Act CXCIV of 2011 on the Economic Stability of Hungary (“Gst.”) enables shares issued by legal entities and other organisations, or other transferable member shares, to be acquired with no tax payment liability for the acquiring party.
It is important to clarify right at the beginning that such a favourable rule is only applicable for the acquisition of certain defined member shares (for instance, in the case of Hungarian companies it is only applicable if the shares belong to a legal entity or organisation without a registered office in Hungary, or to a natural person who does not have a registered permanent residence in Hungary). There are also administrative tasks that need to be considered.
The deadline of 30 June is particularly important in several respects. The transfer of member shares as of 30 June 2017 must be contained in a public document or a document endorsed by a lawyer or legal counsel if the acquisition is not free.
If the acquisition is free, the acquiring party must report it on the form used for this purpose by no later than 30 June 2017, to the competent state tax authority (NAV) according to the permanent address of taxpayer.
The devil is in the details. In the case of a free acquisition, the acquirer is obliged to provide data and simultaneously becomes “visible” to the NAV – what is more the form requires details about the transferring party too. Such reporting does not arise if the acquisition was concluded for a price.
The document available on the NAV website (Bejelentés tagi részesedés ingyenes megszerzéséről – Reporting free acquisition of member shares) needs to be submitted in two copies, in paper format. Shares may be acquired from natural persons, legal entities or other organisations too. In the first section of the form the data of the acquiring entity must be given, while in the second section, the data of the transferring party. The size of the share transfer, the number of shares and the conclusion date of the sale and purchase contract together with its ID or reference number must be provided in the form.
Tax exemption in the case of a free share acquisition may be proven with a certificate issued by the competent tax authority (which, usefully, is one of the two copies of the submitted reporting form duly signed by the tax authority).
You can download the newsflash including this article in PDF format here:
Newsflash 27.06.2017 (PDF)