Hungary has a history of providing tax benefits to companies operating offshore: between 1994 and 2006 the Hungarian offshore regime meant a 3 later 4 percent applicable corporate tax rate for companies who "carried out their activity abroad". This beneficial corporate tax rate accompanied to an extensive tax treaty network, with countries like the US and Canada, UK, etc.
With its accession to the EU, Hungary was forced to eliminate its very beneficial traditional offshore regime. However, some new rules, which were implemented in the Hungarian corporate tax law at the same time and which were accepted by the EU plus its extensive tax treaty network makes Hungary an attractive jurisdiction for holding and financing companies as for companies holding and leasing intellectual property rights.
The major characteristics of the Hungarian corporate tax legislation that companies can make use of are as follows:
- corporate tax rate: 20% (16+4)
- dividend received in not subject to corporate tax (except dividend from CFCs)
- capital gains realized on the disposal of registered participation is not subject to corporate tax
- 50% of interest income may be deductible from the tax base
- 50% of royalty income may also be deductible from the tax base
- No withholding tax on dividend, interest and royalties paid
For further details on Hungary as the emerging holding jurisdiction please see the brochure attached:
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Hungarian company formation
