Update: 26 January 2023 by Edit Buliczka
Hungary: Return template for 2023 published
The Hungarian Tax Office (HUTA) released the 2023 insurance premium tax (IPT) return template last month.
According to the government decree of 465/2017, return templates must be made available at least 30 days before the due date. The first IPT return of the year is due by 20 February 2023, pertaining to the monthly IPT liabilities for January 2023.
The new IPT return template replicates the template from 2022, though the code, rates and scales for 2023 extra profit tax (EPTIPT) are different.
Coding of the tax returns in Hungary are usually formatted so that the first two digits indicate the tax year – in this case, 23 for 2023 – and the remaining digits, which are typically numbers, specify the type of tax. IPT and EPTIPT fall under the same tax code of 20. Therefore, the IPT/EPTIPT return code for 2023 is 2320.
Based on advice obtained from HUTA, it was confirmed to Sovos that the return template will not refer to the declared EPTIPT prepayment. Instead, the difference between the final EPTIPT liability and the declared EPTIPT prepayment will be recorded as an additional debt or overpayment on the HUTA tax account. As a result, insurers must manually calculate the payable EPTIPT and make their payments accordingly.
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Update: 30 December 2022 by Edit Buliczka
Hungary: Increased insurance Extra Profit Tax 2023 rates
It’s been less than a month since the Hungarian Tax Office (HUTA) published instructions for insurance premium tax (IPT) for 2023 and the rules have already been amended.
The amendment is in line with the recently issued government decree (No. 582/2022) published on 24 December 2022. This alters the tax rates for 2023.
The update affects the final scale (premium collected in 2023 exceeding 36 billion Hungarian Forints) in relation to non-life and life insurance premiums.
The rates for premium amounts collected from non-life policies climbed from 7% to 12%. Rates for premium amounts collected from life policies grew from 3% to 5%.
Need more information about Hungary’s Extra Profit Tax? Speak with our Insurance Premium Tax experts.
Update: 15 December 2022 by Edit Buliczka
Hungarian Tax Office publishes extra profit tax and prepayment rules for 2023
On 29 November 2022 the Hungarian Tax Office (HUTA) published instructions for the insurance premium tax (IPT) rules applicable for 2023 liabilities. This guidance includes the rules for extra profit tax and extra profit tax prepayment payable for 2023.
The information provided for 2022, including the section about the overpayment of the extra profit tax prepayment, is essentially repeated in this guidance. It states that reclaims are possible for any overpaid prepayment. The question is how? Even if the HUTA hasn’t released the referenced 2320 declaration form yet, if the 2320-04 additional profit tax settlement page of the return doesn’t change, the oddity we highlighted in our earlier update on 14 November 2022 still exists. The anomaly is: Is the entire declared extra profit tax payable again? Can we deduct the prepayment that was previously made? If yes, how?
Another notable piece of information in the new guidance is the date of the extra profit declaration for 2023. It states that the due date is 30 January 2024. This date is 31 January 2024 according to the government decree.
We are hoping these anomalies will be cleared before the extra profit tax for 2022 is due, that is by 31 January 2023. We are going to update this blog once new information is available.
Read our IPT compliance guide for further information.
Update: 15 November 2022 by Edit Buliczka
Hungary: anomalies around insurance premium extra profit tax
On 2 November 2022 the Hungarian Tax Office (HUTA) published the declaration form for settling the insurance premium extra profit tax or supplemental insurance premium tax (EPTIPT) prepayment and the extra profit tax.
In this update we will be discussing anomalies around the declaration form’s publish date, its content, and its guidance.
Facts about insurance premium extra profit tax in Hungary:
- The government Decree of 197/2022 (the Decree) was published in the Hungarian Official Gazette on 4 June 2022.
- Extra profit tax prepayment is due by 30 November 2022 based on premium amounts collected between 1 July 2021 and 30 June 2022.
- Extra profit tax is due to be paid on premium amounts for the period of 1 July 2022 and 31 December 2022 by 31st January 2023.
- The adjusted declaration form (no. 2220) was published on 2 November 2022
- Prepayments are for prepaying certain but dedicated tax liabilities. For example: Italian Insurance Premium Tax (IPT) prepayment is for collecting the final IPT due earlier. Any prepaid amounts can be offset against the final IPT liabilities.
The publish date of the extra profit tax declaration form
1. In its guidance issued to Sovos, HUTA confirmed that if an insurance company with Hungarian tax registration terminates its taxable activity in Hungary, deregistering between July 2022 and the issuance of the declaration form, the company is liable to declare its extra profit tax liabilities at the date of the deregistration. HUTA adds that since the Decree determined a final settlement deadline of 30 November for extra profit tax prepayment and 31 January 2023 for extra profit tax, the deregistering insurer can and should fulfil its obligation before these final deadlines. The compliant approach for the date of deregistration in Hungary is 15 days following the termination of the activity.
Anomaly: How it is possible to settle extra profit tax liabilities and submit a declaration (online submission is compulsory in Hungary), for example on 15 September, if the declaration form has not been published by that date?
2. According to a government decree (No. 465/2017 on the detailed rules of tax administration) the declaration forms should be published at least 30 days before the tax due dates unless there were adjustments in the regulation during this period.
Anomaly: Although both 31 October and 1 November were public holidays in Hungary in 2022, the phrase “at least” suggests the form was published before the public holidays, leaving more than 30 days for taxpayers to prepare rather than less.
Extra profit tax declaration form and guidance
1. Separate sheets were created in the declaration form for ‘normal’ or monthly insurance premium tax (IPT), the insurance premium extra profit tax prepayment and the insurance premium extra profit tax. The sheet for the settlement of extra profit tax does not include a line to deduct the amount of the prepayment.
In the guidance issued by HUTA to Sovos, it states that as the monthly insurance premium tax, the extra profit tax prepayment and the extra profit tax have the same tax code (No. 200), all payments can be automatically offset against each other.
Anomalies:
- Can the extra profit tax prepayment be offset against extra profit tax? If yes, is only the remaining payable or is the excess reclaimable? If yes, where is the payable amount shown on the declaration form?
- Alternatively, is the full amount of the extra profit tax payable (again)? If yes, how can the prepayment be utilised? If yes, this would be against the usual working mechanism of a prepayment regime.
- In accordance with the guidance, is it possible to offset the extra profit tax prepayment against normal insurance premium tax, for example, against November IPT liabilities? It isn’t very likely, would be against a prepayment regime’s usual working mechanism. At Sovos we believe extra profit tax prepayment overpayment can only be offset against ’normal’ IPT once the extra profit tax is declared by 31 January 2023.
2. Based on the guidance and as per the declaration form, corrective/substitute return should be submitted in relation to ‘normal’ IPT, extra profit tax prepayment and extra profit tax if the amount of these liabilities appears to be incorrect following the submission of the return.
Anomalies
- If the amount of the extra profit tax prepayment is required to be corrected and additional prepayment due, but the amount of extra profit tax does not change (note that the calculation periods for these two liabilities are different) when and how can the additional prepayment be utilised?
- The extra profit tax prepayment and the extra profit tax is payable in thousand Hungarian forints. This is clear on the form. But the issued guidance statesthe amount of the adjusted liabilities should be inserted in Hungarian forints and not in thousands.
The above anomalies are just examples around the extra profit tax prepayment and extra profit tax declaration. Sovos submitted queries to HUTA to clarify these anomalies. We predict some of these anomalies will be clarified soon with the issue of an adjusted declaration form and an amended guidance.
Still have questions about Hungary’s extra profit tax? Get in touch with our Insurance Premium Tax experts.
Update: 11 July 2022 by Edit Buliczka
What is Hungary’s Supplemental IPT?
On 4 June 2022, a Government Decree was published in the Hungarian Official Gazette, numbered 197/2022, with the title “About Extra Profit Taxes”. One may wonder why a government decree regulates a new tax method. To answer this question, we need to research and read the Hungarian Constitution and another law about special measurements in case of catastrophes. Adding two new sections to the mentioned law on 25 May 2022 made it possible for the government to introduce the Extra Profit Taxes in a government decree instead of adjusting the relevant laws. The Extra Profit Tax scheme includes the Supplemental IPT. Although the Government Decree refers to particular tax laws, such as the 102/2012 IPT Law, the Extra Profit Tax regulations are not and will not be built into these tax laws.
Overview of the Supplemental IPT
Supplemental IPT is a temporary tax effective as of 1 July 2022 for 18 months and will end on 31 December 2023. This tax is due on non-life and life insurance policies written by both Freedom of Establishment and Freedom of Services insurers. A similar sliding scale system on the income collected is applicable for this new supplemental IPT as it is for the existing IPT. The scales for 2022 are as follows:
- Under 1 billion Hungarian Forint (HUF)
- Over 1 billion and below 18 billion HUF
- Over 18 billion HUF
While for 2023, the scales are the following:
- Under 2 billion HUF
- Over 2 billion and below 36 billion HUF
- Over 36 billion HUF
The rates vary depending on when the taxpayer collected the premium and the type of insurance policies. In 2022 the rates are higher for non-life and life insurance policies than in 2023, also noting that the life rates are half of those applied to non-life policies. For further details about the rates, please read our tax alert, Hungary: Supplemental IPT Introduced Due to Ukraine Conflict.
The declaration and the payment are due by 31 January 2023 and 31 January 2024, respectively. There is also a prepayment obligation for both years with due dates of 30 November 2022 and 31 May 2023. For further details about the prepayment, please also refer to the abovementioned tax alert.
Interesting features about the Supplemental IPT
The introduction of this tax is one of the features which is unique in taxation. In Hungary, in normal circumstances, taxes are introduced, or the existing taxes are modified via laws. Generally, tax laws should be published at least 30 days before they come into effect. In the case of the Extra Profit Tax scheme, the legislative body fulfilled none of the above.
Another interesting feature to mention is that although it is called supplemental insurance premium tax, it is also due on life insurance policies. In Hungary, there is no existing insurance premium tax on life policies as these policies are exempt.
No prepayment is due for the existing IPT, but prepayment is due to be paid for the supplemental IPT.
Supplemental IPT is a type of Extra Profit Tax, but it seems that there is no separate tax code given to it. The Supplemental IPT should be declared on the IPT declaration form and paid to the same Hungarian Tax Office account as the existing IPT.
Anomalies and open questions around Supplemental IPT
The base period to calculate 2022 prepayment is one year, although the supplemental tax is due only for the second half of 2022. On the other hand, the prepayment for the whole 2023 year is equal to the amount of the half-yearly 2022 supplemental tax. As such, insurance companies will likely overpay the tax with the 2022 prepayment. This overpaid tax will then need to be reclaimed or can be offset against the existing IPT or used for the 2023 prepayment or 2023 supplemental IPT. Is it for purpose or just a mistake and it will be amended?
In the guidance issued by the Hungarian Tax Office on 1 July 2022 on supplemental insurance tax rules for 2022, the tax authority mentioned that taxpayers should declare the supplemental tax on the standard IPT tax declaration form, 2220. However, the tax authority did not update the form by 1 July 2022. As the due date of the prepayment and the supplemental tax differ from that of the existing IPT, there is still an open question of how the form will look to make the distinction between the existing IPT, the prepayment and the supplemental tax. Hopefully, a new return template will be published soon to answer these questions.
As explained above, there is still ambiguity and questions around this new tax. Sovos is dedicated to keeping our clients up to date and informing you as soon as the clarified information is available. Please contact our dedicated IPT compliance team if you have any questions.
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