Frequent changes to tax legislation and the levying of new taxes are major hurdles to inward investment into Hungary. Given this, the Hungarian government may be expected to slow down on implementing new taxes, but this is not something that seems likely to happen within the next year.
Advisers in the jurisdiction say that this has an impact on their clients' willingness to enter or further expose themselves to the Hungarian market. "As you can imagine they [taxpayers] are not very happy with the new taxes levied every year, I think that's one of the major hurdles for inward investment," said one adviser.
However, the core of the tax system remains steady and the legal environment is well established. "The basic tax [and legal] system is relatively stable but by introducing new taxes each year it becomes problematic for investors to know their position with respect to their taxable position," the adviser added.
As a case in point regarding uncertainty, this year has seen Hungary draw criticism from the European Commission for amendments to its advertisement tax, which primarily focused on large internet-based companies such as Google and Facebook.
The amended provisions to the tax will mean that from January 1 2017 advertising revenues that have been generated by Hungarian internet users but are booked abroad will be taxable in Hungary, meaning that the tax itself has an extra-territorial effect.
Taxing revenue that is not booked in Hungary presents obvious difficulties, and how successful the collection of the tax will be is not clear. According to some advisers, the severity of the fines that could be levied (around $2 million) give a clear incentive to multinational taxpayers to comply with the provisions of the amended advertising tax.
However, there is positive news for the Hungarian tax authorities. Advisers drew attention to a shift from an aggressive model of tax collection to a more co-operative one, especially in certain key areas. "On VAT, the general attitude of the tax authority is moving in a more customer friendly direction," said one adviser.
But while there are positive developments in some areas, there is a residual aggressive attitude, coming from the tax authorities in others. "In some areas the aggressive attitude remains, but it has been narrowed to various focal points, such as hybrid structures, interest deductions, all kinds of structures where the tax authorities see the erosion of the tax base," said one adviser. "Most of the aggression comes on structures from the principle of anti-abuse."
Hungary may implement the Anti-Tax Avoidance Directive before the EU's own date of January 1 2018. It is further believed that sometime within the next two years the Hungarian government will move to implement the BEPS Project in full. While the anti-avoidance and anti-abuse provisions have been in place for some time, there has been little else in the way of BEPS implementation in the jurisdiction.
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|Corporate Income Tax||10%||19%||A|
|Capital Gains Tax||10%||19%|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||0%|
A The 19% rate is the standard rate of corporate income tax. The 10% rate applies to the first Ft500 million ($1.85 million) of taxable income. All taxpayers must pay tax on the alternative minimum tax base if this base is more than taxable income calculated under the general rules.
B Permanent establishments of foreign companies are subject to special rules for the computation of the tax base.
C Losses incurred before the 2015 tax year can be carried forward until 2025. Losses incurred in the 2015 tax year or subsequent years can be carried forward for five years.
The tax practice at BDO Hungary offers an extensive range of tax services with a focus on general tax inquiries including taxes and duties, tax planning, restructuring and the preparation of rulings. The firm also provides compliance services as well as due diligence and transfer pricing.
The firm is part of the BDO global network of audit and consulting firms and works closely with other jurisdictions to assist with big international projects.
Deloitte in Hungary offers its clients a fully-integrated tax legal and accountancy service, providing all business services that one could reasonably expect. The firm offers accountancy, audit, transfer pricing and tax structuring as well as dispute resolution and litigation services. Because Deloitte has offices across Europe and the world it can offer a service that truly takes account of the international aspect of taxation.
A key contact at the firm is Attila Kövesdy, the partner in charge at the firm's Budapest office, who as well as managing Deloitte's tax functions in Hungary performs the same role across central Europe.
EY offers clients a fully-integrated tax service. The firm can also draw on the expertise of other EY offices based across Europe. The firm assists clients in tax-efficient structuring, tax litigation and controversy, transfer pricing, personal taxation and indirect tax.
Horváth & Partners Law Firm DLA Piper's team of lawyers serves clients of all types, from individual taxpayers to multinational groups, by providing services such as tax structuring advice, advice during audits and disputes and defence during litigation.
IB Grant Thornton's key contact is Waltraud Koerbler, who is the firm's managing partner and head of tax and has been with the firm since 1999. She leads a team which advises clients on a wide range of corporate tax, international tax, indirect tax and tax structuring issues. The firm also provides controversy management and litigation services.
A key contact at Jalsovszky Law Firm is Pál Jalsovszky, who leads a team consisting of one other partner and four tax professionals, two of whom work in indirect tax, two of whom work in corporate tax and two of whom work in tax disputes.
This year saw the firm advise UniCredit in relation to its obligations arising from the Hungarian financial transaction duty working to advise the client on its exposure to the duty in relation to certain corporate banking services.
A key contact at Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie is head of tax Gergely Riszter, who oversees a team of three other tax professionals. The team advises clients on indirect tax, corporate tax, tax disputes, tax compliance and accounting.
The practice primarily advises clients in the IT, TMT, energy and utilities, manufacturing, financial services and education sectors on a broad range of tax issues.
Kinstellar offers tax and legal advice, through its office in Budapest and in eight other jurisdictions across Eastern Europe and Central Asia. The firm advises privately and publicly held Hungarian and international companies on a range of business and tax issues such as tax planning, international tax, capital markets and structured finance, domestic and cross-border M&A, finance, and real estate transactions, litigation, VAT and transfer pricing.
A key contact at KPMG in Hungary is Gábor Beer, who has been a partner at the firm for 16 years and is the head of tax at the firm. His expertise lies in international tax, advisory services and international financial reporting standards (IFRS). Key practice areas for the team he leads include corporate and international taxation, indirect tax and general tax compliance services.
In addition to this, KPMG advises clients on the efficient tax structuring of M&A deals, financial services and all aspects of transfer pricing. The firm has a fully dedicated transfer pricing team as well as a dedicated tax advisory team to ensure that its clients are always receiving the best service the firm can possibly provide.
Lakatos Köves and Partners advises clients of all kinds of tax issues. The firm specialises in VAT advisory and cross-border taxation. A key contact at the firm is Kitti Kristóf, a certified tax expert who has been with the firm since 2014 and who previously worked for two of the Big 4 accountancy firms.
A key contact at OrienTax Consulting is Karoly Radnai, who leads the tax practice alongside György Székely. The firm is especially capable when advising clients in indirect tax, corporate tax and personal income tax, and represents clients from a range of industries.
PwC in Hungary is based in Budapest, and offers a full tax service including audit, legal and accountancy services as well as assistance during dispute resolution proceedings, including litigation. Through its offices worldwide the firm offers a truly international tax service.
Tandax Advisory in Hungary is made up of tax partners Tamás Knébel and Orsolya Bardosi. Knébel founded Tandax in 2012 after 10 years of advising clients as a tax professional at a Big 4 firm. Bardosi joined the firm in 2015 and has 15 years of experience working for Big 4 accountancy firms and international law firms.
Both of the Tandax partners are capable of advising a wide range of clients, including international multinational groups on an array of tax issues including indirect tax, corporate tax, personal tax, tax structuring, the tax implications of M&A transactions and LBO deals as well as tax controversy management and litigation.
Two key contacts at WTS Klient Tax Advisory are Tamas Gyanyi and Zoltan Lambert, who are joint heads of tax at the firm and oversee a team of 20 tax professionals. The firm advises clients primarily in the manufacturing, technology, media and telecommunications (TMT), transport and aerospace, fast-moving consumer goods (FMCG), financial services, energy and utilities, and education industries.
The firm advises clients in corporate tax, international tax structuring, indirect tax, tax controversy and litigation as well as other areas of tax.
|Tier 1 - Hungary|
|Tier 2 - Hungary|
|Horváth & Partners Law Firm DLA Piper|
|Jalsovszky Law Firm|
|Lakatos Köves & Partners|
|WTS Klient Tax Legal Advisory|
|Tier 3 - Hungary|
|IB Grant Thornton|
|Katjár Takács Hegymegi-Barakonyi Baker & McKenzie|