Hungary

Hungary can be considered as a sophisticated holding centre. Dividends received have been exempt from the CIT (and also the solidarity tax) for a long time. Since January 1, 2006, dividends paid to foreign corporate owners, members, and
shareholders have also been free from any withholding tax, irrespective of the country of residence of the beneficiary of the dividend. This means a tax-free exit for dividends from any kind of business activity not only from Hungary but also from the EU.

However this is only one pillar of a competitive holding regime. The other pillar is the capital gains participation exemption. This was missing until recently, but from January 1, 2007 capital gains on what is called an .announced participation. (whether domestic or foreign) is exempt from corporate taxation, subject to three conditions:

  1. the participation must exceed 30%;
  2. the acquisition of the participation must be reported to the tax authority within 30 days;

and the participation must be held for at least one year.
This lifts Hungary into that small group of countries, which apply sophisticated and very beneficial holding regimes. The number of Hungary’s treaties now exceeds 60 (incl. Russia, Ukraine, China, Kazakhstan). Only a very few countries have more. In this respect, Hungary is ahead of several of the other low-tax countries, which are favourably regarded in the international tax planning industry (e.g. Cyprus and Malta).