Numerous tax advantages can be gained if someone switches to being subject to the tax laws of another country (i.e. changes his tax residency). Although the country in which a private individual has residence is not a matter of choice, with careful planning of his personal circumstances it is possible to influence where he is taxed. And this affects anyone who takes on work abroad, whether for a short or a longer period.

The “new” Civil Code, which entered into force more than two years ago, has made it possible for businesses to shape, in their own image, the regulations governing their organisation and operation. This opportunity has certainly captured the imagination of legal practitioners. All sorts of extreme ideas were mooted. For example it was suggested that a limited liability company (Kft.) could issue shares or other securities embodying members’ rights. The company courts soon put a dampener on things, however, creating the category of “status rules”: no matter how flexible the law, it still isn’t possible to depart from the rules that constitute the defining features of a particular form of business entity.

While efforts to hunt down offshore companies may appear to be yielding results, there’s been no slackening of demand for setting up companies abroad. However, tax avoidance and tax evasion, as the primary motives for doing so, are giving way to other objectives.

Winning a tax lawsuit is a difficult and lengthy process, and often there are no guarantees of victory even when you’re totally confident that you correctly accounted for every transaction. So it’s worth paying particular attention to the opportunities for triumphing over the tax authority relatively easily and without any complications. What is more, recent case law has expanded the range of these options.

Under a less-known rule of the new Civil Code it’s now possible for a property owner to separate the titles to a plot of land and the buildings built on it, and to manage or commercially exploit these as separate properties. Businesses are taking a cautious approach to making use of this opportunity in practice: although splitting titles can make property development or borrowing more flexible, for the time being legal uncertainties are preventing it from becoming more widespread.

The issue of governing law often arises in cross-border M&A deals or contractual relationships. At such times – either due to the UK domicile of a contracting party, or to the widespread use of the Anglo-Saxon templates – it is often the English law that is chosen. It may turn out to be important to understand the difference it can mean to the parties’ positions if instead of Hungarian law they were to opt for English law – for example, when drawing up the documents for a company acquisition. 

A rule in the bankruptcy act that had been in effect for over 10 years presented an impossible dilemma for the senior officers of companies under threat of insolvency. An amendment of the law that recently took effect, however, resolves the stalemate and opens the possibility for managers to make sound business decisions in crisis situations.

In 2009 the Supreme Court made it clear that the VAT on public-purpose investments related to property developments is deductible if it would not be possible to implement the development without such investment. Recently, however, some alarm was unexpectedly caused by the preliminary opinion of the advocate general of the European Court of Justice (ECJ) in a similar, Bulgarian case, which recommended prohibiting the tax deduction right. Although the ECJ’s judgement published in the middle of last week did not follow the advocate general’s opinion, it did make exercising the deduction right subject to some strict conditions.