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The Extended Rules of the Exit Taxation are Applicable since 1 January 2020

The Extended Rules of the Exit Taxation are Applicable since 1 January 2020

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The Hungarian Parliament approved certain amendments to the Hungarian Corporate Income Tax Act in July 2019.

Most of the changes, such as the rules of the exit taxation, are applicable from 1 January 2020. The exit taxation has been introduced in Hungary by implementing the Anti Tax Avoidance Directive (ATAD) regulations. In general, exit tax rules would apply when a taxpayer transfers its place of effective management to a foreign country, and as a result becomes a foreign tax resident, or when a taxpayer transfers its assets or business activities connected to its business in Hungary to a registered seat or branch located in a foreign country, and as a result the transferred assets and business activities would not be taxable in Hungary.

In this case the taxpayers will be required to increase their tax base with the amount by which the fair market value of the transferred assets and activities exceeds the book value. The exit taxation is not unknown in the Hungarian tax system, since it has been applicable to the associated enterprises. The new rules extend the obligations, and the Hungarian tax authority has now the right to exam the transactions between independent parties or parties who seem to be independent. Subject to certain conditions, the exit tax can be paid in five instalments if the effective place of management, assets or activities are transferred to an EU Member State or an EEA country that has a mutual assistance treaty for the recovery of claims relating to taxes concluded either with the EU or with taxpayer’s EU Member State. Special exemptions may apply.

By Eszter Kamocsay-Berta, Managing partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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