Taxpayers can opt for corporate income tax group registration until 20 November

An important deadline is coming for company groups that are pondering about establishing corporate income tax group registration. Those company groups that would like to opt for this regarding to the business year 2020, have to apply to the Hungarian Tax Authority until 20 November 2019. The deadline is limited, so who fail to do so, it will requested to wait one year for the next possible introduction of corporate income tax group registration.

What is a corporate income tax group registration?

From 2019 onwards, the Hungarian Act on Corporate Income Tax provides the opportunity for at least two taxpayers to create a so-called group corporate taxpayer under certain conditions. As a rule, a group corporate taxpayer fulfils its tax liability under the group tax number through a group member (as a group representative) designated for this purpose and announced to the Hungarian Tax Authority, moreover exercises its tax rights in the same way.

Why is it worth to choose the corporate income tax group registration?

Given that the tax base of a group corporate taxpayer is the amount of non-negative tax bases determined individually by the group members (modified by the special rules for deferred income tax relief for group taxpayers and their members), resulting that the use of accrued losses within a group can be optimized even more effectively than before, with specific tax savings being achieved.

In addition, a major benefit of corporate income tax group registration is the simplification of administrative obligations related to transfer pricing documentation: group members do not have to prepare transfer pricing documents for their transactions with each other under certain conditions, which can result in significant administrative and cost reductions if there are a large number of transactions among group members for which transfer pricing documentation was previously required.

Furthermore, a group corporate taxpayer is also considered a single taxpayer from the perspective of tax relief, so it may be worth considering how and up to what extent can be the unused tax relief applied within the group.

Members of the corporate income tax group registration, conditions of its establishment

Several conditions must be met in order to qualify for corporate income tax group registration. In addition to defining the organizational form, members of a corporate income tax group registration could be members with a direct and indirect majority interest, so first of all it is necessary to examine these conditions of affiliation. In addition, the legislator sets conditions for accounting systems, so these standards must also be taken into account when setting up corporate income tax group registration. However, even a foreign-based company can participate in the group through its Hungarian establishment(s).

Therefore, establishing corporate income tax group registration in many cases can be beneficial and can lead to cost savings or even tax savings. However, before the final decision has made, it is worth considering whether, in addition to all the benefits of corporate income tax group registration, all the effects and consequences of group taxation have been considered.

Should you have any questions regarding to the opting for, setting up of corporate income tax group registration, including its advantages and disadvantages, please contact our tax advisors who will be gladly at your disposal concerning this topic.