More and more often we hear in the media that “the 15% global minimum tax is coming” with regards to corporate income tax. What does this mean in practice and how could it affect Hungary? We have endeavoured to collect the most important insights on the topic in this article.

Is the Hungarian corporate income tax increasing?

No, the global minimum tax regulations do not result in the increase of the corporate income tax rate from 9% to 15%. The determination of the nominal (9%) corporate income tax rate is the sovereign jurisdiction of Hungary, and the regulations on minimum taxes cannot breach this.

How can the 15% global minimum tax be achieved?

The essence of the idea is that provided that the tax obligations for the subsidiary of a multinational corporation does not reach the 15% in any given state, the parent company shall be obligated to pay – in its own state – the difference that is needed to reach the 15% threshold.

As a consequence, the low corporate tax obligations – generally 9% – of Hungarian companies involved in a group shall be supplemented in the state of the parent company or any other related company until the 15% minimum tax rate has been achieved

In many cases, the effective corporate income tax obligations – taking into consideration the tax base decreasing and tax allowance provisions – will result in  effective tax obligations under 9%. The percentage calculated in this manner is known as the effective tax rate. The parent company will be obligated to pay the tax for the difference between the effective tax rate (4,5%-5,5%) and the 15% global minimum tax.

Why is this an issue?

The 9% Hungarian corporate income tax rate and the often even lower effective tax obligations will mean that Hungary will be required to cede to the treasury of other states an amount equal to the difference between the Hungarian tax obligations and the global minimum tax. Therefore, it is irrelevant whether Hungary ensures a highly enticing corporate income tax environment, the group would need to finance the 15% corporate income tax at a group level, which would not flow into the Hungarian treasury.

Another issue is that those corporate income tax allowances provided by the Hungarian state – such as the investment tax incentives or the R+D tax allowance – also endeavour to reduce corporate tax obligations. However, if the multinational companies will be obligated to pay their tax obligations in another state in order to reach the global minimum tax, then these tax allowances will cease to serve their purpose.

Momentarily it is unclear as to whether the Hungarian local business tax or innovational contribution will be taken into account when determining the global minimum tax obligation. This would be especially beneficial from a Hungarian standpoint.

What is the goal of all this?

What we have noticed is that other capital importing states that are capable of drawing in investors with a promising tax environment will be affected especially negatively if the global minimum tax is introduced. What then is the concept behind its introduction?

The motivation behind the global minimum tax is to ensure that taxation occurs where value is created; where activities are genuinely performed; or where consumption occurs. And to ensure that the aggressive tax competition underway in the corporate tax sphere between states – owing to their varying tax rates – ceases. Multinational companies should not be interested in allocating their profits (and tax obligations) from where the profit is genuinely created to states with a low tax rate.


In conclusion, there is no surprise that both the Hungarian government and the Ministry of Finance are against the introduction of the global minimum tax because this would mean that the otherwise attractive and appealing tax advantages that the Hungarian corporate tax regime offers to international capital will be impaired.

The regulations are not yet written in stone, the next important step in the negotiation of open issues will occur on July 9th and 10th at the G20 forum in Venice. It goes without saying that we intend to provide an update in our insights section on these developments.

In case of questions, please contact:
Dr. Nikolett Orbán
Dr. Balázs Békés

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