Hungary: Corporate, individual income tax legislative proposals; indirect tax measures

Hungary: Tax legislative proposals

Hungary’s government published tax proposals that, if enacted, would make changes to Hungarian tax law affecting both corporate and individual taxpayers.

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Corporate tax proposals

The proposed changes to the corporate income tax and dividend tax would:

  • Amend the rules on tax avoidance, so that if the “main purpose” (instead of the “only purpose”) of a transaction is to attain tax advantages, then related expenses or tax benefits would not be allowed
  • Provide that with respect to “privileged transformations” and “privileged transfer of assets,” the taxpayer would need to certify that the transaction is based on real business and commercial reasons
  • Impose new rules on receivables from affiliated companies 
  • Revise the tax benefits available for expenses related to renovations of monuments, buildings and structures
  • Reflect the base erosion and profit shifting (BEPS) and EU nexus approaches to provide a new limited definition of “royalties”
  • Impose limits regarding the purchase of intangible assets and research and development (R&D) services from affiliated companies 
  • Clarify the method for calculating income and profit minimum levels and conditions for the development tax allowance
  • Revise the rules concerning real estate investment trust (REIT) status

Individual tax proposals

Among the tax proposals affecting individual taxpayers are new standards for determining the tax residence, and for work assignments at locations different from the workplace. Related to these proposals are measures concerning employer-provided housing benefits. Other proposals would affect retirement plans and social security contributions.

Indirect tax proposals

There are other measures concerning the “local business tax” and certain indirect taxes including a bank tax (a special tax on financial institutions), the value added tax (VAT), the excise tax (duty) on fuels and tobacco products, the advertising tax, and the vehicle tax.

 

Read a May 2016 report [PDF 246 KB] prepared by the KPMG member firm in Hungary: Expected amendments to the tax legislation in line with draft Law No. T/10537

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