There is no use of winning a lawsuit against the tax authority if the enterprise goes bankrupt before the judgement is rendered. And such an outcome is by no means uncommon, as under the current laws the tax authority can initiate enforcement proceedings against a business while the suit is still in progress. What’s more, experience shows that the tax authority doesn’t shy away from enforcement even in the absence of the solid legal grounds for pursuing that route.

In our traditional beginning-of-year review, we again counted the number of taxes levied in Hungary today. This time we got 59. Although the number of taxes has decreased by one since last year, the scale and structure of the tax system has not changed. In terms of tax revenue generated, VAT continues to top the list, bringing in approximately HUF 3,300 billion in 2016.

Under current practice the Tax and Customs Administration (NAV) fines taxpayers that are caught with a VAT shortfall even if the budget has sustained no losses. An opinion recently published by the Advocate General of the European Court of Justice could spell the end for this extremely unfair and much criticised procedure.

Financing banks only had a short time to make use of the collateral structures transformed due to the revised pledge rules of the new Civil Code. A resolution recently passed by the Highest Court presents banks with a new challenge: financiers will, again, need to reconsider the collateral structures that have been developed and used over the years.

While dividends are the result of a happy process, namely the profitable operation of one’s business, the restrictions and difficulties associated with dividend payment have always given grounds for frustration. Particularly troublesome is the treatment of dividends in the course of corporate acquisitions, as the buyer and the seller need to elaborate special techniques for sharing the dividends among themselves. 

While Hungary has long been a preferred place in international tax planning, with a flat 9% corporate tax rate recently introduced, the country has arrived to the forefront of the competition. Adding also the absence of withholding taxes, the participation exemption both on portfolio holdings and intellectual properties, coupled with all benefits of an EU–compliant tax legislation, Hungary is destined to become a popular place for tax experts.

A cartel case of key importance is currently awaiting a decision from the General Court of the European Union (GC). If the GC approves the decision of the European Commission, this will open the door for declaring financial investors liable, under cartel law, for the illegal practices of businesses in their portfolio companies, regardless of whether or not the investor was aware of the cartel activities.

In its latest decision, the European Court of Justice (ECJ) has ruled that the Hungarian tax authority (NAV) unlawfully refused to allow VAT deduction to taxpayers who could not have known that the invoice’s issuer was implied in tax fraud. A special twist in the so-called Signum case is that it was the court of first instance who referred the case to the ECJ, as opposed to the guidelines of Hungary’s supreme court. The decision will have a significant bearing on ongoing tax audits and tax-authority findings, especially in the agricultural and trade sectors.