Hungary will join the community of EU countries, which uses group taxation from 2019. Group taxation means that the group of companies is deemed to be one taxpayer regarding one specific tax, while remains independent for the rest.
Group taxation can be first used in the annual tax period following the year of its declaration. There are conditions to meet in order to be eligible for group taxation. Balance sheet date, reporting currency, the principles of accounting must be identical, and the companies involved should be related parties with a minimum of 75% voting dependency.
The eligibility is given by the authorities following the written request of all group members. Each company can be part of only one group taxation community. The group has one additional group tax number, which should be used to perform the rights and obligations of the representative.
Members in the group should prepare individual tax returns and an additional consolidated group returns should be prepared as well. The tax base of the group is the summary of individual positive tax bases, which can be reduced by the accrued losses. The payable tax should be allocated according to the positive tax bases. Tax allowances can be used during the group taxation period if the company is eligible for the allowance as a group member as well. New tax benefits can be utilized if one out of the group meets the requirement.
The main benefit of group taxation is to utilize the carried-forward losses among group entities. Another benefit is the relief on the transfer pricing rules, both content and format wise.