Participation exemption ’amnesty’

The adopted autumn tax law package provides taxpayers with a favourable opportunity - participations that were not previously declared to the Hungarian Tax Authority (’HTA’) can be declared subsequently for a limited period of time, with the burden of a one-time tax payment.

According to the effective legislation, taxpayers may report (with certain exceptions) their participation acquired in a legal entity established under domestic legislation and in a foreign person within 75 days of the acquisition to the HTA. The deadline is mandatory, i.e. the taxpayer loses their right to submit the report after the above time limit. The legal effect of the notification is that the corporate income tax (‘CIT’) base can be reduced later by the gain achieved on the disposal of the reported shareholding held for at least one year; however, if the taxpayer realizes a loss in connection with the disposal of the declared shareholding, then its amount will increase the CIT base (thus both the gain and the loss will be tax-neutral).

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