Hungary Economic Development Extra-Profit Tax Phase Out

Change in tax policy to provide new opportunities for U.S. companies in healthcare, energy and telecommunications. 

Summary: U.S. companies’ local affiliates that have strong reputation for innovative pharmaceutical and biotechnology solutions through clinical trials will benefit from the change and the decision will provide potential business opportunities for them in the local market once the extra profit tax is phased out on January 1, 2025. 

The Government of Hungary released the Government Decree No. 356/2024 which was published in issue No. 116 of the Hungarian Gazette on November 21, 2024 confirming that Hungary is phasing out extra profit tax on telecommunication, pharmaceutical companies and energy producers and suppliers, as of January 1, 2025.   After this date, the tax rate will revert from 40 percent to 20 percent, which is a tremendous achievement for the sectorial companies impacted by this extra profit tax. 

In late 2022, the government-imposed windfall taxes on several sectors to address budget shortfalls through Government Decree No. 197/2022.  The Windfall taxes were seen as a way to generate additional revenue to support budgetary needs, and at that time, the Government of Hungary aimed to collect HUF 800 billion (USD 2.2 billion) in taxes on “extra profit” earned by companies in the targeted sectors.
  
Phasing out the windfall taxes in Hungary will have several positive effects such as investment and economic growth as reduced uncertainty about future tax burdens can encourage businesses to expand and create jobs which can overall contribute to economic growth.  It will also enhance innovation as lower taxes will incentivize companies in spending available funds on additional research and development, clinical trials and leading to innovation for new products and services.  It will improve business confidence and lead to increased economic activity and job creation. 
Following an extension, Hungary will maintain windfall taxes on banks and retailers through 2025.
For additional information, please contact: Csilla.viragos@trade.gov