Changes in the application of the 10 percent corporate income tax rate
Parliament passed Bill No. T/581 on the Enactment and Amendment of certain Economic and Financial Laws on 22 July 2010. The Bill amends the rules pertaining to the preferential 10 percent rate of corporate income tax with effect from 1 July 2010.
Key Changes
The preferential corporate income tax rate was introduced as early as 2006, however, the current amendment changes two key points of the rules. The new law abolishes the conditions precedent to the application of the preferential tax rate, therefore, it becomes applicable for all companies from now on. The other key change is that the 10 percent tax rate has been applicable up to the amount of the positive tax base not exceeding HUF 50 million whereas this limit is now raised to HUF 500 million.
Transitional Rules
The HUF 500 million limit will only become fully applicable from 2011. The period prior to 1 July 2010 will still be subject to the earlier rules. The law sets out special rules for 2010.
Period before 1 July 2010
According to the transitional rules the 2010 positive tax base shall be proportionately divided on the basis of the number of calendar days between the periods 1 January - 30 June on the one hand, and 1 July - 31 December on the other.
The preferential tax rate will be applicable to the two periods in different ways. The former HUF 50 million limit remains in force for the first half year, which, however, will not need to be divided pro-rata temporis. The former conditions will remain in force for this period (e.g. no tax relief is applicable, the average wage corresponds to double to the minimum wage), however, in some cases they will be modified due to the semi-annual period. The tax rate payable on the positive tax base in excess of HUF 50 million will remain 19 percent.
Period after 1 July 2010
The cap for the preferential tax rate is set pro-rata temporis at HUF 250 million for this period. The former restrictions will lapse as of 1 July 2010. The tax rate payable on the positive tax base in excess of HUF 250 million will be 19 percent.
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