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A Proposal Made by the Government for Preferential Taxation of "Digital" Companies Employing Foreign Workers

A Proposal Made by the Government for Preferential Taxation of "Digital" Companies Employing Foreign Workers

Hungary
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According to a draft legislation on digital companies issued at the end of 2023, “digital companies” would be exempt from paying public burdens and local business tax. Employees in employment relationships and the executives of companies could fulfil their tax payment obligations after their income through special public burden contributions.

According to the bill, only companies in which the majority of employees come from third countries can enter the new system, and access to the incentive would require companies to have appropriate qualifications. The certification would be organised by the government in a foundation circle, with a decree designating the foundation to issue and evaluate the tender, while the digital company would be able to contract with the designated authority once certified.

Companies with at least HUF 20 million in capital can become a digital company by contracting with the competent authority. This may be applicable to companies whose business activities are based on information technology development activities, applicability of smart contracts, cybersecurity, information and communication research, and development and innovation activities that make them available to the market, industry, and science. The proposal also identifies possible areas of activity, adding that any other activities may only be aimed at supporting the main activity, and the revenue derived from it cannot exceed 20%.

The discussion of the draft legislation is expected in the coming months.

By Lilla Majoros, Attorney at law, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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