Hungary Tax Exempt Income

1. Exemption on Dividends Received

• Dividends received by Hungarian companies from both domestic and foreign subsidiaries are generally exempt from corporate income tax (CIT).
• Exception: Dividends from companies registered in offshore jurisdictions may be subject to taxation.

2. Exemption on Capital Gains from Share Sales

• Capital gains on the sale of shares are exempt from CIT if the shares are registered as an invested asset and held for at least one year.
• This exemption applies to both Hungarian and foreign subsidiaries.

3. No Withholding Tax on Outbound Payments

• Hungary does not impose withholding tax on dividends, interest, or royalties paid to foreign companies or individuals.
• This applies regardless of the recipient’s country of residence, except when restricted by international tax treaties.

4. Corporate Tax Exemption for Certain Investments

• Development tax allowances allow companies to reduce up to 80% of their corporate tax liability for investments exceeding certain thresholds (e.g., HUF 3 billion in general cases, lower in certain regions).
• Tax benefits apply for up to 13 years.

5. Exemption on Capital Gains from Intellectual Property (IP) Sales

• Capital gains from the sale of registered intellectual property (IP) are fully exempt from corporate income tax.
• This applies if the IP was held for at least one year before the sale.

6. Special Exemption for Holding Companies

• Capital gains from selling shares of foreign subsidiaries are tax-exempt if the shares were held for at least one year and registered as an invested asset.
• This makes Hungary an attractive location for holding companies.
• This applies if the IP was held for at least one year before the sale.

7. Real Estate Funds and Regulated Investment Funds

• Income earned by regulated investment funds and real estate funds is exempt from corporate tax.
• Applies to both domestic and foreign investors participating in such funds.

8. Exemption for Certain Employment-Related Benefits

• Some fringe benefits and allowances provided to employees (e.g., certain relocation costs, meal vouchers) may be exempt from personal income tax (PIT) under specific conditions.

9. Double Taxation Treaties

• Hungary has over 80 double tax treaties, allowing foreign investors to avoid double taxation on various types of income.
• These treaties often provide tax exemptions or reduced tax rates on dividends, interest, and royalties.

Conclusion

• Hungary offers multiple tax exemptions to foreign investors, particularly in dividends, capital gains, intellectual property, and holding company structures.
  These exemptions make Hungary a favorable jurisdiction for international business operations.