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The Hungarian tax system will continue to be one of the most competitive in Europe, as confirmed by the OECD’s recent rating, the Ministry of National Economy told MTI on Saturday.
According to the statement, on January 15 the OECD (Organisation for Economic Co-operation and Development) published a list of countries whose global minimum tax rules meet the requirements of their model rules as a result of a transitional qualification procedure. In the case of Hungary, the domestic rules for both the qualified domestic additional tax and for the income tax on the return of income (IIR, Income Inclusion Rule) have been recognized. Furthermore, the domestic additional tax also qualifies for a safe harbor exemption.
The recognized qualification brings significant benefits to domestic businesses affected by the global minimum tax.
The country’s highly favorable and internationally competitive tax environment strengthens Hungarian businesses and contributes substantially to improving economic performance,
the Ministry emphasized.
They added that the Act LXXXIV of 2023 on Top-Up Taxes to Ensure a Global Minimum Level of Taxation and on Related Amendments to Certain Tax Acts (Global Minimum Tax Act) entered into force in Hungary on 31 December 2023. The global minimum tax regime generally covers groups of companies with consolidated annual revenues of more than €750 million and provides for a minimum tax rate of 15%, they explained.
Following a specific request from countries that have introduced a global minimum tax regime, the OECD has examined whether the rules introduced are in line with expectations under a transitional procedure.
Hungary’s rules for the domestic additional tax met the requirements of the procedure and Hungary was granted a qualified classification for the IIR tax as well, the Ministry stressed.
This is an international confirmation that the Hungarian tax system continues to meet international standards, making it one of the most competitive and business-friendly tax environments in Europe and thus still worth doing business in Hungary.
The advantage of the qualified rating is that the rules on the list published by the OECD must be considered as equivalent by all other countries. In other words, if the group pays the amount of the additional tax calculated on the Hungarian operation in the form of a qualified domestic additional tax in Hungary, the other countries of the group cannot collect additional tax, they said.
It was explained that, with regard to the IIR tax, the qualification means that if a domestic ultimate parent company pays the full amount of the IIR tax in Hungary on foreign subsidiaries with a tax burden below 15 percent that do not pay the recognized domestic additional tax, no other country can levy additional tax.
The OECD has also stated that the Hungarian recognized domestic additional tax qualifies for a “safe harbor” exemption, which also provides significant administrative relief for the groups concerned. Once the recognized domestic additional tax is calculated for a Hungarian subsidiary, it cannot be recalculated in another country. The tax collected in Hungary must be accepted and Hungarian subsidiaries in the country of the parent company must be exempt from the additional tax there, the statement pointed out.
Via MTI, Featured photo via Pixabay
