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A favorable innovation: The Corporate Group Taxation

As an essential change in the scope of the corporate tax which has the favorable 9% rate, from 2019 the so-called corporate group taxation will be available in Hungary’s Taxation System. Inasmuch you are planning to form an affiliated company in Hungary, you may want to use the advantages of this innovation, which has several auspicious factors.

With this new concept, significant tax saving conditions can be estabilished in the scope of the affiliated companies, i.a., that the positive and negative tax bases can become consolidated, and the tax benefits in connection with the corporate tax (such as the tax benefits in connection with the developments, with the energy efficiency investments, with the supporting of the team sports etc.) can be requisited for the members of the group much more easier from now on.

Another significant benefit is that, the deals between the members of the group will be exempted from the regulations of the transfer pricing corrections, furthermore the transfer pricing documentary obligations only has to be fulfilled on the level of the group corporate taxation. Above that, the corporate group taxation makes easier the handling of the entreprise’s losses, because from now on the loss of the member of the group will become usable between the other members of the group of the affiliated companies.

Besides that, the claiming of the corporate group taxation for the affiliated companies is a really simple process, the only thing is that, the prospective group members submit a common, written application to the National Tax Authority, for the purpose of issuing the license. The application can be submitted from the tax year’s next to last month’s first day until its 20th day.

For obtaining the license, necessary that, between the members of the group there has to be such a direct majority influence, under which one taxpayer in another taxpayer or another person in the taxpayers has at least 75% voting right or there has to be such an indirect majority influence, under which one taxpayer in another taxpayer or another person in the taxpayers has at least 75% voting right, with the proviso, that the voting right of the intermediate legal person can only be taken into account in connection with the other one which has influence in it, if the influencer has at least 75% voting right in the intermediate legal person.

The group taxpayer’s corporate tax is the group’s tax base’s 9%, which tax has to be divided between those group members which has positive individual tax base, namely in the proportion of their individual positive tax base among themselves, and this tax base can be reduced according to the special rules of the accrued loss of the group taxation.

This innovation also proves that, simultaneously with several other favorable taxation factors, the tax conditions for investors are becoming more and more auspicious in this fast developing EU member state, with which aspects taken into account, it is more worthy to consider the Hungarian company formation for every foreign entrepreneurs, who intend to create a successful entreprise with favorable conditions, within the European Union.