Corporate Tax in Hungary: This article is the second part of a seven-part series introducing the most important rules of corporate taxation in Hungary. In the first part, we outlined the general framework of corporate taxation; now, we turn our focus to special regulations – including trust asset management, corporate reorganizations, the choice of currency, and tax benefits related to donations and investments.
Special Tax Regulations Based on Region or Sector
Hungary does not apply special corporate tax rules to specific regions or sectors. Corporate taxation is uniform, with no industry-specific exceptions.
Taxation of Trust Asset Management
Assets managed under a trust contract are subject to special rules:
- The transfer of assets is exempt from taxes and duties.
- The transferred assets constitute the initial capital of the trustee.
- Distributions to beneficiaries are tax-exempt up to the amount of the capital.
- Only returns exceeding the capital amount are subject to tax.
Condition for Tax Exemption:
If both the settlor and the beneficiary are private individuals and the managed assets consist exclusively of specific financial instruments (e.g., shares, securities), the assets may be exempt from corporate tax.
Tax-Neutral Corporate Reorganizations
The following corporate transactions are generally considered tax-neutral:
- Mergers
- Spin-offs
- Contributions of operating businesses
- Certain share-for-share exchanges
Tax neutrality is conditional upon the same entities appearing among the predecessors and successors.
Accounting in Foreign Currency
Companies in Hungary may choose to maintain their accounting records in a currency other than HUF.
Eligible currencies include:
- EUR
- USD
- Other currencies, only if acceptable as a functional currency for the company in question.
Taxation of Intangible Assets
There are no special corporate tax rules for intangible assets (e.g., software, intellectual property).
General Rule:
Intangible assets must be depreciated based on their production or acquisition cost. Straight-line depreciation within statutory limits can be claimed as a tax benefit.
Deductible Expenses and Donations
In the Hungarian tax system, all expenses that are “customary and necessary” within a given industry are deductible. Main categories include:
- Direct and indirect operating expenses
- Interest on loans
- Salary and related contribution costs
Special deductions include:
- Support for spectator sports
- Support for film production
- Support for cooperative education
- Interest on SME investment loans
- Energy efficiency improvements
- Support for live music services
Conclusion
Hungary’s special corporate tax rules – particularly those related to trust asset management, reorganizations, and deductible expenses – offer significant opportunities for tax optimization. To develop an effective tax strategy, seeking professional advice is highly recommended.
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
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Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57