Deferred Tax Calculations

Why is deferred tax important in GloBE calculations?

Under the global minimum tax framework, deferred tax plays a key role because the GloBE effective tax rate calculation takes into account not only current-year covered taxes, but also certain deferred tax effects. Deferred tax can address timing differences between accounting profit and the corporate income tax base, including differences arising from depreciation, tax losses carried forward, and the recognition or release of provisions.

Hungarian statutory financial statements and group-level reporting

Following amendments to the Hungarian Accounting Act, entities preparing Hungarian statutory financial statements may also recognise deferred tax. This option may be particularly relevant for groups within the scope of the global minimum tax rules.

For groups headquartered in Hungary, the deferred tax calculation is generally a group-wide exercise requiring the coordination of accounting data, deferred tax positions and GloBE positions across multiple jurisdictions. For Hungarian constituent entities of international groups, the focus is more commonly on the data and calculations of the Hungarian entities and on GloBE reporting to the ultimate parent entity.

When is a separate deferred tax calculation advisable?

A separate deferred tax calculation may be particularly appropriate where the Hungarian constituent entity has material timing differences, such as tax losses carried forward, development tax incentives, provisions, or significant differences between accounting and tax depreciation.

For GloBE compliance purposes, the relevant question is not only whether a deferred tax position may be recognised for accounting purposes. It must also be properly substantiated, expected to reverse or be utilised, eligible for recognition under the GloBE rules, and treated consistently in the relevant calculations.

Andersen services relating to deferred tax calculations

Andersen Hungary’s tax advisers can support affected businesses in the following areas:

• Identifying deferred tax positions and assessing them from a GloBE perspective.
• Preparing deferred tax calculations for Hungarian statutory accounting purposes.
• Assessing the impact of deferred tax on the QDMTT calculation and any top-up tax liability.
• Reviewing deferred tax information reported by Hungarian constituent entities.

Further information on Andersen’s global minimum tax advisory services is available on this page.