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5.6. Qualification of Specific Income Categories for Tax Purposes

Hungary generally does not levy withholding tax on payments made to non-resident corporate entities except in the case of capital gains on the disposal of shares in a so called “real estate holding company” (see Sec. 8.2.) where a 9% withholding tax applies. Non-residents are further taxable in Hungary with respect to income earned through a Hungarian permanent establishment or the rental or sale of Hungarian-situs real estate (as detailed in Sec. 5.5. above). Income earned from real estate related activities is qualified and taxed as business profit, rather than as income from immovable property. Aside from the preceding, there are no special rules dealing with qualification of certain types of income. All types of income are treated as ordinary business income for tax purposes and no special rates apply. The lack of rules as to the qualification of specific types of income (for example whether technical service fees are treated as royalties or business income) is often not very relevant from a Hungarian perspective given that the country generally does not levy withholding tax on most payments to non-resident corporate recipients.