Recently, Hungary implemented a tax legislation that grants one-time amnesty for any capital gains on the disposal of shares in subsidiaries that had not previously chosen to participate in Hungary’s capital gains exemption regime.
Hungary’s capital gains exemption regime is voluntary, and to participate, one must report the share acquisition to the tax authority within 75 days by submitting the required electronic form. Failure to meet the deadline will result in the respective participation not being eligible for the capital gains exemption in the event of future disposal.
As per the capital gains exemption regime, if the election is made within the 75-day period, capital gains from the disposal of shares and in-kind contribution of shares are exempt after holding them for one year. The current regime does not impose any minimum shareholding requirement.
The conditions of the one-time amnesty are as follows:
- a 9% tax would be applied to 20% of the positive difference between the fair market value and the book value of the shares as of 31 December 2023. Here, the cost of amnesty entails a cash tax payment of 1.8% of the capital gains until 31 December 2023.
- The filing can be submitted by the deadline for filing the corporate income tax return 2023 no later than 31 May 2024.
