On 4 June 2022, the Hungarian government adopted a new government decree introducing sector-specific taxes to companies viewed by the government as generating "extra profits" in the current adverse economic situation. Amongst other sectors, the extra profit tax is levied on electricity generators, which are or were entitled to the KÁT, METÁR-KÁT or METÁR-premium renewable support systems, but exited these systems. The likely justification for this is that current market prices for electricity are significantly higher than in the available price-support system, and the government views the excess as a non-planned additional profit compared to the business model of electricity generators entitled to participate in renewable price support systems.
The tax is imposed on electricity generators who are in commercial operation during 2022 and 2023, but leave the KÁT, METÁR-KÁT or METÁR green premium support systems in 2022 and 2023, either by explicitly exiting or by not entering into them at all (despite being eligible). More specifically, generators with the following characteristics are subject to this new “extra profit tax”:
(a) Generators entitled to mandatory offtake under the KÁT/METÁR-KÁT system who leave or do not enter the KÁT/METÁR-KÁT system and do not join the METÁR premium system, but sell electricity on the free market. The basis of the extra profit tax in their case is the excess turnover reached over the turnover that would have been realised in the KÁT/METÁR-KÁT system.
(b) Generators entitled to a green premium subsidy under the METÁR system who leave or do not join the METÁR green premium subsidy system, but sell electricity on the free market. Similarly, the basis of the extra profit tax is the excess turnover reached over the turnover they would have realised in the METÁR green premium subsidy system.
Importantly, generators under 0.5 MW built-in capacity are currently exempted from the extra profit tax.
The tax rate is 65% (on the excess turnover), and the tax liability is retroactive from 1 January 2022. It is worth noting that this “extra profit” tax comes in addition to the already existing taxes applicable to this sector, primarily the 31% Robin Hood Tax and 9% corporate income tax on profits, and the (up to) 2% local business tax that applies on an adjusted turnover.
Similar to other taxes, the extra profit tax must be self-declared by the 20th day of the month following the given calendar month, with the first payment date being 20 September 2022 for the period up to 30 June 2022.
For further information, contact your regular CMS advisor or local CMS experts.