Österreichische Volksbanken-Aktiengesellschaft ... - Volksbank AG

solidarity tax is non deductible for corporate income tax purposes. Foreign taxes withheld may
be credited against this solidarity levy if a double tax treaty allows so.
Non Residents
Under the Hungarian corporate income tax legislation foreign companies might be subject to
Hungarian tax if they carry out business activity via a permanent establishment in Hungary (or
their place of management is situated in Hungary, as mentioned in the previous section). The
Hungarian PE definition generally follows the one included in the OECD model tax convention
(in broad terms dependent agents, construction sites, and branches are seen as taxable presence
in Hungary).
For corporate income tax purposes non residents are generally subject to limited tax liability.
This limited liability is only extended to income derived from business activity in its permanent
establishment. Therefore interest and capital gains received by non residents are not subject to
Hungarian corporate income tax unless the interest payment is related to the permanent establishment’s
business activity. In this case the interest payment will be added to the PE’s corporate
tax base and will be generally taxed at 16 per cent. (plus 4% solidarity levy). The above
mentioned lower tax rate should also be applied by non residents if the PE meets the requirements.
Hungarian personal income taxation regarding the Notes
Tax Residents
Under Hungarian domestic law, individuals with Hungarian citizenship (with the exception of
dual citizens without a permanent or habitual residence in Hungary) and foreign nationals with a
valid permanent residency permit and stateless persons are treated as residents for income tax
purposes. In case of other natural persons, the residence status can be determined firstly by permanent
residence, secondly by the center of vital interests and thirdly by habitual abode. Individuals
are considered to have a habitual abode in Hungary if they stay in the country for more
than 183 days (including the date of arrival and the date of departure) during a calendar year.
Hungarian resident individuals are subject to individual income tax on their worldwide income.
Under the effective Hungarian tax law, interest is subject to income tax at a rate of 20 per cent.
According to the personal income tax law, interest inter alia shall mean
� the yield on debt securities which are offered and traded in public if the legislation defined
it as interest;
� the capital gain achieved instead of interest in connection with these publicly traded securities;
� the capital gain on these publicly offered / traded discount securities received by the individual
at maturity as the difference between the issue value and the nominal value;
� income earned on the Budapest Stock Exchange or in a stock exchange within the European
Union
Interest income as defined above is not subject to Hungarian personal income tax, however, any
interest items earned on privately issued securities may be subject to Hungarian personal income
tax. Note that an amendment has been implemented in the personal income tax legislation,
whereby, interest will be subject to income tax as of 1 January 2007. The rate of income tax will
be 10 per cent. According to the current plans, income tax will not be applied on interest which
does not exceed HUF 50,000 if the total income of the individual derived from interest or stock
exchange transactions does not exceed HUF 250,000 (approx. EUR 200 and 1,000 respectively).
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