While Hungary has long been a preferred place in international tax planning, with a flat 9% corporate tax rate recently introduced, the country has arrived to the forefront of the competition. Adding also the absence of withholding taxes, the participation exemption both on portfolio holdings and intellectual properties, coupled with all benefits of an EU–compliant tax legislation, Hungary is destined to become a popular place for tax experts.
Back in the day, buyers and sellers were better off selling shares in a company with possession of the property, rather than the property itself; but over the years, legislators have chipped away steadily at the benefits of acquiring property through a company purchase. Contrary to common belief, however, buying real estate through a company can still bring a number of tax advantages; and the range of these is set to expand from January of next year.
As it is commonly known, the calculation of the corporate tax liability of Hungarian enterprises is based on the accounting figures. But a nasty surprise could lie in store for those who believe that they can apply the principles of accounting recognition fully in the course of calculating corporate tax.
The recently adopted tax law changes significantly expand the definition of related parties. As of 2015 not only those companies will qualify as related parties which are connected in their ownership chain, but also those with an overlap in their management. As a result, the number of transactions where parties have to apply arm’s length pricing will increase. The new definition may, however, cause uncertainties as well.
The law is constantly in flux. While many people may find this intimidating, for us it’s precisely what makes it so exciting. We’d like to share this attitude with businesspeople and managers, and with those who just have an interest in business law, in the form of a regularly updated blog that discusses the latest tax law and commercial law issues in an accessible style. Feel free to send your questions and suggestions for topics you’d like us to cover to email@example.com.