Global minimum tax is not only a new tax rule but also a complex compliance challenge for the companies concerned. The preliminary data reporting and notification obligations already raised serious questions, but the real challenge will need to be faced during the 2024 year-end closing and audit. In case a group member subject to the global minimum tax dos not meet any exemption criterion, additional tax liability may arise. Time is short and compliance requirements are complex - so there is no point in delaying preparation. It is worth thinking through the necessary steps now to avoid unexpected tax burdens and compliance risks.
With the global minimum tax rules under the OECD’s Pillar Two framework has been effective in Hungary since 31 December 2023, taxpayers need to ensure they complete specific compliance tasks. In particular, important steps must be taken during the first half of 2025, after the preliminary reporting obligation. The following step-by-step guide outlines the required actions need to be made to meet such GloBE related obligations and mitigate potential penalties.
1. Analysis of global minimum taxpayer status and preliminary reporting
In respect of FY2024, taxpayers with a financial year following the calendar year had to submit their GloBE notification form to the Tax Authority by 31December 2024. From FY2025, the notification deadline is the last day of February (in respect of FY2025, that is 2nd March due to the weekend).
If a constituent entity did not act as it was expected from the taxpayer in the given situation and missed to comply with the preliminary notification obligations, even a 5-million-forint penalty may be levied by the tax authority.
Therefore, it is essential to quickly carryout the necessary analysis to determine whether a company falls within the scope of the global minimum tax. In case the taxpayer status is confirmed, the preliminary reporting is to be taken care of as soon as possible to decrease the potential penalty consequences.
Taxpayers with reporting periods that differ from the calendar year were required to file the GloBE notification by the end of the 12th month following the financial year’s first day in FY2024. From FY2025, the form must be submitted by the last day of the 2nd month following the end of the respective tax year. This means that taxpayers with a fiscal year that does not follow the January-December cycle must align their preliminary reporting as well as other GloBE compliance tasks’ deadline to their own financial reporting period.
2. Analysis of global minimum tax exemption rules
Once the taxpayers filed their preliminary notification, the next step is to analyze potential exemption provisions under the GloBE legislation. If any of the transitional Safe Harbour, de minimis exclusion or other exemption rules is applicable to the Hungarian group members of a multinational enterprise (MNE) group subject to GloBE, qualifying domestic minimum top-up tax (QDMTT) and/or income inclusion rule (IIR) tax for the given year can be deemed to be zero.
During the transitional period (applicable to 2024–2026 when the financial year follows the calendar year), constituent entities of MNE groups may benefit from the transitional CbCR Safe Harbour rules if they pass one of the following three tests based on the qualified country-by-country report (CbCR) of the respective tax year:
- De minimis test: The MNE Group reports Total Revenue below EUR 10 million and Profit (Loss) before Income Tax below EUR 1 million in Hungary; or
- Simplified ETR test: The MNE Group’s Simplified effective tax rate reaches the Transition Rate (15% In respect of FY2024) in Hungary for the fiscal year; or
- Routine profits test: The MNE Group’s Profit (Loss) before Income Tax in Hungary is not higher than the Substance-based Income Exclusion (SBIE) amount.
If there are multiple Hungarian entities within the MNE group, the Hungarian entities must be assessed collectively. "Once out, always out" – it is important to note that if a MNE Group has not applied the transitional CbCR Safe Harbour provisions with respect to its Hungarian entities in a fiscal year in which the MNE Group is subject to the GloBE rules, it will not be eligible for those Safe Harbour provisions for its Hungarian entities in any subsequent years either. Therefore, it is important to carry out the mentioned analysis of potential Safe Harbour/exemption rules already in respect of FY2024, since if the MNE Group does not apply these provisions, it will permanently remain ineligible to apply them.
We note that the above tests require a thorough technical knowledge and a detailed analysis of the relevant international and national rules, since each test may be based on several background calculations, where even collection of the initial data may face challenges.
There may also be further exemption options that should be explored by the Hungarian group members concerned. For example, de minimis exclusion may be considered based on the average figures of all Hungarian constituent entities; there is an initial five-year exemption for MNE groups in the initial phase of their international activities; or an initial exemption could be available for large-scale domestic corporate groups.
3. Calculating and accounting for GloBE liability
If taxpayers within a MNE group do not meet the conditions of any Safe Harbour or other exemption relief, the precise calculation of their global minimum tax (QDMTT / IIR) liability is to be carried out in compliance with the OECD’s model rules on the Pillar Two framework as well as EU and domestic regulations.
Although the payment and return filing obligation for supplementary taxes is only due in 2026 – with a tax advance payment and return filing liability in November 2025 – calculation and quantification of the any global minimum tax liability for FY2024 cannot wait until November! The supplementary tax of FY2024 must be properly accounted for in the FY2024 books, and the corresponding tax expense is to be included in the FY2024 financial statement.
To mitigate potential risks and time pressure due to year-end closing, it is recommended that the constituent entities start discussions with their statutory auditors and commence the above GloBE related set of tasks as early as possible. In case it is concluded that a Hungarian MNE group entity falls under the GloBE rules in respect of FY2024, and none of the available exemptions (safe harbours or exclusions) could apply, it is advisable to start gathering the underlying information and figures and prepare the necessary calculations at the earliest convenience. Given the complexity of the global minimum tax regulations and the high penalties that may be assessed for non-compliance, the above GloBE tasks are to be given priority.
*Act CL of 2017 on the Rules of Taxation, Section 227/B [Breach of tax return and data supply obligations related to supplementary taxes ensuring the global minimum tax level]
The state tax and customs authority may impose default penalty, as specified in Act LXXXIV on Supplementary Taxes Ensuring the Global Minimum Tax Level and Amending Certain Tax Laws
a) of five million forint, in the case of failure to comply with the reporting obligation or late compliance,
b) of ten million forint, in the case of failure to comply with the obligation to submit returns, or late, defective, erroneous compliance or compliance with false data content.
