Hungary as an Alternative Holding Location

Hanjalka Csabai at January 31, 2021

Although Hungary would not be on top of your mind when thinking of viable holding locations, using a Hungarian company as a holding vehicle may work out quite well. As a member of the EU Hungary has implemented the Parent-Subsidiary directive and in addition domestic legislation is providing for favorable provisions in relation to holding activities.

By virtue of the Hungarian Corporate Income Tax legislation dividends received by a Hungarian company are in most cases excluded in determining the corporate tax base. Furthermore the Hungarian company can opt to mark shares it holds in other companies (both domestic and foreign) as so called qualifying shares – by reporting such shareholding(s) within the stipulated deadline any capital gains realized upon alienation will be effectively exempt from Hungarian Corporate Tax provided that the company had owned these shares for a period of at least one year.

Both dividend income and capital gains do not form part of the tax basis for Local Business Tax.

Dividend distributions made by a Hungarian holding company will be exempt from withholding tax if made to a shareholder that is a body corporate irrespective of location of the shareholder.

If you would like to explore if a Hungarian holding would meet your needs DBH Finance will be happy to discuss the possibilities with you and assist you in the setup and support in operating your Hungarian holding.

Foppe Andriesse