Exceptional tax saving option: subsequent declaration of shareholdings

Dear Clients, Dear Readers,

Companies are given an exceptional opportunity to declare previously unreported acquisitions of shareholdings until the last day of the deadline for filing the annual corporate tax return for the tax year 2023. For calendar year taxpayers, this deadline is 31 May 2024.

Subsequent declaration of shareholdings

As mentioned in our previous newsletter, the law introducing the global minimum tax has amended several tax laws, including various amendments to the Corporate Tax Act. Consequently, the legislature has granted companies an extraordinary opportunity to report to tax authorities their shareholdings not previously reported by December 31, 2023, up until May 31, 2024 (or until the submission date of the annual corporate tax return for the respective company). The deadline is legally binding, and no confirmation requests can be submitted thereafter. Notification can be done to the tax authority using Form T201T.

Conditions for ex-post notification

To benefit from this option, taxpayers must meet the following conditions:

• At the time of filing, the shareholding must meet the definition of a declared shareholding as defined in the Corporate Tax Act.
• The taxpayer must declare and pay corporate income tax of 9% on 20% of the difference between the market value of the shareholding and its book value as applicable to independent parties on 31 December 2023 as the taxable amount on the annual corporate income tax return.
• The market value to be applied by the independent parties referred to in the previous point must be supported by an independent auditor's report or an expert report with expertise in the valuation of the shareholdings. The report must be available at the time the return is filed.
• A separate record must be kept in relation to the filing.
• However, there is no minimum size of shareholding, any size of shareholding can be declared.

Corporate tax base relief for the declaration of shareholdings

In the case of a sale of shares, if the sale price of the shares exceeds the book value, a corporate tax liability of 9% would arise on the difference between the two amounts, i.e. the gain.

The most important tax advantage of notified shareholdings is that if the company has held the shareholding as an asset for at least 1 year and then sells it or derecognizes it from its books, the 9% corporate tax is not payable on the gain on sale or derecognition, as the corporate tax base can be reduced by the exchange gain on the sale of the shareholding. However, if a loss is realized on the sale, this loss cannot be deducted from the tax base.

If your business has an undeclared shareholding and you are planning to sell or derecognize this holding, and if you have achieved or expect to achieve significant market appreciation, you should consider this exceptional possibility in good time, as the deadline is approaching and it is essential to complete the relevant administrative tasks.

Our colleagues will be happy to help you with the rules on reporting your shareholding.

The above summary is for information and awareness-raising purposes. We recommend that you consult our experts before making any consequential decisions. For more information about our services, please visit our website: www.abt.hu