Hungary: Changes in the tax legislation

In July, the Hungarian Parliament adopted the most recent legislation package amending certain financial laws.

Corporate Income Tax. As of 1 July 2010, the corporate income tax rate applied on the first HUF 500 million of the positive tax base is 10% without any further preconditions. The tax base above this limit will continue to be subject to 19% corporate income tax.

As the 10% corporate income tax rate is amended in the middle of the tax year, this year’s corporate income tax base will be split proportionately according to the calendar days. The taxpayer has to comply with the earlier legal requirements when applying the reduced tax rate (10%) to the first half year’s tax base until HUF 50 million. The 10% tax rate is applicable without any preconditions to the second half-year’s proportionate tax base up to HUF 250 million.

Real Estate Transfer Tax. As an addition to the earlier regulation, the transfer of a real estate owning company’s shares between related parties is exempt from real estate transfer tax. The new rule can be applied to real estate transfer tax cases which were not ruled on by 1 July 2010. The definition of a company owning real estate and the regulation which is applicable for the real estate transfer tax was enacted on 1 January 2010. According to this regulation, the acquirer is subject to real estate transfer tax, if he/she owns (directly or indirectly) at least 75% of a company which owns real estate in Hungary.

Local business tax. Following the adoption of a respective law by Parliament in June, new regulations were introduced placing matters related to local business tax back with local governments as of 29 June 2010. This means that from that date businesses will need to pay all their tax obligations to the competent local tax authority.

The beginning and termination on or after 29 June 2010 of taxable commercial activities, whether pursued permanently or on a temporary basis, will have to be reported to the competent local tax authority from 29 June 2010 onwards.

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