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6.6. Excluded and Segregated Income

Exempt Income

Participation-Exemption

Under the Hungarian participation exemption rules, dividends received from domestic and foreign subsidiaries are tax exempt, except for dividends received from CFCs (other than -from 1 January 2021- where the CFC conducts a genuine business) and situations where the participation exemption results in double non-taxation (essentially, as provided for by the EU ATAD directive, where the dividend is deductible to the payer).

Capital Gains

Capital gains are exempt from corporate income if derived on the sale of shares or on the in-kind contribution of shares to the capital provided the shares are:

  • Reported to the tax authority within 75 days from the time of the acquisition; and
  • Held for at least one year.

The participation exemption rules are not applicable in the case of shares held in CFCs.

Royalties

Only 50% of the royalties received are subject to tax (see above).

Separately Segregated and Assessed Income

All income of a company is considered ordinary business income and is taxed as such. No separate assessment or segregation rules exist, save for a per-income and per-country segregation in the case of foreign-sourced income.