The three-year moratorium period for the application of the increased HUF 12 million threshold for the individual tax exemption expired at the end of 2021. On 19 January 2022 the Council of the European Union allowed Hungary to keep the HUF 12 million threshold unchanged for the next three years, until 31 December 2024. According to the PwC's tax alert, this popular tax treatment method continues to provide a favorable opportunity for small and medium-sized enterprises (SMEs) in Hungary (the other conditions for opting for and applying the exemption remain unchanged).
However, for the SMEs concerned it is also worth looking ahead, as from 1 January 2025, the special regime for small businesses set out in the VAT Directive will change at EU level. The new system will be introduced as part of the so-called Action Plan on VAT, adopted in 2016, which aims to reduce the administrative burden on SMEs and to promote a tax environment that facilitates their growth and the development of cross-border trade.
After the new rules enter into force, Member States will still be able to allow exemption to SMEs established in the Member State, in respect of transactions carried out in the territory of the Member State, whose annual turnover does not exceed the threshold set by such Member State. A single maximum exemption threshold, not exceeding EUR 85,000 or the equivalent in national currency, will be introduced in respect of transactions carried out in the territory of the Member State under a domestic tax number.