HUNGARY COULD BE A CORPORATE PROFIT TAX HAVEN IN THE EUROPEAN UNION
The new 9 percent flat corporate profit tax – to be introduced 1st of January 2017 – will put Hungary in a very good position in the international race for investments as Hungary will offer even better conditions than Ireland and Cyprus, which are both often regarded as the European Union’s tax havens, Hungarian news portal origo.hu reported.
Hungary’s current corporate tax rate is split into two brackets; companies with an annual revenue below 500 million forint (1.6 million euro) pay a 10% tax on corporate revenues, while larger companies, with revenues above that level, pay 19%. As of January, however, these brackets would be replaced with a single, 9% flat corporate tax rate, which is to be the lowest of its kind in the whole European Union. Comparing the Hungarian tax to its Central European counterparts, the difference seems remarkable. In Czech Republic and Poland the corporate profit tax is 19 percent, while in Slovakia it is as much as 22 percent. In Slovenia the same kind of tax is 17 percent, while in Romania it is 16 percent. Currently the corporate profit tax is the lowest in the EU in Bulgaria, but it still one percent higher than the Hungarian one will be next year. (In Ireland and Cyprus the highest rate is 12,5 percent.)
The Hungarian cut will boost the big companies in particular. According to origo.hu’s estimations, there are 800-900 companies in Hungary that paid 19 percent corporate profit tax in 2016. They are attributed to one-third of all the income, half of the whole export and quarter of all the investments in the Hungarian economy, while employing 15 percent of the people. As a result of the new flat rate, they could spare 132 billion forints in 2017 and 140 billion forints in 2018 at the expanse of the central budget of Hungary. At the same time smaller companies could spare together 20-20 billions in the next two fiscal years due to the one percent cut in their corporate profit tax rate.