Mária Lakatos

Taxation in General: Hungarian Tax System

Subjects of the corporate tax

Act No LXXXI of 1996 on the Corporate and Dividend Taxes (in Hungarian abbreviation: tao) and the Act No. CVXII of 1995 (the Personal Income Tax) (Szja), discussed previously, starts with the definition of the scope of tax subjects [11], [16]. This scope was extended by three new tax subjects in 2010. According to this new definition and the extension thereof, subjects of the Corporate Tax Act (tao) are the domestic and foreign persons mentioned by name in the Act.

From among resident taxpayers and resident persons

business associations (including also not-for-profit companies), societies, European Companies (including European Holding Companies and European cooperatives),
cooperatives,
state-owned companies, trusts, other state-owned business organizations, undertakings with legal personality, subsidiaries,
law offices, law enforcers at the courts, patent attorney’s offices, a working community with legal personality of private persons, forest owners’ society and from 2005, notary publics’ offices,
organizations of Employee Stock Ownership Plan (MRP by the Hungarian, and ESOP by the English abbreviation),
public benefit corporations, water management associations,
foundations, public foundations, social organizations, public organizations, churches (including also the organizational units thereof having legal personalities listed in the foundation documents or statutes of the specific church), housing associations, and voluntary mutual insurance funds,
institutions of higher education (including also the institutions established thereby), student hostels,
European groupings of territorial cooperation (EGTC),
companies possessing real estate: taxpayers not listed on the recognized stock exchange, subsidiaries of the taxpayer possessing real estate in Hungarian, if the real estate represents more than 75 per cent of the total market value of their assets or if the member (shareholder) of the company or of any of its subsidiaries is a foreign resident for at least one day in a fiscal year in a state with which Hungary has not concluded a treaty for the avoidance of double taxation, or if such treaty has been concluded, then it allows the taxation of exchange gain in Hungary,
one-man companies (we have discussed them already when analyzing the provisions of the Personal Income Tax Act regulating the self-employed).

Definition

Resident taxpayers: Foreign persons whose businesses are managed, or who pursue economic activity in Hungary and have permanent premises are treated as resident taxpayers. Non-resident taxpayers are foreigners, and non-residents, who perform the entrepreneurial activities they are involved in at their Hungarian premises, but keep their places from where they manage their businesses, they cannot be considered as resident taxpayers.

The tax liabilities of the different categories of taxpayers also vary: the tax liability of resident taxpayers extends to their income from Hungary and abroad alike, which is the so-called full tax liability.

The tax liability of the foreign entrepreneur extends only to his/her/its income from entrepreneurial activities carried out at his Hungarian premises, this is why it is called limited tax liability.Further, the Corporate Tax Act (tao) gives a definition of the terms and expressions used therein.

Just a few examples:

Definition

Controlled foreign company: the foreign person in which the taxpayer alone or jointly with its associated companies holds more than 50 % of the voting powers, or a participation in excess of 50 %, or is entitled to more than 50 % of the after-tax profits and during the fiscal year pays less than 4.5 % corporate tax.

Taxpayer: the domestic or foreign person (named in. Tao. 2. § (2)-(4)), who pays the tax.

Turnover: the net sales as defined in the Act on Accounting (Szvt) reduced by the consumption tax, excise tax, interest and interest-like revenues associated with production, the activity, the service or the sales and not recognized among the stocking costs of own products, the interest paid and interest-type expenditure and increased by the revenues from other financial services and net sales of non-financial investment services, the revenues from the activities; reduced by the dividends and profit-sharing received, adjustment of revenues from own real estate in own use, interest recognized as expenditure in the prize of interest-bearing securities, and the amounts recognized on the Indemnification Account as expenditure.

Declared participation: a participation of 30 % or more in a legal person, partnership without legal personality or foreign person (except for controlled foreign companies) established according to the Hungarian statutory provisions, presuming that within 30 days after the acquisition of this participating interest the acquirer reports it to the tax authorities. If he or she fails the 30 days’ deadline there is no room for submitting an application for presenting the reasons. A change introduced in a year is, that irrespective of their volumes the taxpayer can report and declare any additional participations he or she may acquire in the same undertaking and can consider them as declared participation, if he or she already has a minimum share of 30 % in the given enterprise.

Inland/domestic: territory of the Republic of Hungary including the free and the transit zones.

Domestic person: a legal entity, partnership without a legal entity, association of persons, other organization and private persons classifying as Hungarian resident according to the Personal Income Tax Act (szja).

Value of investment: historical value of the intangible asset put into operation.

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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