Attention: Important deadline! Corporate income tax group election will be open between 1 and 20 November

For the ninth time since 2019, qualifying Hungarian affiliated enterprises have the opportunity to form corporate income tax groups for their next business year. For the 2027 business year, companies whose business year corresponds to the calendar year may submit their applications to enter a corporate income tax group between 1 November 2026 and 20 November 2026, and it is also in this period when applications may be submitted in case a new member wishes to join an existing group. Companies whose business year differs from the calendar year can submit their applications between the first and the twentieth day of the penultimate month of their tax year.

There is still time to think over to what extent it would be worth using the opportunity in case of your company. This is a peremptory deadline, which means that a decision on forming a corporate income tax group must be made in the next few weeks. In our newsletter we briefly highlight the most important advantages.

One of the important objectives of the system of corporate income tax groups is to ease the administrative burdens of the enterprises choosing this opportunity, since members of such groups do not, or only partly have to apply the transfer pricing rules in relation to transactions carried out within the tax group, including the obligation to prepare a transfer pricing documentation and the provisions applicable to the mutual adjustment of the tax bases. In light of the more stringent transfer pricing documentation requirements introduced from 2026, it is particularly worth considering the option of corporate income tax groups in case of Hungarian affiliated enterprises with a large number of transactions that should be documented, as well in such cases where the determination of the arms’ length price would be difficult, due to the special nature of the transaction. Therefore, by choosing the corporate income tax group, businesses can reduce the costs of the preparation of transfer pricing documentations and in respect of transactions between the group members, they can eliminate the risk of failure to comply with the documentation obligation (as of 2023, the maximum fine for a missing or incomplete transfer pricing documentation was significantly increased, from HUF 2 million to HUF 5 million per transfer pricing documentation, and from HUF 4 million to HUF 10 million in the case of repeated violations). Likewise, the obligation to submit a report regarding transfer pricing documentation in the corporate income tax return can also be avoided if prospective group members have related party transactions only between themselves.

On the other hand, corporate income tax groups may also bring tax savings in case a member in the group is generating losses, since members of the group may, in accordance with the rules provided, adjust their combined tax base with such losses carried forward. While the tax base of the corporate income tax group is determined as the aggregate of the individually calculated, non-negative tax bases of the group members, i.e. the consolidated tax base is not directly reduced by the losses incurred by loss-making members, group members may nevertheless utilize tax losses generated within the corporate income tax group against the taxable profits of other group members, subject to the applicable statutory limitations. It requires further consideration if any member of the group is otherwise entitled to use a tax benefit, or it would continue to use a tax benefit it has already started to use, since different rules apply, for example, to the development tax benefit or to the one associated with the support of popular team sports.

When choosing to enter a corporate income tax group, several important factors and conditions need to be taken into consideration. It should be examined, for example, if all of the affiliated enterprises wishing to join satisfy the relevant requirements. Further, the determination of the tax base could also pose challenges: due to the application of the new rule limiting the deduction of interests, choosing to enter a tax group could even be unfavorable for the group.

With a view to the fact that the applicable rules are rather complex, for the preparation of the decision we recommend that you should consult with the tax experts of Forvis Mazars Kft. who are pleased to be at your service in helping interpret the rules specifically from the perspective of your company, weigh the advantages that a tax group could offer, as well as the possible pitfalls, and can support you or, if needed, take the administrative tasks related to the registration entirely upon themselves.