Global Minimum Tax: Practical Experience from Hungary

1) Brief Overview of the Global Minimum Tax Rules

The global minimum tax (Pillar Two / GloBE) ensures that large multinational enterprise groups and large domestic groups are taxed at an effective rate of at least 15% in every jurisdiction where they operate. The rules apply to groups whose consolidated revenues reach or exceed EUR 750 million in at least two of the four preceding fiscal years.

Where a jurisdiction’s GloBE (global minimum tax) effective tax rate (ETR) is below 15%, a top‑up tax may arise under one or more of the charging rules: the Qualified Domestic Minimum Top‑up Tax (QDMTT), or the Income Inclusion Rule (IIR), or the Undertaxed Profits Rule (UTPR) enacted by the local jurisdiction. Even if no top‑up tax is ultimately due, the global minimum tax introduces extensive compliance, notification and filing obligations.

2) Hungarian Specifics: Covered Taxes and Safe Harbour Considerations

Under a full GloBE calculation in Hungary, corporate income tax (CIT) is a covered tax. In addition, local business tax (LBT) and the innovation contribution are generally treated as covered taxes for the purposes of the full GloBE (global minimum tax) ETR calculation under the Hungarian implementation. This is a crucial point in practice: the combined effect of CIT + LBT (and innovation contribution) often pushes the Hungarian jurisdictional ETR to or above 15% in a full calculation.

By contrast, simplified calculations—especially the Transitional CbCR safe harbour—use ”simplified covered taxes”, which include only those taxes presented as income taxes in the financial statements. In practice, this means that LBT and the innovation contribution—taxes that affect almost every Hungarian company—are typically not treated as covered taxes in the simplified approach. As a result, a simplified ETR can appear lower than the full GloBE ETR, even if no top‑up would arise under a complete computation.

2B) Accounting Basis and Typical IFRS–HU GAAP Differences

Hungarian legislation allows the global minimum tax computation to start from statutory financial statements prepared under HU GAAP. However, where differences compared to IFRS exceed EUR 1 million at jurisdictional level, those differences must be identified and reflected for GloBE purposes. Across many sectors—the common IFRS–HU GAAP differences include:

• Leased assets (IFRS 16 vs. HU GAAP):

Under IFRS, most leases are on‑balance sheet as right‑of‑use (ROU) assets with a corresponding lease liability; expense is split into depreciation + interest. Under HU GAAP, operating leases are typically off‑balance sheet with straight‑line expense. The IFRS approach often increases EBITDA and alters the timing and nature of expenses—differences that can exceed the EUR 1 million threshold.

• Derivatives and fair value changes (IFRS 9 vs. HU GAAP):

IFRS requires fair value through profit or loss for most trading derivatives (e.g., forwards, swaps, options), producing unrealised P&L volatility. HU GAAP commonly recognises effects upon settlement/realisation, or presents derivatives off‑balance sheet. The timing gap is frequently material.

• Deferred taxes (IAS 12 vs. HU GAAP):

IFRS recognises deferred tax assets/liabilities for temporary differences across the balance sheet; HU GAAP does not require comprehensive deferred tax accounting. GloBE imposes specific limits on deferred taxes considered in the ETR—another area where adjustments may be needed.

• Inventories / commodity positions (IAS 2 vs. HU GAAP):

IFRS allows fair value less costs to sell for broker‑traders; HU GAAP typically uses historical cost with more limited impairment triggers—again, a potential driver of material differences.

Where the IFRS–HU GAAP difference is below EUR 1 million, it need not be reflected; above that level, a GloBE adjustment is required.

3) QDMTT in Practice: Why Many Hungarian Subsidiaries End Up at Zero

For Hungarian subsidiaries of multinational groups, the QDMTT is the main Pillar Two mechanism in play; IIR/UTPR exposures are usually secondary. In many cases, the domestic outcome is still zero top‑up because a full Hungarian GloBE calculation—including CIT + LBT (and innovation contribution where applicable)—often results in a jurisdictional ETR at or above 15%. Practically, the global minimum tax becomes less about additional cash tax and more about governance and compliance.

4) Zero Tax Does Not Mean Zero Compliance (and Penalties Matter)

A zero QDMTT does not eliminate obligations. In‑scope Hungarian entities must register/notify annually and file the relevant QDMTT returns, even if the calculated tax is zero or a safe harbour applies. Non‑compliance can be costly:

• Failure to submit the annual notification: HUF 5 million (≈ EUR 12,500) per entity.
• Failure to submit the QDMTT return: HUF 10 million (≈ EUR 25,000) per entity.

A Hungarian subsidiary that has not addressed its global minimum tax obligations could therefore face up to EUR 50,000 in fixed penalties despite having no tax payable. That said, Hungarian law includes a “reasonable taxpayer” safeguard: if the company acted as could reasonably be expected, penalties should not be imposed. In practice, the safest path is to review the current process, remedy any missed steps, and document that remediation—so penalties can be avoided.

5) Conclusion

Hungary’s early journey under the global minimum tax shows that Pillar Two is more about consistency, documentation, and timely filings than about paying more tax. While full GloBE calculations in Hungary often reach the 15% threshold thanks to CIT + LBT (and the innovation contribution), companies should not mistake a zero tax outcome for zero compliance.

Start from HU GAAP if that is your statutory basis, but identify and reflect any IFRS differences above EUR 1 million. Finally, keep an eye on the simplified safe harbours: they can be helpful, but because LBT and the innovation contribution are generally not “simplified covered taxes”, a full calculation is usually the most accurate guide to your true ETR—and to staying penalty‑free under Hungary’s implementation of the global minimum tax.

We are happy to assist you with the matters outlined above, providing our expertise and support to ensure your objectives are achieved efficiently and effectively.