Mária Lakatos

Taxation in General: Hungarian Tax System

Tax liability, rate of the corporate tax

The taxpayer is to pay corporate tax on the taxpayer’s income. According to the main rule, i.e., in the ordinary case, the corporate tax is equal to 9 % of the basis of assessment (if this is positive).

Obviously, it matters from when the tax accrues and from when becomes a company a tax subject. There are several possibilities, such as the execution of the Deed of Foundation, its filling with the Court of Registration, assignment of a tax number – just to mention a few – from which it could be counted. According to the law, the dates of start and termination of the tax liability of the domestic taxpayer shall be as follows:

the date of drafting the articles of association in the form of a public deed or its countersigning, if the taxpayer can start the taxpayer’s business activities still prior to registration in the Company Register,
the date of making the first legal statement (representation), if the taxpayer’s Hungarian domicile originates from the place of managing the taxpayer’s business,
in all other cases the day on which the taxpayer has been established according to the statutory provision regulating its establishment,
the tax liability of the taxpayer shall cease on the day, on which it is deemed to cease according to the statutory provision regulating its termination, or on the day that follows the one from which for any reason whatsoever the taxpayer does not fall within the scope of corporate tax liability (e.g., its application for registration in the Company Register is rejected, or the registration procedure is terminated).

These conditions regulate also a very important issue, namely, what happens, if somebody becomes subject to tax liability because the place of management of such person changes? E.g., the premises remain where they were but the owners who manage the firm or the employees move elsewhere? In this case the tax liability shall start from the date of the first legal statement (representation,) i.e., from the day the very first action under the changed circumstances is made.

The regulations applicable to foreign entrepreneurs are slightly different. According to these, the corporate tax liability of the foreign entrepreneur shall start from the day his/her/its branch is registered in the Company Register, and cease from the day it is deleted therefrom. The corporate tax liability of the foreign entrepreneur ceases if a liquidation proceeding is instituted against him/her/it in Hungary or, if the proceeding extends also to the Hungarian branch, then it shall cease even if such proceeding is instituted abroad. In the latter case the corporate tax liability of the foreign entrepreneur shall cease from the day before the launching of the liquidation proceedings abroad.

In case that the foreign entrepreneur pursues his/her/its entrepreneurial activities in Hungary through his/her/its premises not registered in the Company Register, then his/her/its corporate tax liability shall accrue from the day on which the entrepreneur makes the first legal statement, and shall cease on the day when the foreign entrepreneur makes a legal statement (representation) resulting in his/her/its ceasing to be an entrepreneur, or in the winding up of the entrepreneur’s premises (including also if the entrepreneur shall continue his/her/is business in the business premises as an European Company or an European Cooperative).

Just note, that the place of management by itself creates business premises, i.e., a corporate tax liability on this ground.

Corporate tax liability in connection with the building and assembling activities has special treatment in every country. The corporate tax liability of the foreign entrepreneur for the construction works performed thereby in Hungary shall start from the day on which execution of the works starts inasmuch as the duration of the construction exceeds that defined in the treaty for the avoidance of double taxation concluded between the two countries, or, if no such treaty has been signed, then the time period of three months. It is important that the continuity of the construction work is not influenced by whether the foreign entrepreneur carries out the construction at the foreign entrepreneur’s or someone else’s premises.

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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