December 18, 2023
Hungary offers capital gains tax amnesty for shares that previously didn't qualify
Newly enacted tax legislation in Hungary includes a one-time amnesty for capital gains on shares in subsidiaries that had not previously opted in to the Hungarian capital gains exemption regime.
The Hungarian capital gains exemption regime is optional. Opting in requires reporting the acquisition of shares to the tax authority within 75 days by submitting the appropriate electronic form. Missing the deadline means that the respective participation would not be eligible for the capital gains exemption in the case of future disposal.
Under the regime, assuming that the election was made within the 75-day period, capital gains from the sale and in-kind contribution of shares is exempt after a one-year holding period. The current regime does not apply any minimum shareholding requirement.
There could be several reasons why a multinational with holding functions in Hungary did not opt in to the capital gains exemption regime for certain participations — e.g., the regime was not available at the time of the acquisition or the participation percentage was below certain thresholds that used to apply.
Details of the one-time amnesty
Under the year-end tax bill, taxpayers with shares that currently do not qualify for the exemption now have the opportunity to make the election by submitting the respective form with the tax authority, As a result, their shares would become eligible for the regime. The deemed election date would be 31 December 2023. The conditions of the one-time amnesty are as follows:
The final legislation, as enacted, offers the amnesty for every company in Hungary, whether or not the group is subject to the Organisation for Economic Co-operation and Development's (OECD's) Pillar Two.
Key takeaway: This one-time opportunity is available for all Hungarian companies with shares not currently eligible for capital gains exemption. The respective considerations should be analyzed before making a decision on the election.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), Hungarian Tax Desk, New York
Ernst & Young Consulting Ltd., Hungary (Budapest)
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor