Attention: Important deadline! Choosing to enter into corporate income tax groups until 20 November

For the seventh time since 2019, Hungarian affiliated enterprises have the opportunity to form corporate income tax groups for their next business year. For the 2025 business year, companies whose business year corresponds to the calendar year may submit their applications to enter a corporate income tax group between 1 November 2024 and 20 November 2024, and it is also in this period when applications may be submitted in case a new member wishes to join an existing group. Companies whose business year differs from the calendar year can submit their applications between the first and the twentieth day of the penultimate month of their tax year.

There is still time to think over to what extent it would be worth using the opportunity in case of your company. This is a peremptory deadline, which means that a decision on forming a corporate income tax group must be made in the next few weeks. In our newsletter we briefly highlight the most important advantages.

One of the important objectives of the system of corporate income tax groups is to ease the administrative burdens of the enterprises choosing this opportunity, since members of such groups do not, or only partly have to apply the transfer pricing rules in relation to transactions carried out within the tax group, including the obligation to prepare a transfer pricing documentation and the provisions applicable to the mutual adjustment of the tax bases. It is particularly worth considering the option of corporate income tax groups in case of Hungarian affiliated enterprises with a large number of transactions that should be documented, as well in such cases where the determination of the arms’ length price would be difficult, due to the special nature of the transaction. Therefore, by choosing the corporate income tax group, businesses can reduce the costs of the preparation of transfer pricing documentations and eliminate the risk of failure to comply with the documentation obligation (as of 2023, the maximum fine for a missing or incomplete transfer pricing documentation was significantly increased, from HUF 2 million to HUF 5 million per transfer pricing documentation, and from HUF 4 million to HUF 10 million in the case of repeated violations). The obligation to submit a report regarding transfer pricing documentation in the corporate tax return from the 2025 tax year can also be avoided if prospective group members have related party transactions only between themselves.

On the other hand, corporate income tax groups may also bring tax savings in case a member in the group is generating losses, since members of the group may, in accordance with the rules provided, adjust their combined tax base with such losses carried forward. Even though the tax base of a corporate income tax group is the sum of the individually determined, non-negative tax bases of the group members, in other words, the combined tax bases is not netted with the sum of the losses of members closing the year with a negative result, at the same time, the members may offset against each other their losses generated at individual members of the tax group. It requires further consideration if any member of the group is otherwise entitled to use a tax benefit, or it would continue to use a tax benefit it has already started to use, since different rules apply, for example, to the development tax benefit or to the one associated with the support of popular team sports.

When choosing to enter a corporate income tax group, several important factors and conditions need to be taken into consideration. It should be examined, for example, if all of the affiliated enterprises wishing to join satisfy the relevant requirements. Further, the determination of the tax base could also pose challenges: due to the application of the new rule limiting the deduction of interests, choosing to enter a tax group could even be unfavorable for the group.

With a view to the fact that the applicable rules are rather complex, for the preparation of the decision we recommend that you should consult with the tax experts of Forvis Mazars Kft. who are pleased to be at your service in helping interpret the rules specifically from the perspective of your company, weigh the advantages that a tax group could offer, as well as the possible pitfalls, and can support you or, if needed, take the administrative tasks related to the registration entirely upon themselves.