CERTAIN PHARMACEUTICAL COMPANIES ARE EXEMPT FROM EXTRA-PROFIT TAXATION
Government Decree No. 62/2023 (II. 28.) was published in the Hungarian Gazette on March 1, 2023, amending, among other things, Government Decree No. 197/2022 (VI. 4.) on Extra-profit Tax (hereinafter: the "Decree"). The amendment to the Decree specifies which pharmaceutical companies must assess, file, and pay extra-profit tax in Hungary for fiscal years 2022 and 2023.
Before the amendment to the Decree, all those pharmaceutical companies whose primary business activities were either "Manufacture of pharmaceutical preparations" (hereinafter: "NACE no. 2120") or "Manufacture of basic pharmaceutical products" (hereinafter: "NACE no. 2110) were required to pay extra-profit tax. According to the amendments to the Decree, pharmaceutical companies incorporated in Hungary whose net sales revenue generated from main activities from NACE No. 2120 or NACE No. 2110 exceeds 33.33% of their total revenues based on their annual reports must pay extra-profit tax for fiscal years 2022 and 2023.
According to the Decree, companies subject to extra-profit tax obligations include, among others, Teva Pharmaceutical Industries LTD, Egis Pharmaceuticals LTD, Richter Gedeon PLC, CHINOIN LTD (Sanofi's Hungarian operating company), and Béres Pharmaceuticals LTD. The extra-profit tax payment obligation does not apply to companies that generated revenue from NACE No. 2120 or NACE No. 2110 as their primary activities but their revenues from these activities did not exceed 33.33% of their total revenues in fiscal years 2022 and 2023.
By defining the precise threshold at which pharmaceutical companies must pay extra-profit tax, the Decree established that only those companies are subject to the extra-profit tax, which generate at least 33,33% of their total net sales revenue from NACE No. 2120 or NACE No. 2110. As a result, the amendments to the Decree benefit domestic pharmaceutical companies whose net sales revenue do not exceed the 33.33% threshold generated from one of the Decree defined primary activities.
