The deadline for creating group taxation arrangement is approaching

From the tax year of 2019, with the permission of the Hungarian State Tax Authority, companies have the opportunity to choose corporate group taxation. Those, at least two companies may create a corporate tax group that meet – among others - the following conditions:

• Taxpayers that qualify as Hungarian resident
• The group members should be related parties due to having at least 75 percent voting right in each other or having another person who controls at least 75 percent of the voting rights in the group members
• The annual report of the group members should be prepared uniformly and the balance sheet date of the group members should be the same.

Advantages

In case of group taxation arrangement, members of the group may achieve cost and tax savings:

• The carry forward losses generated during the period of group taxation may be taken into account by the group, under certain conditions;
• The members of the group are exempted from the transfer pricing documentation obligation
• The members of the group are exempted from the transfer pricing adjustments for their intra-group transactions (exceptions may be made for pre-group transactions)
• The group is considered to be one single taxpayer for the purposes of tax relief; the group may benefit from the tax relief if one of the group members meets the conditions.

Deadline

For those companies whose financial year are identical to the calendar year and who would like to take advantage of the group taxation arrangement, the application should be submitted between November 1, 2019 and November 20. In case they miss the deadline, the applications will be rejected by the Hungarian Tax Authority.

In the case of those company groups where the conditions are fulfilled, it may be worth considering the option of group taxation arrangement.

How can BDO help?

If you have any questions regarding the group taxation arrangement, BDO tax advisors are at your disposal:

• Preliminary consultation and calculation regarding the available tax advantage
• Preparation and submission of the application/notification form
• Preparation of the obligatory record-keeping policy