EU Commission opens probe into Hungarian interest tax scheme |
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Wed, 21 Mar 2007 12:02
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BRUSSELS (AFX) - The European Commission said it has opened an in-depth investigation into Hungary's intra-group interest taxation.'We must ensure that fiscal measures respect EC Treaty state aid rules and do not distort competition by unfairly influencing the allocation of economic activities,' EU Competition Commissioner Neelie Kroes said in a statement.The Hungarian scheme, introduced in 2003, allows companies to claim as taxable income or expenses only 50 pct of the balance of interest received from or paid to affiliated companies in intra-group relations.This means that when a Hungary-based company has a positive balance of interest with its affiliated companies, only half of the interest is taxed.Similarly, if the affiliated company paying the interest is Hungary-based, it deducts only half of the amount from the taxable income.When the interest-paying affiliated company is based outside Hungary, however, it is able to deduct the whole balance of interest paid from its taxable income.The commission doubts that the legislation constitutes a general tax measure.It said the legislation excludes small companies and is only open to groups of companies, not individual ones.Companies may also choose to opt out on a yearly basis.'In addition, the scheme appears to be advantageous only in an international context,' the EU executive added.nina.chestney@thomson.comnc/cmlCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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