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01 February 2019

Hungary’s tax system offers benefits for migration of hybrid entities, including advance rulings

In addition to the move of management activities to Hungary, Hungarian case law has recently enabled legal migration as well. Both types of migrations can help taxpayers to eliminate hybrid entities and/or instruments from their corporate structures that face a constantly growing pressure from legislators.

The Hungarian Ministry of Finance has recently confirmed that it is possible to obtain binding rulings on both legal migrations and for migrations only involving the move of mind and management to Hungary.

The recent favorable changes in Hungary may affect – among others – Dutch limited partnerships (CVs) and US LLCs.

Entities may be migrated to Hungary from non-treaty/offshore jurisdictions as well. Following the migration to Hungary, European Union (EU) entities may also be merged into a Hungarian entity through a tax-neutral cross-border merger.

Migrated companies will become subject to Hungarian corporate income tax and will be entitled to the benefits of the Hungarian corporate income tax regime, such as:

  • Statutory corporate income tax rate of 9% – the lowest among all EU Member States – with a possibility to reduce the effective tax rate below 9%
  • Full participation exemption (i.e., applies to qualifying dividends, capital gains, foreign exchange gains)
  • No withholding tax (WHT) on outbound payments under domestic law
  • Access to approximately 90 double tax treaties, generally with favorable WHT rates

For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Ltd., Budapest
  • Miklos Santa | miklos.santa@hu.ey.com
  • Tibor Palszabo | tibor.palszabo@hu.ey.com
  • Hans Kleinsman | hans.kleinsman@hu.ey.com
Ernst & Young LLP, Eastern European Business Group, New York
  • Gabor Kiss | gabor.kiss2@ey.com
Ernst & Young LLP, Eastern European Business Group, San Jose
  • Richard Kocsis | richard.kocsis1@ey.com

ATTACHMENT

Document ID: 2019-5155

 
 

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