Recent changes to the Hungarian legal and tax system have created a new type of legal entity: an asset management foundation.
This new entity enables families to manage, preserve and increase their wealth over generations, similar to the private foundations widely used in western European countries. These foundations can also be useful tools in organising and financing educational, cultural, sports or health-related activities.
To ensure the long-term sustainability of these foundations, the new law requires a minimum capital investment of HUF 600 million (EUR 1.8 million), which can be contributed in cash or in-kind contributions (e.g. movable assets, real estate or intellectual property) or both. This minimum capital investment must be preserved at all times during the foundation's existence. In short, the foundation's equity must not decrease below this threshold.
An asset management foundation can be established for public or private reasons. Private purpose asset management foundations are free from a number of restrictions that otherwise apply to foundations in general, the most important exemption being that the founder and its family members can be beneficiaries.
Each asset management foundation requires a board of trustees, supervisory board and an independent auditor. In certain cases, a separate asset controller tasked with monitoring the foundation's investment and asset management activity is also necessary. If the founder has not provided an investment policy at the time the foundation is opened, such a policy must be adopted within six months.
In certain circumstances, the profits of an asset management foundation are tax-exempt. In all other cases, the foundation is taxed like an ordinary company.
The yield of the foundation’s investment activities distributed to private individual beneficiaries are taxed as dividends for the beneficiaries, and are subject to a 15% personal income tax.
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