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Tax Amnesty and Changes Relating to Offshore Companies in Hungary

Tax Amnesty and Changes Relating to Offshore Companies in Hungary

Hungary
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An amendment concerning offshore companies was adopted by the Hungarian Parliament at the end of 2016, introducing a new tax amnesty and modifying the regulations on foreign companies owned by Hungarian individuals.

According to the new provisions, an amnesty can be applicable for capital income earned until 30 June 2016, by using a preferential tax rate of 10% plus the related self-revision surcharge. Furthermore, until 30 June 2017 individuals can acquire all shares that foreign entities have held in Hungarian companies in favour of such individuals without any penalty, sanction or tax liability. However, such transfers must be reported to the Hungarian tax authority. 

Under the new rules, in order for a company to be qualified as a ‘controlled foreign company’ (i. e. offshore company), the individual shall have more than 50% ownership in the company, instead of the previous 10%. In addition, the company has ‘offshore’ status only if the amount of the corporate income tax paid by the foreign company is less than half of the amount that the company would pay in Hungary.

According to the revised Personal Income Tax Act, the tax burden of the income arising from a low tax-rate state remains 33%, however, contrary to the previous rules, the tax becomes due only when the dividend is paid to the individual. Another novelty is that if such state has a tax convention with Hungary, this rule shall not applicable.  

By Eszter Kamocsay-Berta, 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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