The challenges of GloBE obligations and top-up tax calculation

The CbCR safe harbour determines whether a company can be exempted from the detailed GloBE calculation based on three possible thresholds. These are the CbCR-based simplified effective tax rate (ETR) test, the ’de minimis’ test, and the routine profits test. The Global Minimum Tax Act (Act LXXXLV of 2023) refers to the fact that the detailed rules of the exemptions will be regulated by a government decree; however, this decree had not been issued by the deadline for submitting the first advance tax return. According to the Tax Authority’s announcement, the government decree is expected in January 2026. In the meantime, for the purposes of filing advance tax returns, the OECD’s published GloBE Commentary provides guidance on the application of the rules, although its interpretation poses a significant challenge even for professionals. The Tax Authority has also published a set of frequently asked questions on its website, which can offer useful support when completing the advance tax return.

When assessing the exemptions, the first step is selecting the correct exchange rate, as the data in the CbCR report – typically presented in EUR – must often be compared with the data of the Hungarian financial statements, which are generally prepared in HUF. The thresholds in the law are also set in EUR. When applying the ‘routine profits test,’ the average value of tangible assets and personnel expenses must be used to determine the so-called substance-based income exclusion amount, which is then compared to the pre-tax profit reported in the CbCR filing. Determining this deduction, however, may present administrative challenges, as it requires accurate records of the net book value of Hungarian assets and of the allocation of payroll costs. Another question that may arise is whether, for the purpose of determining the ETR, only corporate income tax may be taken into account as an income tax, or whether the local business tax and innovation contribution – currently treated as covered taxes – can also be included.

If the CbCR safe harbour exemption does not apply, other exemption categories may still be available. The thresholds for the permanently available, annually electable ’de minimis’ exemption must also be examined, as they are based on three-year average figures. Therefore, it is possible that the permanent exemption can be substantiated even when the transitional safe harbour does not apply. However, calculating the permanent exemption is more complex, as it requires determining the amount of qualified income/loss retrospectively for the previous two years as well.

The calculation of qualified income/loss differs from the approach normally used to determine the corporate tax base: it starts from the after-tax profit, to which the covered taxes must be added in order to arrive at the pre-tax profit. Determining the amount of covered taxes itself is a separate task, as there are adjustment items that must be considered in the calculation. The law lists the pre-tax profit adjustment items without providing substantive explanation, which on its own is not sufficient for proper interpretation. The OECD GloBE Commentary must therefore be applied as the underlying guidance, as it explains the rationale and logic behind the tax base adjustment items.

Our tax advisory team is ready to support companies in correctly preparing the required reports and determining the data relevant for the minimum tax.