Collective corporate taxation opens new perspectives for companies

Next year the so-called collective corporate taxation which is a popular tax planning technique in Germany and Austria will also become available in Hungary. Thanks to the new opportunity for companies the Hungarian tax system might become more attractive, i.e. it can catch foreign investors' attention and improve the competitiveness of Hungarian corporate groups. Let's see how it works!

Breaking news - The latest tax package draft has been released

On 19 October 2018, a new tax package was presented to the Parliament. Please find the most important amendments of the package here: the threshold of VAT exemption for SMEs will be raised to HUF 12 million, collective corporate taxation is coming, the international tax information exchange increases, the personal income tax liability of insurances taken out by employers is re-regulated, and, last but not least, the rules on the abolition of employer housing subsidies will be clarified.

Future of 5% VAT on residential properties in Hungary

The reduced 5% VAT rate on residential properties undeniably played an important role in strengthening the real estate industry. Although from the outset the reduction was incorporated for a fixed period of four years, between 2016-2019, many expected the long-term continuation of the rule. The Minister of Finance’s summer announcement cut an end for these hopes. The return of 27% VAT on such real estate will significantly affect the overall market; the consequence may be the further increase of property prices, but also the reduction of investors’ profits. Certain prepayment constructions may help to extend the validity of the reduced VAT period, but these require due care and attention from developers, buyers and financing banks.

Actions against tax fraud bring a better world for the good-faith taxpayers too

Considering the low direct tax rates similarly on corporations (9%) such as on private persons (15%), the reducing social security charges (19.5%) and the ceasing sectoral taxes; Hungary has a more and more attractive tax environment, even in a wide international comparison. At the same time, Hungary is continue to play increasing attention to compliance and introducing new and new actions – mainly administrative measures – against tax evasion. This, especially during implementation, undeniably triggers significant costs and administrative burden for the stakeholders. The new era of digitalization; however, gives the role for control solutions that will finally reduce manual administration and “competitive advantage” of tax fraud too.

LeitnerLeitner established a new transfer pricing business line led by a new colleague

As of April 2018 Ágnes Fotiadi joined LeitnerLeitner as the leader of the newly established transfer pricing business line. She has so far headed the Transfer Pricing Unit of the Hungarian Tax and Customs Administration from its establishment. Due to her work, the field has become an internationally recognized area within the Hungarian Tax Authority.

Transfer Pricing: Too Expensive to Ignore

Up to now – Hungary was the first in CEE that introduced statutory transfer pricing documentation requirements in 2003 – very complex transfer pricing requirements pertained to affiliated companies. Therefore, group-pricing should be measured in line with the arm’s length principle and be strictly documented. Moreover, unlike in international practice, the Hungarian transfer pricing documentation obligations cover domestic intragroup transactions too. As tax authorities examine transfer prices very closely, it has become vital for groups to have a consistent, reliable TP-system. This is especially so, considering the record high Hungarian penalties for non-compliance that amount to HUF 2 million (appr. EUR 6,500) per transaction per year.