International Tax Newsletter - Winter 2011-12 - Hungary
INTRODUCTION OF NEW CORPORATE ENTITY: THE REGULATED INVESTMENT COMPANY
A new type of corporation has become available in Hungary, the regulated investment company (RIC). This new company is largely similar to the real estate investment trusts that exist in several other countries. RICs may also invest through their ‘special purpose entities’ (SPEs) into real property projects.
Both RICs and SPEs are exempted from corporate income tax and local business tax but they are subject to a 2% discount rate of transfer duty. The profits are taxed at the shareholders of the RICs.
The RIC is a publicly held company limited by shares and must be engaged in one of the following activities:
- Sale of real property
- Renting and operating of real property
- Management of real property
- Holding activities.
There are certain limitations to the owners of a RIC:
- No more than 10% of the shares or voting rights is held by insurance companies or credit institutions
- Must have a 25% ratio of public ownership on a regulated market
- At least 25% of the shares must be held by shareholders owning less than 5% of the RIC.
The other conditions for RICs include:
- At least 90% of the profits must be paid to the shareholders as dividend
- Its initial capital is not less than 10 billion HUF
- Its real property assets must be revaluated at least quarterly
- Can only own shares of other RICs or SPEs
- There are certain limitations to the asset and liability structure.
OTHER RECENT CHANGES
The European Court of Justice ruled that the Hungarian legislation which did not allow the reclaim of VAT on invoices that have not been paid is not in line with the VAT Directive. The relevant legislation has been changed and taxpayers are now allowed to reclaim such VAT. All related penalties from the previous periods can be reclaimed as well.
The Government has revealed the main features of the tax changes effective from 2012:
- The standard rate of VAT is expected to be increased from 25% to 27%
- The current rate of; 20.32% personal income tax will be decreased to 16% up to a monthly tax base of 202,000 HUF (approx. 700 EUR), and to 18.16% above this limit. At the same time, a tax credit will no longer be available to ensure the PIT exemption for the minimum wage
- Reverse VAT will be introduced in agriculture
- The minimum wage will be increased to 92,000 HUF (approx. 320 EUR)
- The excise duty on cigarettes, alcohol and diesel will be increased from 1 November 2011
- The game tax will be significantly increased from 1 November 2011.
More information on these developments can be provided by Vadkerti Krisztián, PKF Hungary, through the EisnerAmper contacts listed on the homepage.
International Tax Newsletter - Winter 2011-12 Issue