One of the less visible yet potentially serious pitfalls of Hungarian tax law is the concept of the “payor” (kifizető). Many foreign companies assume that, if they have no permanent establishment or branch in Hungary, they are outside the scope of the Hungarian tax authorities. The reality is more nuanced. Moreover, a Hungarian individual employed by a foreign payor may also find themselves in an uncomfortable position as a result.

Hungary offers a broad range of tax incentives for research and development. Early in the innovation cycle, relief may be available for R&D costs; later, for the profits from exploiting the intellectual property created. The measures reach beyond corporate income tax to local business tax, the innovation contribution, social security tax and the KIVA base.

Global employee mobility is an increasingly common issue for companies. Therefore, it is important to be familiar with the basic legal and tax regulations regarding postings. While the first chapter of our three-part series focused on the most important legal questions, this time we will explore tax and social security considerations.

Many people who hold assets or realise income on foreign bank accounts have recently received an invitation from the Hungarian tax authority, NAV, to partake in a “support procedure”. An invitation from a tax authority is never entirely pleasant, even if its purpose is “support”. Or is there really nothing to fear?

A widely applied business model among software development companies is providing software development services for other businesses. Few of these companies know that they can still claim tax relief in this case too, just as they would be able to if they were developing software for their own purposes.

Tax-efficient forms of remuneration, serving at the same time, as a means of motivating management have never been more popular. And the range of options available for doing this has expanded this summer to include what’s known as a Special Employee Co-Ownership Program (“KMRP” in Hungarian), a vehicle that can be used for in certain situations that cannot be handled in the context of an Employee Part-ownership Program, MRP. In addition, KMRPs are an excellent vehicle for implementing management buyouts. 

The most common form of corporate financing among owners is still the member’s loan. But many forget that while granting a member’s loan is relatively easy, it hides several ticking time bombs – as a recent Supreme Court decision confirmed. Fortunately, there’s already a risk-free capital contribution option. 

For many, the summer months bring to mind sunny beaches, mouth-watering Mediterranean cuisine, colourful buildings along Portuguese streets, and cities that offer memorable cultural experiences... Yet few are aware that, beyond drawing in tourists, because of their tax systems, popular holiday resorts are also attractive destinations for affluent, well-to-do foreigners - often for periods of time longer than that of a mere summer adventure.