According to the proposed change in the local business tax regulations from 2010 an exemption from this tax will be granted for the part in the local business tax base related to  the revenue from an activity pursued at a foreign establishment. Previously, income from a foreign establishment was only exempted from local business tax in Hungary if a similar tax had been paid in the country of the foreign establishment.
Attempts had been made several times before to abolish the option of deducting the local business tax (recorded as an expense) from the corporate tax base. According to the current proposal, this tax base decreasing item will indeed be abolished as of 1 January 2010.
According to the proposed changes, although being a local tax, the local business tax return will have to be filed with the state Tax Authority and the tax will also have to be paid to the state Tax Authority.
The main objective of this amendment is to simplify taxation. Businesses will not have to file a local business tax return with each and every local government of their permanent establishments and they will not have to make the advance payments and tax payments to them separately. They will therefore be able to comply with these obligations by using a single tax number provided by the state Tax Authority and a single form designated for this purpose.
In the future the state Tax Authority will distribute the collected tax between the local governments in accordance with the relevant tax returns. The deadline for distributing the payments will be thirty days.
It is very likely that the tax audit rights will be transferred to the state Tax Authority regarding the business years from 1 January 2010. According to the new rules proposed, local governments’ tax authorities will only be entitled to hold tax audits until 31 December 2011 regarding the local business tax of the tax years before 1 January 2010.