Hungary’s tax system continues to rank among Europe’s most competitive, as recently affirmed by the Organisation for Economic Co-operation and Development (OECD). The Hungarian Ministry of National Economy announced that the OECD, after conducting a transitional review process, confirmed that the country’s global minimum tax rules align with international standards.
The OECD’s report, published on 15 January, evaluated compliance with its model rules for global minimum tax implementation. Hungary received recognition for its domestic top-up tax and income inclusion rule (IIR), both of which were validated as meeting international requirements. Moreover, Hungary’s domestic top-up tax qualifies for the ‘safe harbour’ exemption, providing significant benefits for multinational enterprises operating in the country.
This recognition strengthens Hungary’s position as a favourable destination for businesses. The certified rules not only reinforce the country’s reputation as having a highly competitive tax environment but also ensure that domestic enterprises can thrive without facing undue international tax burdens.
The Ministry noted that Hungary’s tax framework supports economic growth by fostering a competitive business climate. The compliance certification applies retroactively to the introduction of the global minimum tax rules on 31 December 2023, ensuring seamless integration with global standards.
‘Hungary’s compliance ensures that additional tax revenue remains within its borders’
The global minimum tax, designed to ensure a minimum effective tax rate of 15 per cent for multinational enterprises with annual consolidated revenues exceeding 750 million euros, was introduced in Hungary at the end of 2023. If a company in a given country pays less than this threshold, additional top-up taxes are levied to meet the global minimum.
The OECD mandates a specific collection order for the top-up tax. Firstly, the country where the under-taxed subsidiary operates has the right to collect the additional tax as a domestic top-up. If this does not occur, the parent company’s home country, or other jurisdictions within the multinational group, may collect the remaining tax through income inclusion or undertaxed payment rules.
Hungary’s compliance ensures that additional tax revenue remains within its borders, safeguarding national interests and preventing other countries from collecting taxes owed to Hungary.
A key feature of Hungary’s recognized tax rules is the ‘safe harbour’ exemption, which streamlines administrative processes for multinational enterprises. Under this exemption, if a Hungarian subsidiary’s top-up tax is calculated and paid in Hungary, it cannot be recalculated in other jurisdictions.
This measure not only simplifies compliance but also ensures that taxes paid in Hungary are fully acknowledged internationally. Parent companies of Hungarian subsidiaries are exempted from paying additional taxes in their home countries, reducing administrative burdens for businesses.
By meeting OECD standards, Hungary has demonstrated its commitment to maintaining a business-friendly and internationally compliant tax environment. This achievement underscores the country’s efforts to balance fiscal responsibility with economic growth, making it a competitive choice for global enterprises.
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