Connect with us

Hi, what are you looking for?

Economy

The Hungarian government acknowledged where the US punitive action was leading

The Hungarian government acknowledged where the US punitive action was leading

As is known, the United States announced last July that it would end the decree that has been in place since 1979, after Hungary used its veto against the adoption of the European Union directive on the application of a global minimum tax, ensuring the avoidance of double taxation.

Although the Hungarian government has since voted on the draft union, the agreement has not been renewed, and will not be replaced by a new agreement.

In addition, two tax laws have now been uploaded to Parliament’s website at the same time: one is a legislative amendment detailing the introduction of the previously heavily criticized minimum tax, and the other General fall tax packageWhich actually addresses the effects of the sanctions imposed on Hungary due to the veto, in addition to several other amendments.

Taxpayers can prepare for changes in many items

According to the new regulations, Hungarian taxpayers can include the tax paid on their income from abroad in the Hungarian tax base. This is a necessary change due to the termination of the previously effective Double Taxation Prevention Agreement, which allows for the reduction of taxes paid abroad on the basis of Hungarian tax liability.

Along with these changes, Hungarian taxpayers have the opportunity to offset tax paid on income from abroad that is subject to tax liability in the state where the income is earned. This amount may cover 90 percent of the income on which the tax liability is based, but it may not exceed the tax amount determined by the tax rate.

See also  Technology: Facebook could come out with this watch, and it also has a built-in camera

It was also clarified that in the absence of an international agreement, income tax paid abroad cannot be counted against income tax on income where the place of generation of income is domestic. Furthermore, the amount of tax paid on income that is returned to an individual based on an international law, treaty provisions or foreign law cannot be considered income tax paid in the country in which the income is earned.

An important detail is that with regard to taxes deducted at source, no later than December 31, 2023. For amounts paid or creditedRegarding other taxes, which expire on December 31, 2023 at the latest For tax periods The rules of the bilateral tax agreement remain in effect.

The new provisions stipulate that part of the interest and dividends on securities from countries with low tax rates, such as OECD member states, are not subject to tax in Hungary. The provisions relating to income from exchange rate gains also apply to those securities, the holding of which does not require tax as tax paid on foreign income.

Many people will be hit hard by the new taxes

In the case of investments – for example, in the case of dividends – the tax burden on the Hungarian individuals concerned will increase significantly due to the termination of the agreement. As Gabor Vajsak, RSM Hungary partner and head of tax administration, told Portfolio in the spring, the tax treaty so far includes that a maximum withholding tax of 15 percent can be imposed in the United States if payments are made to a Hungarian resident. .

See also  You can now install the latest version of Ubuntu linux

But from January, this will stop, since then, according to American rules, a 30 percent tax will be imposed on dividends, and in Hungary the rule of the Sja law will come into force, which states that despite the deduction of tax abroad on dividends To be taken into account, a tax of 5 percent must be paid.

Simply put, this means that, according to the current situation, after 2023 from the current 15 percent. The personal income tax burden on dividends from the United States will rise to 35 percent.

As Gabor Wajsak explained, interest payments will also change. Until now, interest from the United States has only been taxed in Hungary, based on the agreement, at a tax rate of 15 percent. However, from next year, it will be possible to tax in both countries. In the US, there is also a 30% withholding tax on interest, and in this case too, an additional 5% has to be paid at home.

The Hungarian government will negotiate, but Washington will not talk to it

The Hungarian government repeatedly began renegotiating the terminated double taxation agreement with the United States, but Washington did not respond to the request. However, he has already signaled his readiness several times since the spring: In April, Secretary of State Peter Szijjarto spoke at an American Chamber of Commerce forum in Budapest, saying he would be open to dealing with the situation.

More recently, in October, Finance Minister Mihály Varga spoke at a meeting of the US-Hungarian Business Council about Hungary’s openness to a new Hungarian-US double taxation agreement. However, as far as Portfolio is aware, the Washington leadership has not responded to government inquiries since then, but we also know from American sources that there are signals to this effect from Budapest.

See also  Russian Sanctions: China has suspended the activities of two major banks

Front page photo: Finance Minister Mihály Varga at a press conference on the 2024 budget bill and the procedures for negotiating it in parliament on May 30, 2023. Next year’s budget focuses on strengthening air defense and national defence. Image source: MTI Photo/Zoltán Máthé

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Top News

In a harrowing incident that has shaken the community of Lewiston, Maine, a series of shootings on Wednesday evening resulted in a tragic loss...

Top News

President Joe Biden’s abrupt departure from a speech on the U.S. economy at the White House on Monday sent a ripple of speculation and...

Top News

Given the differences in styles with next-generation consoles, the so-called “console war” between Sony and Microsoft is arguably moot. Most console players, however, will...

World

Chinese scientists have discovered a little-known type of ore containing a rare earth metal highly sought after for its superconducting properties. The ore, called...

Copyright © 2024 Campus Lately.