.5%.

Interestingly, a similar tax obligation was imposed by the Government following the financial crisis of 2008 on telecommunications and retail companies, however the Court of Justice of the European Union ruled that the concerned legislation is compatible with the principle of freedom of establishment and does not constitute discriminatory, therefore it is in compliance with the EU law.

The newly introduced Decree is effective until the termination of the emergency situation declared by the Hungarian Government, although it may remain effective following the emergency situation based on the Government’s intention to levy such tax on retailers.

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