The provisions of the US-Hungary tax treaty on the avoidance of double taxation only apply until the end of the year.Continue reading
Individuals and companies alike may be adversely affected by the Biden administration’s decision to unilaterally terminate the double taxation treaty with Hungary, something that has never been done before with any country with major economic potential.
There will be no major short-term negative economic consequences, but in the longer term the unprecedented decision may create uncertainty among investors, and therefore negative effects may come later: for example, in the form of lack of investment, reduced investment, and the shifting of service functions to other countries, Károly Radnai, Managing Director of Andersen in Hungary and Chair of AmCham Hungary’s Tax Committee told Világgazdaság.
Hungary’s National Tax and Customs Administration (NAV) published on its website that the provisions of the treaty applied until December 31, 2022, so although it has already expired, there will be no change in the tax treatment of income earned up to the end of the year.
Double taxation will mean that anyone who owns U.S shares and makes a profit there will have to pay much more next year,
Világgazdaság noted.
The U.S government’s unilateral termination of the double taxation treaty made 43 years before with Hungary, was announced last July. Minister of Foreign Affairs and Trade Péter Szijjártó said at the time that the background to the US decision was clearly Hungary’s opposition to a global minimum tax.
Minister of Finance Mihály Varga said that the real reasons behind the decision to terminate the agreement are not the tax policy and technical arguments in the official justification, but the fact that Hungary stood up for its own, and in his opinion, the European Union’s long-term interests.
Even in the light of the fact that Hungary finally agreed to the global minimum tax last December in a multi-issue “megadeal,” the United States has not changed its unfavorable decision.
As Hungary Today reported in December, EU ambassadors reached an agreement to implement the minimum taxation component, known as Pillar 2, of the OECD’s reform of international taxation at the EU level. Hungary has been against this decision and only agreed to support it with a condition. The Hungarian business tax is included in the global corporate minimum tax, therefore Hungary does not have to raise taxes.
Featured photo via Pixabay
