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3.7. Tax Consequences of Acquisition or Loss of Tax Residence

The relative effect of the treaty tie-breaker rule is well established in Hungary. A treaty tie-breaker rule only serves the purpose of allocating taxing rights in the case of dual residence and does not affect the corporate tax law or company law status of an entity under domestic law. The tax authority is of the opinion that entities with a Hungarian registered office will generally be considered as Hungarian resident, and that this assumption can only be refuted by proving that the POEM is in another treaty country.

If a foreign entity acquires Hungarian tax residence by moving its POEM to Hungary, basically it does not have to publish financial statements in Hungary, however, it has to keep its book in accordance with the Hungarian accounting rules, and prepare unpublished financial statements fora basis of its CIT calculation. When acquiring Hungarian residence there are no specific rules on the opening method of the books, which can raise difficulties in practice.