|WTS Klient Tax Advisory|
|DLA Piper Horváth & Partners|
|IB Grant Thornton|
|Jalsovszky Law Firm|
|Kajtár Takács Hegymegi-Barakonyi Baker McKenzie|
In 2017 Hungary introduced the lowest corporate tax rate in the EU in an effort to attract large foreign companies to set up business in the country. The tax rate was cut to 9% for all businesses. The previous rate was 10% for companies with revenue of up to $1.8 million and 19% for those above this threshold.
"One new trend that is overlooked is the change in corporate income tax. It has had an indirect impact on transfer pricing," said Zoltán Lipták, a partner at EY. "In the new BEPS environment it sends a clear message to multinationals that Hungary is a significant place. It is easy to build on, even in a BEPS environment."
Hungary has undergone a slew of legal changes in recent years, and tax professionals expect more of the same.
"Hungary is always interesting because the Hungarian government changes tax laws as frequently as Cristiano Ronaldo changes his girlfriend," commented Tamás Gyányi, partner at WTS Klient Advisory in Budapest.
The Hungarian government adopted country-by-country reporting (CbCR) requirements into domestic legislation in May 2017, in accordance with the OECD's BEPS principles.
However, experts and taxpayers were less fazed by the new TP requirements introduced this year because the country has had its own TP legislation in place since 1992.
"In the past, transfer pricing regulations have caused a lot of disturbances. You must have the correct market documentation and the correct databases," said Gábor Szarka, head of the department of valuation and transfer pricing at Grant Thornton. "This has been going on for a while, so companies are used to this."
CbCR covers multinational enterprises with revenues of €750 million ($884 million) or more within the financial year preceding the first reporting year.
"There are only two Hungarian companies that are big enough entities to report CbCR," mooted Gyányi.
Those that fail to submit, are late or provide false or incomplete information are liable to penalties of up to HUF20 million ($76,000). The ultimate responsibility to comply with CbCR falls on the parent entity, on behalf of its multinational entities.
As an EU member state, Hungary is also expected to introduce the EU's Anti-Tax Avoidance Directives (ATAD 1 and 2) into domestic law by December 2019.
National Tax and Customs Administration
Large Tax Payers' Directorate
1077 Budapest, Dob utca 75-81
Tel: +36 1 428 5100
(As of July 2017)
|Corporate tax||9% (a)|
|Branch tax||9% (b)|
Net operating losses (years)
Source: EY and Deloitte