After a long history of being a preferred location for
financing companies, recent experience shows that Hungary seems to
become attractive again for intra-group financing structures.
International attention towards Hungary is being fuelled by recent
changes in US anti-hybrid rules.
The last US tax reform has introduced a number of rules
(e.g., the so-called BEAT legislation) to keep taxpayers
from eroding the US tax base. Inter alia, these rules have
significantly impacted the intercompany financing of US inbound
investments by foreign companies, which had so far used structures
involving debt-financing. This allowed them to reduce their US tax
burden by securing a tax deduction, and to avoid incurring US
withholding taxes on outbound cash flows. In order to ensure the
effectiveness of the provisions cracking down on such structures,
anti-hybrid rules have been implemented, which stipulate that
deductions for any interest or royalty paid or accrued amongst
related
