Main advantages, tax incentives for intellectual property
- Corporate tax rate is 10% up to HUF 500 million (ca. EUR 1,800,000)
- 50% of the royalty income deductible from the tax base
- No „capital gain” tax on sold registered intellectual property
- No withholding tax on dividends to foreign shareholders
- No withholding tax on royalty paid to foreign shareholders
- Attractive double tax treaty network (Hungary has double tax treaties with more than seventy countries)
Hungary is an attractive center for IP holdings since 2003 and has the lowest tax rates. Under the Hungarian corporate tax law regime, consideration received in exchange for the transfer or licensing of industrial and intellectual property, of know-how and of trade secrets all qualify for the tax allowance.
The Hungarian corporation tax enables the deduction of the tax base by 50 percent of revenues deriving from the exploitation and sale of intellectual property, in other words, the actual corporate tax rate can be as low as only 5 percent – if the earnings are under HUF 500 million.
If the earnings are higher, above a tax base of HUF 500 million the tax rate is 19%, in that case the actual tax rate of royalty and similar revenues can reach 9.5 percent. Hungarian companies are allowed to forward royalty and dividends free of withholding tax to companies with tax residence in a third country and to private individuals.
Revenues not belonging to the scope of royalty must be kept on record separately and the tax base cannot be adjusted by their value.
Intellectual property held for at least 12 months and reported to the tax authority can be sold free of tax. The acquisition or production of the intellectual property must be reported to the tax authority within 60 days, otherwise the capital gain tax benefit is not applicable.
The deadline is strict, missed reports cannot be made later and no excuses are accepted for the delay.
Consider setting up a line of holding, royalty and operating companies to fully benefit from these advantages and contact us today to find out the best scheme for your enterprise. Süle Law Firm has all the necessary know-how and expertise to manage IP portfolios.