Mária Lakatos

Taxation in General: Hungarian Tax System

Calculation of corporate tax

The basis of assessment is calculated from the pre-tax profits as follows hereunder. Certain items increase, while others decrease the pre-tax profits.

Basis of corporate tax = pre-tax profits + items increasing – items decreasing the basis of assessment.

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Diagram a vállalati adóalap kiszámításáról, nyereség előtti eredmény, növelő és csökkentő tételek.

8. Figure. Process of taxation

Source: by own chart

Seemingly, the role of the adjusting items is senseless as, on many occasions, these items stand in pairs, and by as much we increase the basis of assessment of the corporate tax, seemingly, we reduce it by the same amount. When we break down the whole process into steps, we shall see that part of the deductions are limited, which means that the basis of assessment is reduced only under certain conditions: if they do not subsist, then, according to the rules of accounting the items recognized as costs become the basis of the assessment of the corporate tax.

The original goal of the dual regulations was to eliminate withdrawing income from the enterprise untaxed. On the one hand, it does not accept recognized costs which are not closely related to the entrepreneurial activities, on the other hand, sanctions entrepreneurs, who have reduced their bases of assessment based on some investment benefit but broke the rules thereof. Since 2010, most of the previous benefits have been repealed and, for the time being, the increasing-decreasing pair is set in the Act on Accounting (Szvt).

To be able to better comprehend the reducing and increasing items we have arranged them into a table.

5. Table. Items modifying the basis of assessment of corporate tax

Increasing items	Decreasing items
Depreciation based on the Act on Accounting (Szvt)	Depreciation based on the Corporate Tax Act (tao)
Provisions set up	Provisions used
	Development provision
–	50 % of the proceeds from royalty (up to 50 % profit before tax)
	Benefits for employers
Costs incurred for purposes other than the economic activity	Accrued/deferred loss (Up to 50 % of the basis of assessment calculated without taking loss into consideration)
Part of dividends paid abroad that can be recognized as expenditure	Dividends received
	Benefits for donations to charities
	De minimis benefits

Source: by own calculation

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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