Last year, after a year and a half of negotiations – after having previously accepted the introduction of a global minimum tax in negotiations with the OECD – the Hungarian government blocked the European Union from adopting a directive to introduce a 15 percent effective corporate tax, which would apply to the largest companies. The move triggered a response from the initiator of the minimum tax, the United States, which canceled the double taxation avoidance agreement concluded with Hungary in 1979.
Finally, in December of last year, the Hungarian government also accepted that from January 1, 2024, an effective corporate tax rate of 15 percent will be applied instead of the nominal level of 9 percent for the largest companies with a global turnover of 750 million euros. In theory, the cabinet decided to withdraw the veto because, according to the EU’s non-binding position, the payment of the local business tax will also be included in the minimum tax. Also, the option of “substance-based carve-out” (tax base reduction related to real activity) will be applied to the descriptions.
Mihály Varga has now announced that he will initiate negotiations with the heads of large Hungarian companies on the domestic implementation of the EU directive on the global minimum tax.
The government’s goal is to maintain the competitiveness of the Hungarian tax system despite the global minimum tax, and for Hungarian companies to continue to pay one of the lowest public taxes in Europe, the Ministry of Finance says in a statement.
They say that the government’s goal is to restore the Hungarian economy to the growth path and increase Hungary’s competitiveness. For this reason, the cabinet also develops the regulation of the global minimum tax in such a way that our country continues to provide an attractive tax environment for businesses. The Ministry of Finance will submit the detailed rules for the transposition of the EU directive on the global minimum tax to the Parliament, taking into account company proposals, when submitting the autumn tax laws.
At last week’s Traveling Economist meeting, the Minister of Finance told Portfolio that the autumn tax package will be presented to the parliament in October. He also informed our paper that the economic government had already prepared calculations regarding the budgetary impact of the tax increase, but he did not want to share the results.
Cover image source: EU.
