Hungary does not levy withholding taxes on payments made to non-resident enterprises; i.e., no Hungarian withholding tax applies to interest, royalty, service fee and dividend (etc.) payments. It must be noted furthermore that the double tax treaty network of Hungary is very favorable in respect of interest and royalty taxation, as many of the treaties completely eliminate source taxation of interest and royalties.
Unless a tax treaty prevents the taxation in Hungary of capital gains on real property share deals, capital gains realized upon the sale (or withdrawal) of shares in a so-called "real estate holding company" (see definitions in Section 5.4) by a foreign entity are subject to 9% withholding tax.
There is no withholding tax on profit repatriation from Hungary when distributions are made to entities (except real estate holding companies, see Sec. 5.4.). Distributions to individuals are generally subject to 15% personal income tax, subject to any relief available under an applicable tax treaty.
Liquidation of Hungarian companies and losing Hungarian tax residence by migrating the POEM to another country may result in taxation with regard to the assets and liabilities of the company, as compulsory revaluation has to take place at the time of the liquidation.
In 2019 and 2020, Hungary has introduced a number of anti-tax avoidance measures as part of the implementation of the EU ATAD rules, including exit tax provisions. The transfer of assets or an entire line of business activity to a foreign country may result in taxation upon the transfer. The main criterion is that after the transfer, Hungary remains without any taxation right regarding the transferred assets. The tax base of such exit tax is the positive difference between the fair market value and the capitalized value (book value) of the transferred assets, with a tax rate of 9% to be applied.
Based on the Hungarian Act on Tax Procedures, the tax authorities may (in case of an unreliable taxpayer, must) conduct a tax audit of companies under bankruptcy or a voluntary winding up liquidation and dissolution procedure. The law stipulates that this tax audit should be completed within 90 days (120 days for the largest taxpayers) following the submission of the closing tax return and may cover all tax years that are still open for tax audit purposes.
The period between the end of the previous financial year and the day before the commencement of the liquidation is a financial year for accounting and tax purposes. The company to be liquidated has to prepare an "activity closing return", which in itself includes several kinds of tax returns (wage tax, social security contributions, corporate income tax, etc.). The activity closing tax return must be submitted to the tax authorities within 30 days following the commencement of the liquidation.
For foreign corporations and other legal entities, proceeds from the liquidation of a Hungarian company are not subject to any tax or withholding tax, unless the Hungarian company qualifies as a "real estate holding company" or the participation in the Hungarian company was held by a Hungarian permanent establishment of the foreign corporation/entity.
The following table shows the most up-to-date standard domestic withholding tax rates.
|Capital Gains||0.0 %|
|Royalty Copyright||0.0 %|
|Royalty Patent||0.0 %|
|Royalty Trademark||0.0 %|
|Service Management||0.0 %|
|Service Technical||0.0 %|
*Rates are current as of 02 October 2022