The restrictive limitations to the deductibility of financing expense have been lifted in Hungary with effect of January 1, 2019. The new rules allow for an internationally generous tax base reduction, replacing the previous thin capitalization rules that used to be based on interest/equity ratio.
According to the general rule net interest expense not exceeding 3 million Euros per year is generally deductible for corporate income tax purposes. Net interest expense is defined as the difference between the interest income and the interest expense incurred by the taxpayer. Interest paid to credit institutions is also considered part of the net interest expense. In the case of group taxation, the rules apply to the group as a single taxpayer.
Corporate taxpayers with net interest expense exceeding 3 million Euros (HUF 939,810,000) have the possibility to seek higher deduction limits allowed for by the law. Such taxpayers may deduct their net interest expense not exceeding 30 per cent of their tax base before interest, tax, and depreciation.
The main further exemptions from the limitations on the deductibility of interest expense are as follows:
In addition to the above exemptions, taxpayers are allowed to carry forward non-deductible net interest to subsequent tax years without limitation. Moreover, the law also allows for the carrying forward of the unused part of the tax deductible interest for the next five tax years.
In our opinion, the rules can be considered as generally favourable for groups and individual taxpayers alike. They are the result of a competitive tax policy which is also reflected in the general corporate income tax rate of 9 percent in Hungary.
For the sake of completeness it is to be mentioned that the Hungarian rules on interest limitation are compliant with the European Union’s Anti Tax Avoidance Directive (ATAD), reflecting measures of the OECD’s BEPS Action Plan.
We are dedicated to adding value to our clients’ businesses through understanding their objectives and supporting them in achieving their goals. With over 20 years of international experience and a strong focus on digitalization we provide full scale professional services at a single point of contact.
In our Case Studies we have described some examples of how we work for our clients and what benefits we have achieved for them.
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Businesses looking to permanently outsource their accounting and reporting functions can benefit from our full-scale, fully digitalized accounting solutions, including a wide range of professional services.
Our outsourced accounting services are built on three pillars:
Depending on your preference, we will maintain your accounts in HUF or any other functional currency such as EUR, USD, or CHF. We also manage all interconnected tasks arising from foreign currency accounting.
Our comprehensive accounting services include filing financial statements and registering your firm in the electronic systems of the Hungarian tax administration. We also prepare and submit your tax returns electronically.
If your company requires a tailored management information system in Hungary, we will adapt our services to align with your preferred accounting system, policies, and data format.
Our fully digital accounting platform streamlines financial management for businesses of all sizes. With a cloud-based system, our clients can gain real-time access to their accounting data, ensuring accuracy, transparency, and efficiency. The integration of tax compliance features also ensures that businesses remain up to date with local regulations, avoiding costly penalties.
We will generate detailed financial reports tailored to our clients’ needs, a further useful function of our fully digital accounting system. These reports provide valuable insights into cash flow, profitability, and the overall financial status, enabling better decision-making.
Another key advantage is the flexibility of digital collaboration between our clients and their accountants. A centralized platform allows for efficient document sharing and direct communication with our financial professionals. This enhances workflow efficiency and ensures that accounting tasks are completed accurately and on time. Whether managing payroll, tax filings, or financial planning, our clients benefit from a reliable, secure, and scalable accounting solution tailored to their specific needs.
We understand the importance of a smooth and efficient accounting process, also in cases when you wish your financial data to be integrated in your company’s own ERP-system. To ensure that financial data is seamlessly integrated into your ERP we handle the direct upload of your accounting data, eliminating errors and saving valuable time.
This automated process ensures that your company always has access to up-to-date financial records, improving accuracy and operational efficiency. Quarterly, monthly or weekly financial reporting enhances decision-making by providing your management team with precise, reliable insights.
We tailor our accounting services to our clients’ needs—whether for permanent outsourcing or for temporary support until an in-house accounting department is established.
We provide expert accounting advice, especially valuable in the early stages of business operations. Our team also advises on implementation and compatibility related to IFRS, US-GAAP, and Hungarian Accounting Standards.
While most companies in Hungary maintain accounts in Hungarian Forints (HUF), this may not be ideal for internationally active businesses. We guide our clients through the process of transitioning their accounting system to a preferred functional currency, such as EUR, USD, or CHF.
Once implemented, we support your accounting team in maintaining the accounts, compiling financial statements, and managing all related tasks in the chosen currency.
We offer payroll services for companies that require complete confidentiality of salaries or find it impractical to employ an in-house payroll team. This is particularly beneficial for:
Our payroll experts meet all legal requirements for handling payroll for companies with over 100 employees.
We handle full-scale payroll administration, allowing your company to focus on core business operations. Our services include:
Most clients who outsource their accounting with us also choose to use our payroll services.
For an estimate of employer wage costs, you can use our online salary calculator.
International businesses that do not wish to maintain a physical office in Hungary can outsource their registered office to us.
We can:
A registered office is a supplementary service available to clients outsourcing their accounting and reporting with us.
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