U.S. Termination of 1979 Income Tax Treaty with Hungary

On July 8, the U.S. Treasury Department provided notice to Hungary that it is terminating the U.S.-Hungary income tax treaty, first enacted in 1979. The Treasury explained this action citing long-standing concerns with Hungary's tax system and the tax treaty. “The United States, across administrations, has had long-held concerns with Hungary’s tax system and the Hungary treaty,” a Treasury spokesperson said in a statement provided to the Washington Examiner. “We discussed these concerns with Hungary starting last fall, but are taking this step due to a lack of satisfactory action by Hungary to remedy these concerns.”

An analysis performed by the Treasury found that the treaty’s benefits now just unilaterally benefit Hungary. The U.S. is in the process of sending over the notice of treaty termination, after which the treaty will be ended following a six-month period. The treaty termination will apply to payments of U.S.-source dividends, interest, and royalties for payments made on or after January 1, 2024.

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