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Hungarian Parliament Approves 2011 Tax Bill

by Ulrika Lomas,, Brussels

19 November 2010

The Hungarian parliament has approved the government’s 2011 tax bill, which introduces a flat rate personal income tax of 16%, and grants a 10% corporate tax rate to certain companies from next year. The bill also contains a highly controversial amendment to the country’s original bank tax legislation.

Hungary’s 2011 tax bill, which was adopted by 259 votes to 104, provides for a 16% flat rate of personal income tax in a bid to boost domestic demand. It also reduces the corporate tax rate from 19% to 10% for all companies from January 1, 2013.

To the surprise of all, an amendment to the government’s bank tax provisions was also included in the latest tax bill. This amendment grants banks the option of paying a 30% tax on profits, which can then be taken into account in the bank tax levied on the balance sheet. The amendment also increases from 0.5% to 0.53% the tax imposed on those banks in Hungary with an annual tax base of over HUF50bn, although transfers between the country’s banks and their subsidiaries within the European Union (EU) may now be deducted from the tax base.

Hungary’s bank tax was approved by parliament by a large majority in July. The new law imposed a special annual tax of 0.15% or 0.5% on the banks balance sheet totals in a bid to generate additional revenues of around HUF200bn (EUR690m) for the government. Both the International Monetary Fund and the EU expressed their opposition at the time to the tax, warning that it could serve to weaken the banks and to damage both the investment climate and economic growth.

TAGS: tax | Hungary | law | banking | budget | International Monetary Fund (IMF) | corporation tax | legislation | tax rates | individual income tax | European Union (EU) | Europe

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