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Newsletter about the change of the affiliated companies‘ definition in the Corporate Income Tax Law

18 March 2015

Since 2015, the affiliated companies‘ definition in the Corporate Income Tax (Furthermore: CIT) Law has been changed.

According to the 4. §. of the Corporate Income Tax Law (Act 1996. /LXXXI.) the affiliated companies‘ have been defined as:

„a) the taxpayer and the person in which the taxpayer has a majority control - whether directly or indirectly - according to the provisions of the Civil Code,

b) the taxpayer and the person that has majority control in the taxpayer - whether directly or indirectly - according to the provisions of the Civil Code,

c) the taxpayer and another person if a third party has majority control in both the taxpayer and such other person - whether directly or indirectly - according to the provisions of the Civil Code, where any close relative holding a majority control in the taxpayer and the other person shall be recognized as third parties;

d) a nonresident entrepreneur and its domestic place of business and the business establishments of the nonresident entrepreneur, furthermore, the domestic place of business of a nonresident entrepreneur and the person who maintains the relationship defined under Paragraphs a)-c) with the nonresident entrepreneur;

e) the taxpayer and its foreign branch, and the taxpayer’s foreign branch and the person who maintains the relationship defined under Paragraphs a)-c) with the taxpayer;

f) the taxpayer and other person if between them dominating influence is exercised relating to business and financial policy having regard to the equivalence of management.”

 

As you could see from the above tax law parts, the affiliated companies‘CIT Law definition has been extended, supplemented substantially, so as all those companies, in which the managing director is the same, and so dominating influence is exercised relating to business and financial policy, should be considered as affiliated companies. To interpret the law change more detailed, we should study also the provisions of the Civil Code:

According to the new Civil Code, the decision making body embodied of the company’s members should decide about the business and financial policy questions. In case no decision making way has been defined in the articles of association, the managing director is the person who has the dominating influence expressed in the new definition change of the CIT Law.

 

In our current newsletter we would like to draw our kind clients’ attention on the announcement obligation of the affiliated companies. The affiliated relationship should be announced to the Hungarian tax Authority within 15 days after the first contracting. In case – due to the current law change – the companies already contracted previously had to be regarded only because of the same management as affiliated ones, had to be announced till 15. January 2015. From 2015, the companies with the same management should announce also the cash transactions above 1.000.000 HUF.