Global minimum tax advisory

The global minimum tax (GloBE) is the second pillar of the OECD’s international tax reform, which sets a minimum level of income tax for multinational enterprise groups. The organization began working on the relevant regulations in 2019. Initially, the focus was on creating a unified solution for the international taxation of digital services and big tech companies. This was later extended to include all groups with total revenue exceeding a certain threshold.

Adoption of the global minimum tax (GloBE) rules

In December 2022, the EU Member States agreed to adopt Pillar Two of the OECD tax reform through a directive. Council Directive (EU) 2022/2523 lays down global minimum tax rules for multinational enterprise groups and large-scale domestic groups, internationally known as the GloBE rules. The Directive applies to fiscal years beginning after 31 December 2023 and required Member States to transpose the new framework into national law by 31 December 2023.

On 31 October 2023, the Hungarian Government submitted Bill No. T/5877 to the Hungarian Parliament as part of the autumn tax package. The Bill included the legislation on top-up taxes ensuring the global minimum level of taxation and, consistently with the EU Directive, entered into force on 31 December 2023.

Who is subject to the global minimum tax rules?

In Hungary, the global minimum tax does not affect the business community at large. It primarily applies to multinational enterprise groups and large-scale domestic groups whose annual consolidated revenue reaches or exceeds EUR 750 million during the relevant reference period. For Hungarian entities directly within scope, compliance entails substantial administrative, calculation and data-coordination work. The GloBE rules require an assessment of, among other matters, the group’s scope status, jurisdictional effective tax rate, any top-up tax liability, the availability of safe harbours and other reliefs, and the related notification, filing and information-reporting obligations. A distinction should be drawn between multinational groups headquartered in Hungary and Hungarian subsidiaries of foreign-headed multinational groups. For Hungarian-headquartered groups, the focus is on group-wide GloBE compliance, GIR data collection and cross-jurisdictional coordination. For Hungarian subsidiaries, the principal practical tasks typically relate to Hungarian QDMTT exposure, local notifications and returns, and reporting data to the parent entity.

GloBE obligations of multinational groups headquartered in Hungary

Where the ultimate parent entity of the group is resident in Hungary, GloBE readiness is primarily a group-wide data and process implementation exercise. It requires the coordinated treatment of multiple jurisdictions, accounting and corporate income tax data, differing local rules and central governance. The Hungarian headquarters must assess not only potential Hungarian QDMTT exposure, but also the group’s overall GloBE position, jurisdictional effective tax rates, available safe harbours and the group-wide data collection required for GIR/DAC9 reporting. The GloBE Information Return (GIR) is the standardised information return for GloBE compliance and tax administration. In Hungary, the National Tax and Customs Administration has also published specific guidance and technical specifications for GIR/DAC9 reporting.

Typical questions and challenges include:

Is the effective tax rate of each constituent entity in each jurisdiction expected to meet the 15% threshold?
Is a transitional or permanent safe harbour available?
Could a QDMTT, IIR or UTPR liability arise in any jurisdiction?
How should group-wide data collection and reporting be organised?
Which data sources, GloBE data points and validation procedures are required?
Which entity should be designated as the local entity for GIR/DAC9 purposes, and what internal roles and responsibilities should be established?
How can consistency be ensured between the CbCR, financial statements, local tax returns and GloBE calculations?
What accounting, deferred tax and consolidation implications need to be considered?

GloBE obligations of Hungarian subsidiaries of multinational groups

Where a Hungarian company is a subsidiary of a multinational group within the scope of the global minimum tax rules, GloBE readiness is generally not a full group-wide coordination exercise, but primarily a local compliance and data-reporting task. The Hungarian subsidiary must assess whether a Hungarian QDMTT exposure may arise, which notification, return-filing and information-reporting obligations apply locally, and which data must be supplied to the ultimate parent entity or designated filing entity for group-wide GIR/DAC9 compliance. Hungarian constituent entities of multinational groups within the scope of GloBE must also assess their information-reporting obligations relating to top-up tax. During the first live filing cycle, the practical management of QDMTT and GIR obligations has become particularly important.

Typical questions and challenges include:

Is the Hungarian subsidiary a constituent entity of a group within the scope of the global minimum tax rules?
Are there any other constituent entities in Hungary?
Could a QDMTT payment or return-filing obligation arise in Hungary?
Must the Hungarian entity independently submit a notification, tax return or information report?
Which data must be provided to the parent entity or designated constituent entity for GIR/DAC9 reporting?
In what format, with what content and by what deadline does the ultimate parent entity require the Hungarian GloBE data?
Is a safe harbour available for Hungary, and are the required supporting data available?
What local accounting and deferred tax implications arise for the Hungarian subsidiary?
Is there an internal process for collecting, reviewing and approving Hungarian GloBE data, including data relating to any additional Hungarian constituent entities?
What risks arise if the Hungarian subsidiary cannot provide complete and accurate data to the group headquarters on time?