Higher VAT and corporate registration fees, lower corporate tax, and changes relating to in-kind benefits and investment incentives: these are among a slew of tax changes passed by Parliament last Monday.

The 5% VAT category will contain products earlier classified in the 0% category, including pharmaceuticals, formula milk and special nutrients for human consumption. The 15% category will contain goods including dairy products, mineral fuels, passenger transport and printed materials. The rate of corporate tax will go down from 18% to 16% next year, while the rate applicable to offshore companies will rise from 3% to 4%. Erdôs noted that the 16% rate will only be applicable from the tax year that starts in 2004, which means companies that start their fiscal year at the end of this year will only benefit from the change in 2005.

Companies investing Ft 3 billion (€10.9 million) into R&D will receive the tax incentives, rather than the current minimum of Ft 10 billion. In underdeveloped regions, the amount will go down from Ft 3 billion to Ft 1 billion. In addition, the period for which the incentive will be available will double to ten years. Similar changes affect tax incentives granted for creating new jobs. They will be available to companies creating 100 jobs, instead of the current 500. In underdeveloped regions, the minimum job creation requirement will go down from 300 to 50.

Another change last week widened the field of companies who can opt for the 15% flat-rate tax scheme known as the simplified entrepreneurial tax (EVA), which replaces VAT, the company car tax, corporate tax and personal income tax.

From now on, this will be available to partnerships and self-employed entrepreneurs with annual revenue of Ft 25 million and below, rather than the current Ft 15 million.

Income tax brackets moved up by approximately the rate of increase in wages. There is now an 18% tax on annual incomes under Ft 800,000, 26% on incomes in the Ft 800,000–Ft 1.5 million range, and 38% on incomes over Ft 1,500,000.

The new law canceled income tax benefits on certain investments, such as stocks. Both positive and negative changes were noted with regard to new legislation on taxation of fringe benefits.

(BBJ 17.xi.03)