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Tax groupings for CIT purposes in Hungary

Tax groupings for CIT purposes in Hungary

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One of the most important elements of the tax package adopted by the Hungarian Government on 13 November is to create the possibility of tax groupings for CIT purposes from 1 January 2019.

One of the main advantages of the group taxation is that the members of the group are exempted from the obligation for supporting the prices applying between the associated enterprises (i.e. the transfer pricing documentation) regarding the transactions between the group members. The other main advantage is the determination of the common tax base. In order to determine the common tax base of the group, the tax bases of the members having positive tax base must be added up first, then the amount (or a part of the amount) of the tax bases of the members having negative tax base can be deducted (except for the deferred losses generated prior to becoming a member). The deduction is the half of the amount of the added positive tax bases. The members of the tax groupings for CIT purposes may be corporate taxpayers that are related companies based on at least 75% voting right. Not only direct, but indirect voting rights may also give the possibility for the concerned taxpayers to become members of the same group taxation, but only if the direct voting rights underlying the indirect voting rights reach or exceed the rate of 75%.

The establishment of a group taxation for CIT purpose requires the authorization of the Hungarian tax authority. For the first time, the application must be submitted between 1 and 15 January 2019, which is a mandatory time-limit.

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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