The following categories are subject to the non-resident corporate income tax rules:

Income realized through a permanent establishment situated in Hungary; and
Income realized through transferring a business quota in a Hungarian real estate holding company.

Permanent Establishment

Non-registered permanent establishments and registered branches are taxed in a manner similar to Hungarian entities. The tax base is calculated on the basis of their Hungarian sourced profit: the total Hungarian revenues less their proportional costs and expenses. Under the Corporate Income Tax Act, the tax base must be further increased by 5% of the revenues and income that have been earned through, but not directly accounted for at the permanent establishment.

If the foreign entity operates more than one branch, the tax base of each branch must be calculated separately. However, in the case of more than one Hungarian permanent establishment (not being a branch) their tax base must be aggregated.

It should be noted that tax treaties typically override these special domestic rules resulting in similar tax treatment for permanent establishments of foreign entities to that of domestic taxpayers.

Real Estate Holding Company

Foreign entities receiving income from the sale or withdrawal of shareholding in a Hungarian real estate holding company, are liable to corporate on such income at the standard corporate tax rate (see Sec. 8.1.). The tax base is the capital gain realized upon the sale of the shareholding or upon the reduction of the registered capital of the company.

Hungarian real estate holding company means an entity which owns (individually or jointly with its related parties) real estate situated in Hungary, but only if the book value of the real estate situated in Hungary represents more than 75% of the total assets.

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