We have already discussed plans for the introduction of a global minimum tax. Last week, Hungary agreed to join the convention that aims to set corporate tax at a 15% minimum for international companies that have a yearly revenue above EUR 750 million.

Global minimum tax at 15%

As discussed earlier, the main objective of the introduction of the global minimum tax is to deter international corporations from setting up shell companies in tax havens, this way avoiding the payment of a corporate tax that would be higher in their place of actual activity. However, several issues and concerns were raised, and since the last meeting of the OECD, we already know more.

First of all, the global minimum tax will apply only to international companies with a revenue over EUR 750 million. This way it will hardly affect any small and medium sized companies in Hungary.

Another important clarification is that the base of the 15% corporate tax can be reduced with various items that might include the local business tax in Hungary. Moreover, thanks to a procedure called “substance carve out”, thanks to which in a transitional period of 10 years, 8% of the value of material assets, and 10% of salary costs can be deducted from the tax base in Hungary.

Accordingly, the Hungarian Ministry of Finance deems that only a fraction of companies active in Hungary will suffer negative effects due to the introduction of the global minimum tax.

Global minimum tax to be introduced in just 14 months (but delays are almost certain)

Participants have set an ambitious timeline that hopes to finalize details by the end of October 2021. If that is achieved, the global minimum tax might be implemented as early as 1 January 2023. However, for implementation, the EU must first create the guidelines for implementation, which will have to be ratified by the member states, and this will postpone the deadline.

There are rumors that the 9% corporate tax in Hungary will remain unchanged, and an additional regulation might be introduced to manage the taxation of affected entities. Moreover, the above mentioned 10-year transition period may keep Hungary an attractive destination for setting up the EU headquarters of an international company.

At the same time, small and medium size companies can most probably continue to take advantage of just the 9% corporate tax that remains the lowest in the EU for now.

Want to keep on top of regulations?

Helpers Finance offers accountancy and bookkeeping services to small and middle-sized companies in Hungary. Let us take care of your financial administration, keeping your company compliant with and you up-to-date on regulations, while you can focus on the growth of your business. Send us an email or fill in our contact form to learn more, or call our office on +36 1 215 0712.

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