Hungarian Tax Planning

Hungarian tax and double tax treaty planning - detailed analysis.

USERNAME: Mitol1 Tax Question:

My question is in two parts. I am a UK citizen and currently resident for tax purposes. I am the sole member of an incorporated limited company that I hold 100% o shares in. I source products from the Far East and sell onto the USA - none of my products enter the UK and I have no local trade, though all funds are processed via UK bank (this can be changed if necessary).

I am intending to relocate myself to Budapest. Is it possible for me to still have my company in the UK and trade through it as normal without this affecting tax residency status in Hungary? I assume my company will still have to pay corporation tax in the UK, which I am fine with.

If I was to draw no salary and only a dividend from the UK company as a Hungarian tax resident, taking into account the double tax treaty, what percentage tax would I have to pay in Hungary? Can I assume that no dividend tax will be taken from UK side? Please let me know if you have any better recommendations with how to go about this.

Answer:

If you moved to Hungary the company itself would still be UK resident and subject to UK corporation tax (as it is a UK incorporated company). You would need to consider the Hungarian tax implications, in particular whether it could be subject to Hungarian tax on its profits by virtue of the Hungarian domestic rules and/or any available double tax treaty.

In terms of dividends, there wouldn't be any UK tax on the extraction of dividends, but as you state there would be Hungarian tax.

You could also consider a UK salary which could be paid free of income tax and may also be deductible for corporation tax (unlike dividends).

Foreign tax issues are outside the scope of the Q&A service. If you wanted an analysis of the Hungarian and double tax treaty implications we could provide this under the tax consultancy service: