Knowledge
12 Minute
A Hungarian holding company can bundle dividends from a German GmbH for further investments. However, a distribution without German withholding tax and tax-free dividends in Hungary are not an automatic promise. I would first have payment route, place of management and foundation sequence checked.
Differentiate two tax issues in dividend flow
For me, the concrete benefit of this structure lies in combining distributed profits of a German subsidiary with a Hungarian parent company for further investments. There are two separate questions to answer: Can the distribution leave Germany without German withholding tax? And how is the dividend received treated at the holding company in Hungary?
Under EU law, a distribution of the German subsidiary to the Hungarian parent company can be possible without German withholding tax. At the Hungarian holding company, these dividends can be tax-free. I would have both results technically examined before the implementation for the concrete participation structure. The mere combination of a German GmbH with a Hungarian company is not yet confirmation of the tax treatment.
The said 9 percent Hungarian corporate tax concerns a different level than the tax exemption of received dividends. Similarly, around 30 percent in Germany are to be understood as a combined burden of corporate tax and business tax, not as a corporate tax rate alone. As a result, no calculation follows, according to which all profits of the German GmbH would suddenly only be taxed at 9 percent.
What the Example of Investment Actually Means
The structural example is manageable: An entrepreneur lives in Hungary. His Hungarian holding company holds the German GmbH. GmbH distributes profits to the holding company, which is to use these funds for investments.
The crucial point is the transition from the operating subsidiary to the investing parent company. If the envisaged tax treatment is effective, the dividend can arrive at the holding without the mentioned additional tax deductions on this distribution path. This does not mean that the underlying GmbH profit is untaxed. Similarly, the example describes money for investments within the holding company, not a tax-free private payment to the entrepreneur.
Combining countries by task
A parent company in Hungary can be linked to subsidiaries in Germany, Austria or Switzerland. I would first assign each company a specific task: which company operates the business, which holds the investments and which decides on further investments?
This distribution of tasks is more meaningful than an isolated comparison of tax rates. The dividend treatment described for Germany and Hungary cannot be transferred to any other country combination solely because of the same parent company. Each additional connection belongs to the competent technical examination.
Clarify leadership and order before establishing
A holding company is not a finished product for me. It needs real substance and an actual place of management on the ground. For the preparation, I would therefore clarify: Who actually runs the Hungarian holding company? Where do their decisions fall? What function does it perform beyond receiving dividends?
My organizational order would be: first to record tasks and investments, then to describe the planned dividend flow and the local management, then to have the legal and tax issues examined. Only on this basis should the specific order of establishment be determined. A new structure is also not a blanket solution for issues of exit tax in a later move.
If you would like to prepare this connection between a German GmbH and a Hungarian holding company, you can contact me, Norbert Péter / THE BUDAPESTER, via the contact page. Describe the existing participation, the planned location of the management and the investment objective. This contribution serves as orientation; the individual legal and tax audit belongs to approved professionals.
form a holding company · Contact with Norbert Péter / THE BUDAPESTER
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