EXPECTED TAX BENEFITS IN CONNECTION WITH THE TAXATION OF ASSET MANAGEMENT FOUNDATIONS

The Hungarian legislation introduced the asset management foundation as a new type of asset management in March 2019, which is very similar to the well-known trust. According to the bill on amending certain tax laws submitted by the Hungarian Government in June 2019, the foundation performing asset management will be considered as a taxable person for corporate income tax purposes. The foundation must fulfil its tax liability in the same way as the assets managed by a trust. However, if the foundation established by a natural person in favour of a natural person beneficiary has income only from financial instruments or from the exercise its rights of disposition of such instruments, the income from such activities are not taxable for corporate income tax purposes.

The bill also defines the tax liabilities of the payments performed by the asset management foundation to the beneficiary. If the beneficiary is a natural person, then such payments are taxable for personal income tax purposes. As a general rule, such payments derived by the returns of the assets and performed by the foundation (which is not charitable) are taxed in the same way as the dividends (i.e. 15% personal income tax). The bill is expected to be adopted in July 2019.