Hungary tax: Hungarian Parliament measure on foreign-source interest income

The Hungarian Parliament passed on 9 November 2009 a measure that exempts 75% of a Hungarian entity's foreign-source interest income. The change, which applies as from 1 January 2010, will allow Hungarian financing entities to pay tax on only 25% of their interest income at a rate of 19%. The simple application of this rule will result in a 4.75% effective tax rate without any additional planning and with the ability to fund the Hungarian financing company fully from equity.