Hungarian Parliament passed bill no. T/10676 into law. The new Act concerns amendments to certain acts on sole traders (sole proprietorships) and savings incentives and introduces significant changes to several tax types. The following is a summary by PricewaterhouseCoopers of the most important amendments to the Act on Corporate Tax and Dividend Tax relating to interest income received from abroad.

As described in our Tax & Legal Alert of 4 November 2009, the rule that allows a corporate tax deduction of up to 50% of the net interest income from loans between related companies will expire on 1 January 2010.

However, with this amendment, the Hungarian Government is clearly inclined towards continuing to provide the possibility of a favourable corporate tax treatment with respect to corporate finance.

Under the amended Act, from 1 January 2010, taxpayers resident in Hungary and foreign entrepreneurs will calculate their corporate tax base exclusive of

any income that is subject to taxation abroad, if so prescribed by an international treaty, and
interest income received from abroad.

Under the amended Act, "interest income received from abroad" is defined as 75% of such income, less the costs and expenses directly attributable to the acquisition of such income, adjusted by the items that increase and decrease the pre-tax profit.