Hi, I am the global minimum tax, but my friends call me GloBe!

After a lengthy debate, the Hungarian Parliament has passed the law on additional taxes to ensure a global minimum tax level and, in this context, amending certain tax laws, putting an end to the case. Before we start getting angry that another tax has to be paid by our company, let’s clear: we don’t have to. The following articles on this topic will highlight the more important details of the global minimum tax.

Let’s start at the beginning, as they say, but I’m not promising a light trip.

As has been mentioned, in Hungary it will affect a relatively narrow range of taxpayers, as the effective tax rate for companies is determined by dividing the taxes paid by companies in a jurisdiction by their income. If the tax rate in that country is below the 15% minimum, the so-called pillar 2 rules of the Organisation for Economic Co-operation and Development (OECD) will apply and the group will have to pay additional tax until the tax rate rises to 15%. The 15% is important to highlight because if we are already familiar with navigating the ocean of Hungarian tax rates, we know that the corporate tax rate in Hungary is 9%, so we expect to discover a slight difference.

Let’s see who GloBe applies to

A group member resident in Hungary that is a member of a multinational group or a large domestic group of companies whose annual income, including the income of the excluded entity, as reported in the consolidated financial statements of the ultimate parent company, equals or exceeds EUR 750 000 000 in at least two of the four tax years immediately preceding the tax year is subject to the additional tax liability providing for the global minimum tax level.

It is a lot to write down, so the threshold is EUR 750 million, which on 29 November 2023 is HUF 283 234 384 725.00 converted into HUF.

So we can take a deep breath and relax, this regulation will not apply to a huge percentage of businesses in Hungary.

If, by the way, one or more of the four tax years is longer or shorter than 12 months, the above income threshold for each of these tax years will be pro-rated according to the number of months actually completed.

Consolidated financial statements

As a complement to the above, let’s look at the definitions of parent-subsidiary and of dominant influence.

According to Section 3(2) point 1 of the Accounting Act, a parent company is “a company that effectively exercises a dominant influence over another company (hereinafter referred to as “subsidiary company”), either directly or through its subsidiary company.” And according to point 2 of the same paragraph, a subsidiary company is “the business association over which the parent company referred to in Point 1 exercises a dominant influence.”

Thus, a company that is a parent company of one or more other companies as defined above must prepare consolidated annual reports in addition to its own annual reports. According to Article 117 of the Accounting Act, if any two of the three values do not exceed the following thresholds at the balance sheet date in the two financial years preceding the financial year, it does not have to prepare consolidated annual reports:

  • annual net turnover (HUF 12,000 million),
  • balance sheet total (HUF 6,000 million),
  • number of employees (250 persons).

Before we get into the hardest definitions, let’s warm up with some easier ones. One of these is a low-tax jurisdiction, which means, in respect of an MNE group or a large-scale domestic group in any fiscal year, a Member State or a third-country jurisdiction in which the MNE group or the large-scale domestic group has a qualifying income and is subject to an effective tax rate which is lower than 15%.

Don’t be surprised, if it’s about law, when you analyze one concept, it’s explained by another concept anyway, so let’s look at that, it won’t work on us.

A low-taxed constituent entity means

  1. a constituent entity of an MNE group or of a large-scale domestic group that is located in a low-tax jurisdiction; or
  2. a stateless constituent entity that, in respect of a fiscal year, has qualifying income and an effective tax rate which is lower than 15%;

To understand how the additional tax liability arises, we need these three abbreviations:


What they mean is explained in the next article.