The planned amendments to the Hungarian Tax Regulations that affect foreign investors are part of the 5-year tax amendment program that was announced by Prime Minister Ferenc Gyurcsny in summer 2005, says RZB.
These amendments are predicted to take effect as of January 1, 2006, pending legislative programs that may change in the light of political and economic developments.
As of January 1, 2006, the deadline for carrying out tax audits will be extended with the time incurred for exchange of information between the Hungarian tax authority and foreign tax authorities carried out based on agreements on avoiding double taxation and the regulations for mutual assistance of the EC.
Tax reclaimed may actually be paid at a later date. Besides this amendment, the deadline of 30 or 45 days for the tax authority to make an actual refund will remain unchanged. Therefore, should the tax authority, as a result of such an exchange of information, extend the deadline for the audit and mix the deadline for making the refund, it would have to pay late payment interest (subject to further conditions).
All types of dividend income to foreign non-private investors will be exempt from dividend withholding tax, based on a previous amendment, meaning that there will be no withholding tax at all in Hungary for payments to foreign institutions from 2006, as withholding tax for interest had been abolished already as of January 1, 2004.