Combining CIT and VAT Grouping in Hungary: Tax Savings, Cash-Flow Benefits and Key Deadlines for 2026

Group taxation in 2026: why now is the time to assess your options

Companies can apply to establish a CIT group between 1 and 20 November each year. This is a statutory deadline that cannot be extended. For calendar-year taxpayers, applications must therefore be submitted by 20 November 2026. Missing this deadline means waiting another year before a CIT group can be established. The same application window applies to companies seeking to join an existing CIT group. 

Subject to approval by the Hungarian National Tax and Customs Administration (NAV), CIT groups established through applications submitted by 20 November 2026, as well as new memberships in existing groups, will take effect from 1 January 2027.

VAT grouping is not subject to the same strict application window. Nevertheless, assessing both arrangements together can provide a more comprehensive view of potential tax efficiencies, cash-flow improvements and administrative savings.

Group taxation should be assessed from a group-wide perspective. CIT and VAT grouping address different tax challenges, but when applied together, they can deliver additional financial and administrative benefits,” says Dr Viktória Clamba, Senior Manager, Tax Services, RSM Hungary.

What is group taxation and how does it work?

As a general rule, companies are treated as separate taxpayers, responsible for meeting their own tax obligations and exercising their tax-related rights. Each company calculates its taxable base, files its tax returns, pays the relevant taxes and bears the consequences of any non-compliance, including penalties and late-payment charges.

Group taxation offers an alternative. Companies belonging to the same corporate group that meet certain statutory requirements may be treated as a single taxpayer for specific taxes while retaining their separate legal identities.
This allows eligible group members to fulfil certain tax calculation, payment and filing obligations collectively rather than individually.

Which corporate groups can benefit from CIT and VAT grouping?

Within a corporate group, it is not unusual for some companies to be profitable while others incur losses. Group companies may also regularly invoice one another, finance VAT payments on intra-group transactions and prepare extensive transfer pricing documentation. 
CIT and VAT grouping address different aspects of these challenges.

CIT grouping primarily offers opportunities to utilise tax losses at group level and reduce transfer pricing compliance requirements.

VAT grouping can simplify the VAT treatment of intra-group transactions, reduce invoicing obligations and improve cash flow. It may be particularly beneficial where group members provide substantial services or recharge costs to one another that would otherwise be subject to VAT.

The potential benefits are often greatest when the two arrangements are considered together.

Group taxation is particularly worth exploring where:

• some group companies are profitable while others are loss-making;
• intra-group services or cost recharges are substantial;
• related-party transactions occur frequently;
• transfer pricing documentation requirements are extensive;
• group members have different input VAT recovery entitlements; or
• financing VAT on intra-group transactions ties up significant working capital.

Which taxes can be covered by group taxation in Hungary?

In Hungary, group taxation is currently available for corporate income tax and VAT.
Although these arrangements can offer substantial tax and administrative benefits, companies remain separate taxpayers for other taxes and must continue to meet their respective obligations independently.

“Our experience shows that, with appropriate compliance planning and well-designed financial, accounting and tax processes, companies can effectively manage the challenges of operating as group members for certain taxes while remaining separate taxpayers for others,” explains Dr Viktória Clamba, Senior Manager, Tax Services, RSM Hungary.

Benefits of CIT grouping: tax loss utilisation, transfer pricing and tax incentives

The principal advantages of CIT grouping arise from the ability to coordinate corporate income tax obligations across group members while reducing certain administrative requirements.

1. Tax loss utilisation: how can CIT grouping reduce the taxable base?

• Members of a CIT group fulfill their corporate income tax obligations collectively, with a single CIT return filed for the group.
• Subject to statutory conditions and limitations, tax losses incurred by individual members during their CIT group membership may be offset against the positive tax bases of other group members. Importantly, losses arising during group membership may reduce the group's taxable base in the same tax year, rather than being carried forward for use against future profits. This effectively allows tax losses to be utilised across several companies within the same CIT group.

Practical example: offsetting losses against profits within a corporate group

Consider a corporate group comprising three companies. Companies A and B have positive tax bases, while Company C incurs a tax loss.
Under separate taxation, Company C would generally be able to utilise its loss only against its own future taxable profits, subject to the applicable loss carryforward rules. Under CIT grouping, however, part of Company C's loss may be offset against the group's positive tax base in the year the loss arises, subject to the statutory limitations. This can reduce the overall CIT liability attributable to the profitable members, Companies A and B, without having to wait for Company C to generate future taxable profits. The benefit may therefore extend beyond the timing of tax payments and, in certain circumstances, result in permanent tax savings where losses might otherwise remain unused.

“The advantages can be particularly significant where a company joining a CIT group is unlikely to become profitable in the foreseeable future because of its business model or expected operations. On a standalone basis, its tax losses could continue to accumulate and eventually expire without being utilised. Within a CIT group, however, losses incurred during membership may be used as they arise to offset the positive tax bases of profitable group members,” explains Dr Viktória Clamba, Senior Manager, Tax Services, RSM Hungary.

2. Reducing transfer pricing obligations within a CIT group

• Another important advantage of CIT grouping is the potential reduction in transfer pricing compliance requirements. For transactions between members of the same CIT group, the statutory exemptions generally remove the obligation to prepare transfer pricing documentation and apply arm's length pricing adjustments for CIT purposes, subject to the relevant conditions. Consequently, transactions between two related companies belonging to the same CIT group are not generally subject to the usual arm's length pricing requirements when determining their CIT liabilities. These exemptions are specific to corporate income tax. Related-party requirements applicable to other taxes, such as Hungarian local business tax, must still be considered.
• In addition, a company that became entitled to a CIT incentive before joining a CIT group may continue to claim that incentive during its membership, provided the relevant eligibility conditions remain satisfied.

Benefits of VAT grouping: simpler invoicing and improved cash flow

• VAT grouping allows eligible companies to be treated as a single taxable person for VAT purposes.
• Members account for output VAT and recoverable input VAT collectively through a single VAT return.
• Transactions between members of the same VAT group are disregarded for VAT purposes. Consequently, these transactions do not require VAT invoices and generally do not trigger the associated Hungarian online invoice reporting obligations or the itemised domestic purchase invoice reporting requirements under Form 65M.
• A further advantage is that VAT does not need to be charged or financed on intra-group transactions.

• This can reduce working capital requirements and administrative costs, particularly for corporate groups with a high volume of internal services and cost recharges.

  Practical example: when VAT grouping can generate actual tax savings, not just cash-flow benefits

VAT grouping can be particularly attractive where some group members have restricted input VAT recovery rights because they carry out VAT-exempt activities, while other members predominantly make taxable supplies.

Depending on the group's activities and cost structure, VAT grouping may improve the recovery of input VAT on certain shared costs.

Consider a corporate group consisting of three companies:

• Company A (A Kft.) provides VAT-exempt residential property lettings.
• Company B (B Kft.) provides taxable office property lettings.
• Company C (C Kft.) supplies property management, administrative and IT services to other group members.

Assume that Company C provides property management services to Company A for an annual fee of HUF 20 million plus HUF 5.4 million in VAT.

Without VAT grouping, Company A would generally be unable to recover the HUF 5.4 million of input VAT because the services relate to its VAT-exempt residential letting activities. The VAT would therefore represent an actual cost.

If the companies form a VAT group, the services supplied by Company C to Company A are disregarded for VAT purposes. As a result, the HUF 5.4 million of VAT previously charged on the internal service would no longer arise.

Depending on the underlying cost structure, this may result in actual VAT savings rather than merely a cash-flow advantage.

However, the treatment of VAT incurred on purchases from external suppliers remains an important consideration.

For example, where Company C purchases services from third-party suppliers exclusively for Company A's VAT-exempt residential letting activities, the related input VAT does not become recoverable simply because the companies have formed a VAT group.

The position may be different for shared costs that support both taxable and VAT-exempt activities and cannot be directly attributed to either category based on actual use.

Examples include group-wide IT systems, central administrative services and certain general overheads.

Where most of the VAT group's external turnover relates to activities that confer a right to deduct input VAT, the recovery percentage applicable to such shared costs may be substantially higher than the recovery percentages previously available to individual group members.

A higher group-level VAT recovery percentage cannot automatically be applied to all purchases. Determining the appropriate recovery rate requires a detailed assessment of the members' activities, intra-group transactions and external purchases, supported by a thorough calculation of the group's VAT recovery position,” cautions Dr Alexandra Dely-Simon, Junior Tax Manager, RSM Hungary.

Tax advisory

Establishing CIT and VAT groups: what are the eligibility requirements?

The statutory requirements for CIT and VAT grouping differ. Ownership and voting rights, accounting frameworks and financial year-ends may all affect a corporate group's eligibility and the most appropriate structure.

Requirements for establishing a VAT group

Hungarian-established related taxable persons may establish a VAT group by submitting a joint written application to the tax authority.

Unlike CIT grouping, VAT grouping generally requires a relationship involving more than 50% of voting rights, in line with the relevant related-party criteria.

Companies may also join or leave an existing VAT group.

There is no fixed annual application window for establishing or joining a VAT group, and the arrangement is not tied to the beginning of a financial year. The intended effective date may therefore be selected as part of the application process, subject to the tax authority's approval and the applicable procedural requirements.

Applicants must also demonstrate that their accounting records and systems can clearly distinguish intra-group transactions from transactions with third parties.

Dr Alexandra Dely-Simon, Junior Tax Manager at RSM Hungary, emphasises that VAT grouping also entails joint and several liability for VAT obligations. This may extend to related companies remaining outside the VAT group, in accordance with the applicable statutory provisions. A company may belong to only one VAT group at a time.

Requirements for establishing a CIT group

CIT grouping is subject to stricter eligibility requirements.

Eligible group members must be domestic related taxpayers with a qualifying relationship based on at least 75% of voting rights, compared with the more-than-50% threshold generally applicable to VAT grouping.

In addition, CIT-group members must:

• have the same financial year-end; and
• prepare their financial statements under the same accounting framework, either Hungarian accounting standards or International Financial Reporting Standards (IFRS).

Companies wishing to establish a CIT group or join an existing group must submit a joint written application to the Hungarian tax authority.

As a general rule, applications must be filed between the first and twentieth day of the penultimate month of the relevant tax year.

For calendar-year taxpayers, this means that 20 November 2026 is the deadline for establishing a CIT group effective from 1 January 2027.

What are the potential risks of group taxation?

Although CIT and VAT grouping can offer substantial benefits, companies should carefully evaluate the associated compliance requirements, financial implications and potential risks before making a decision.

• Group-level tax compliance obligations
  CIT-group members fulfil their corporate income tax filing obligations collectively rather than through separate CIT returns. Establishing a CIT group therefore requires new compliance processes. In addition to determining each member's individual tax base, the group must calculate its collective CIT liability and prepare and submit a group-level CIT return. In our experience, with appropriate preparation and clearly defined responsibilities, these additional compliance processes can become part of the group's routine tax administration.
• Group-level interest deduction limitation rules
  The interest deduction limitation rules apply at CIT-group level rather than separately to each member. The EUR 3 million threshold, equivalent to HUF 939,810,000 under the amount specified in the source text, applies collectively to all group members with net borrowing costs. Any resulting tax base adjustment is allocated among the affected members in proportion to their net borrowing costs.
• Joint and several liability
  Members of a CIT group are jointly and severally liable for the group's relevant tax obligations. This liability continues even after the period of CIT group membership has ended. It may also extend to tax obligations incurred by the CIT group before an individual company joined it.
• Restrictions on input VAT recovery
  VAT grouping does not automatically make all input VAT recoverable. Where one group member makes taxable supplies and another carries out VAT-exempt financial or property transactions without a right to deduct input VAT, the recovery of VAT on purchases must still be determined under the applicable deduction rules. For shared costs, particular attention must be paid to their actual use and the appropriate allocation of input VAT between activities that do and do not confer a right to deduct.
• Retroactive termination of CIT group membership
  Where a company ceases to qualify for CIT group membership during a tax year, its membership may terminate retroactively with effect from the final day of the preceding tax year. In such circumstances, the departing company must meet its CIT advance payment obligations on a standalone basis from the beginning of the current tax year. The CIT group's advance payment obligations must also be adjusted accordingly.

When should CIT and VAT grouping be combined?

CIT and VAT grouping are independent arrangements, and companies may participate in both simultaneously. Importantly, the membership of a CIT group does not have to be identical to that of a VAT group. For example, a parent company may establish a CIT group with its wholly owned subsidiaries while forming a VAT group with the same or a different combination of eligible subsidiaries. A VAT group may also include related companies with voting rights exceeding 50% but falling below the 75% threshold required for CIT grouping. This flexibility allows corporate groups to design arrangements that reflect their actual ownership structure and business operations. The benefits of the two arrangements can also reinforce one another. For example, transactions between members of a CIT group may qualify for exemptions from transfer pricing documentation and arm's length tax base adjustments for CIT purposes.

Where the same companies also belong to a VAT group, their intra-group transactions are disregarded for VAT purposes. Consequently, the VAT rules requiring adjustments to an open market value in certain circumstances do not apply to those disregarded transactions.

Practical example: reducing compliance costs for a shared service centre

Consider a Hungarian corporate group in which one company provides accounting, IT, HR and management services to four other Hungarian group companies. If the shared service company issues one invoice to each group member every month, this generates at least 48 intra-group invoices annually, together with the associated online invoice reporting, bookkeeping and internal reconciliation requirements. Depending on the nature and value of the transactions, transfer pricing documentation and reporting obligations may also arise.

Combining CIT and VAT grouping can substantially reduce these compliance requirements. Under VAT grouping, transactions between members are disregarded for VAT purposes, removing the related VAT invoicing and online invoice reporting obligations.

Under CIT grouping, qualifying transactions between members may also be exempt from transfer pricing documentation and reporting requirements. The arm's length principle generally does not need to be applied to those transactions when determining the CIT base, subject to the statutory conditions.

The two arrangements therefore do not provide the same tax benefit twice. Instead, they address separate tax and compliance obligations associated with the same underlying intra-group activities.

Is group taxation worthwhile? Key factors to consider

Group taxation does not automatically result in tax savings. A decision to establish a CIT group, a VAT group or both should therefore be supported by detailed financial and tax modelling.

The assessment should consider:

• the value and frequency of intra-group transactions;
• the profit and loss positions of potential group members;
• current and projected input VAT recovery percentages;
• the extent of transfer pricing documentation and reporting obligations; and
• the potential tax, cash-flow and administrative savings.

Potential benefits must also be weighed against the risks, including joint and several liability, the position of related companies remaining outside a VAT group, and the need to implement appropriate accounting and tax compliance processes.

Taking a coordinated approach to group taxation

Both CIT and VAT grouping can offer substantial benefits independently. However, their full potential often becomes clearer when the two arrangements are evaluated together.

A corporate group considering CIT grouping should therefore also model the potential impact of VAT grouping, and vice versa.

Because the two groups do not need to have identical memberships, the structure can be tailored to the group's ownership arrangements, business activities and tax profile.

Before proceeding, companies should quantify the expected tax, cash-flow and compliance benefits and carefully assess the risks associated with group membership and joint and several liability.

For calendar-year taxpayers considering CIT grouping from 1 January 2027, the immediate priority is to complete this assessment in time for the 20 November 2026 application deadline.