Introduction of a global minimum tax 

What liabilities are expected  for domestic taxpayers
and how can they be exempted?

The global minimum tax will open a new chapter in the taxation of multinational corporations, especially in Hungary, where the new rules could make a particularly huge difference due to the currently low corporate tax rate.

Following the EU directive based on an OECD guidelines, the new rules were recently adopted by the Hungarian legislation and will come into force in 2024. Although the first deadline for filing the minimum tax return for calendar year taxpayers is 30 June 2026, it is worth starting the preparation in 2024 to assess the potential exemption options, to clarify and to assess the domestic tax liability.

For calendar year taxpayers, the first deadline for filing a minimum tax return is 30 June 2026.

The Directive aims to eliminate tax competition between member states, which would curb aggressive tax planning by multinational companies and uneven capital inflows. This is ensured by a minimum tax rate of 15%.

The legislation also includes exemption rules, such as CbCR-based exemption rules, profit extraction rules based on commercial presence etc., but also the possibility for the companies concerned to report their shareholdings.

Who will be affected by the new regulation?

International companies whose net turnover in the consolidated financial statements of the ultimate parent company exceeds €750 million in at least 2 of the 4 years preceding the year under review must comply with the new rules. 

Revenue is not only examined in a given Member State, but also at group level. This means that even subsidiaries whose parent companies, even foreign ones, are subject to the global minimum tax will also be liable.

What taxes are covered by the minimum tax?

The law does not only take account of corporate tax, but also of all taxes imposed on amounts that are considered income or profit for accounting purposes. Accordingly, in Hungary, the 15% rate includes corporate tax, local business tax, innovation contribution and income tax on energy suppliers, among others. The difference between the aggregate rate of these taxes and the 15% minimum is levied according to the rules of the global minimum tax.

How will the tax difference be collected?

The bill set out three ways to collect the tax difference:

• Income inclusion rule (IIR)
• Undertaxed Payments Rule (UTPR)
• Qualified Domestic Minimum TopUp Tax (QDMTT)

In the case of an IIR, the ultimate or intermediate parent company has an additional liability for another group member in a Member State or Hungary with a lower tax burden.

The UTPR will apply where the ultimate parent company is not an EU resident and that state does not apply the IIR rules. Also, the UTPR rules will apply if the ultimate parent is classified as a low-tax entity.

The third option is the payment of Qualified Domestic Minimum Top-Up Tax, which will be the most common form of tax collection in Hungary. It is no coincidence that this option was introduced on a Hungarian proposal. In this case, the difference is levied on the group member with the lower tax burden in the group member's country of residence. This means that multinational companies with a presence in Hungary will have the possibility to calculate and pay the global minimum tax differential only in Hungary for their Hungarian subsidiaries.

Exemption options - it is important to check eligibility on time!

Especially in the initial period, temporary exemptions granted by the GloBE will also be of great importance.

No additional tax is payable, for example, on group members whose profit is less than €1 million and whose income is less than €10 million, but it will also be possible to apply exemptions in accordance with the CbCR. Exemptions will not only have a positive tax impact but will also provide administrative, tax allocation and correction simplification for the parties concerned, so it is recommended to start assessing the potential for exemptions as soon as possible.

What benefits are compatible with the minimum tax?

Tax benefits resulting from investment incentives (e.g. development, energy efficiency and R&D benefits) are widespread in Hungary, and many businesses take advantage of them, so the regulation and offsetting of these benefits is an important issue in the context of the global minimum tax.

However, with the introduction of the new minimum tax, the traditional tax and tax base reliefs may reduce the tax payable, but the difference will have to be paid through the new additional tax.

Nevertheless, benefits that are considered as other income (e.g. direct government grants) are other income that increase profits and are less affected by the additional tax. In this respect, the new law introduces the concept of a refundable tax benefit, for example for R&D tax benefits, which, based on the above principle, reduces the effective tax rate to a lesser extent. The aim is to maintain the subsidy, while complying with the requirements of the global minimum tax. The companies concerned will be entitled to choose between the two R&D allowances, with the declaration of choice to be submitted with the first tax return.

In addition, the Accounting Act introduced the concept of deferred tax claims to ensure that such tax benefits are not lost due to the additional tax.

What reporting obligations should be expected in 2026?

The domestic group member concerned must make a declaration to the tax authorities within one year of the first day of the first tax year for which the tax is due. In addition, if another group member has not already done so, the domestic group member is also required to file a GloBE information return, which among other things, provides information about the group members, the collection rules applied and the information needed to calculate the tax rate.

Failure to file the return can result in a fine of up to HUF 10 million.

How can VGD help?

• We can help you clarify that your Company is affected by Globe or not, assess the payment liability, identify any country-specific exemption rules, and report your shares towards the authority;
• Calculate and administer domestic additional tax
• Preparing tax returns
• Determination and calculation of deferred taxes
• Supporting communication with the tax authorities.

If you have any further questions regarding the information in this newsletter,
please do not hesitate to contact our tax experts.

This newsletter provides general information and does not constitute advice.