Emerging Markets Rates and Currencies Handbook

Tax Summary – Hungary Hungary Country Tax Deductibility and Considerations Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equities W/H Tax • No WHT • N/A • N/A Deductibility of interests • Generally deductible, if the following conditions are met: • Interest is incurred in company’s profit generating activity • Transfer pricing principles satisfied • New EU ATAD interest stripping rules: non-deductible interest calculated using instead of the Debt-to-Equity ratio. Net borrowing costs tax deductible only up to higher of either 30% EBITDA or HUF 939.81 mm p.a. (safe harbour clause) • Grandfathering rule: For loans agreed prior to 17 June 2016, the old thin capitalization rules of D/E 3x* can be used, if there no increase in amount of debt or maturity date is not prolonged • Generally deductible • N/A Deductibility of (FX) Losses • Generally deductible • Unrealised FX gains may be deferred Other Taxes/Duties • Payment transactions decreasing the balance of the account holder kept with a resident bank are subject to financial transaction tax with certain exceptions • The FTT is 0.3% of the transaction value capped at HUF 10,000 (cca.USD 25) and 0.6% with no cap in case of cash transactions • Examples for exempt transactions: Payments between accounts of the same account holder, accounts of financial institutions and investment service providers, transactions of restricted purpose accounts, payments related group financing etc. * Under the old thin capitalization rules which can be applied under the grandfathering rule, when calculating the D/E ratio, debts from financial institutions shall be disregarded and the amount of liabilities could be decreased by the amount of cash receivables (to exempt back-to-back financing from this rule). Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor. Source: Relevant legislation, publicly available sources