As of 2019, Hungary has introduced a new group taxation regime, which allows for interesting planning opportunities.
According to the new rules, group taxation can be opted for by at least two entities subject to corporate income tax in Hungary, provided that (i) one of the entities directly or indirectly holds at least 75% of the voting rights in the other entity; or (ii) the same person directly or indirectly holds at least 75% of the voting rights in each entity.
The tax base of the group consists of the positive tax bases of its members. Each group member has to determine its tax base in accordance with the corporate income tax rules. In contrast to the current Hungarian tax legislation which does not allow a taxpayer to utilize losses carried forward by another taxpayer, the negative tax bases of group members may, subject to certain limitations, be utilized to decrease the tax base of the tax group in the tax year and the subsequent five years. Special rules apply to the tax allowances that can be used on a group level. The corporate income tax payable should be allocated to each group member in proportion to their positive tax bases.
In addition to the above, group taxation also substantially eases the transfer pricing obligations (e.g., preparing transfer pricing documentation and adjusting the tax bases) as the group members do not need to fulfil these obligations in respect of transactions effectuated between them.