Capital gains tax amnesty for shares previously not reported in Hungary!

According to the changes introduced by the recently promulgated amendment of the Corporate Income Tax Act, it is now possible to notify investments that have not been previously reported to the Tax Authority, but otherwise meet the criteria prescribed for participation exemption. The statutory deadline is the same as the submission deadline of the CIT return (for calendar year taxpayers: 31 May 2024)!

The essence of the capital gain exemption is as follows: if the taxpayer declares the acquisition of a participation in a domestic or foreign company (except a controlled foreign company) to the Tax Authority within 75 days of the acquisition and sells or derecognizes it as in-kind contribution after a holding period of one year, the taxpayer may reduce the corporate tax base by the capital gain on the sale, i.e. any capital gain does not have to be taxed unlike normal shares.

However, in order obtain the future tax exemption 9% corporate income tax is payable on 20% of the difference between the market value of the share and its book value existing on 31 December 2023.

The taxpayer must have an independent auditor's or expert's report supporting the market value and must keep separate records to support the declaration.

Should you have any further questions regarding the declared shareholdings or would like to request expert assistance during the process, please do not hesitate to contact our experts.