We spoke to Judit Jancsa-Pék, partner and senior advisor at LeitnerLeitner, regarding the most important tax changes of the current year.
What are the most important tax changes this year?
One of the most important changes is the new eVAT/M2M system, which can help taxpayers simplify the preparation of their VAT returns. This also shows that digitalization is progressing quickly not only in the area of sales tax, but in the entire tax system. The NAV tax office has so much data that it may know the individual companies better than their managing directors. In this way, it is able to monitor companies remotely and specifically scrutinize those companies where it is almost certain to find problems. It is therefore important to constantly check internal processes and always be prepared for an audit.
There are also some important changes to transfer prices. The strict application of the median adjustment rule and the increasingly complex reporting requirements present companies with new challenges.
In the past year, the tax rules governing the administration of trusts have changed several times, prompting family businesses to set them up in a hurry, although working under time constraints is never the best solution. This year should be a time of consolidation. Our clients can rely on the support of the LeitnerLaw law firm.
Finally, the GLoBE tax should be mentioned, which affects corporations and provides for an additional tax if the effective tax rate is below the agreed minimum rate of 15 percent.
What are the main changes in accounting?
As already mentioned, one of the most difficult tasks for companies is adapting to the new GLoBE system. The complexity of the topic requires the joint support of tax and accounting experts regarding tax forecasting and deferred taxes. In order to put companies affected by GLoBE in a better position, deferred taxation has just been included as an option in the Hungarian accounting standards. The issue must also be addressed in the meantime up to 2023, not only from a tax but also from an accounting perspective, as this year’s decisions will have a lasting impact on taxation for the period from 2024.
What tax changes would you most like to see and how likely are they?
It would be nice if not only the support of so-called “spectacular team sports” were exempt from corporate tax, but also the support of health facilities and environmental protection projects. Of course, this decision does not only depend on the Hungarian decision-makers, but would also require negotiations at EU level. Even if the Hungarian side had the intention and the budget situation allowed it, it would still be a lengthy process to implement this.
What changes in accounting do you most want to see?
Digitalization will and must change the classic image of accounting. It offers accountants the opportunity to automate many repetitive and time-consuming tasks. Using specialized software, they can automate processes such as data entry, invoice management and expense recording. This offers numerous benefits that help streamline the financial reporting process and improve accuracy and efficiency. By reducing manual processes and automating certain procedures, it can make the daily work of the responsible specialists easier. Many fear that this might make the accountant’s work unnecessary. This development might only lead to a change in activity: traditional accountants become consultants who think for their company, analyze processes and support them with important suggestions on this basis. This change is already underway. We must use it to the advantage of everyone involved.
What awaits companies in the next few years?
A lot is changing in international taxation, for example VIDA is coming as a digital solution at the European level for VAT. In addition, the introduction of DRR, a transaction-based approach, is imminent. DRR stands for Digital Regulatory Reporting and will enable all multinational companies to uniformly implement regulatory reporting rules across member states. As the world becomes increasingly digital, tax authorities are trying to transform their traditional reporting systems into digital platforms as quickly as possible. DRR can be an answer to this digital transformation, which presents new challenges for multinational companies and new opportunities for tax authorities.
In summary, data provision at EU level should be further developed, which will help reduce the administrative burden on companies and thus ease the burden on the economy.
What else can we expect?
Among other things, another package from the EU Commission, which consists of three legislative proposals: the Framework Directive on Income Taxation (BEFIT), a proposal to introduce a head office tax for small and medium-sized enterprises (HOT) and a Transfer Pricing Directive (TPD).
Under BEFIT, companies belonging to the same group would calculate their tax base according to a common set of rules. In this way, an aggregate tax base would be divided among the group members. The HOT proposal would allow SMEs operating across borders through permanent establishments to interact with just one tax administration, including reporting and paying taxes, rather than complying with several different tax systems. The Member State where the head office is located would pass on all tax revenue to the countries where the permanent establishments are located. In turn, the aim of TPD is to harmonize transfer pricing regulations within the EU and ensure a common approach to transfer pricing issues.
How do you assess your company’s supply of well-trained young talent?
Like many other companies in the financial sector, we also have difficulty finding well-trained applicants. We offer young people who come to us flexible working hours, a four-day week in the summer, the opportunity to work from home, a pleasant working environment, ongoing training and numerous career opportunities.
LeitnerLeitner is one of the most influential tax advisory, accounting, auditing and legal advisory firms in Central Europe with global coverage through the Taxand and Praxity network.
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