Although the new Civil Code that took effect in 2014 made it impossible to use a good few commonly used types of loan security, since then the legislature has gradually restored them to their rightful place. Indeed, the amendments to the Bankruptcy Act coming into effect on 1 July will go further than the previous rules, giving security options and security assignments, the same priority status as mortgages. This case is a good example of the effective cooperation between the legislature and the banking industry in Hungary.

A recently revealed ministerial decree could render the operation of domiciliation service providers in Hungary untenable – at least for those who provide this service at a high professional standard. As the new piece of law contains no explanation, the question that springs to mind is: who does the new legislation favour?

Many people could be in for a nasty surprise when trying to set up a company: the company court refuses to register the majority owner or managing director on grounds that the person is subject to a ban. While the banned persons sometimes know that they have “been up to no good”, in other cases they are baffled as to the reasons for the ban. A lot is at stake: a person who is banned could end up on the “black list” for up to 7-8 years.

ESOP (Employee Share Ownership Programme) entities have been springing up like mushrooms in Hungary since last year, and the acronym itself has become something of a buzzword. And this is hardly surprising, as ESOP entities can be a tax efficient vehicle for paying out work incomes. Caution is advised, however: alongside the many advantages, the regulations also conceal a number of pitfalls.

It is becoming a practice that companies involved in cartels are being sued by market players who have suffered losses as a consequence of a cartel and now want to recover the extra costs they have incurred. The new provisions based on an EU directive and adopted in Hungarian legislation early this year to help the effectiveness of claims for damages are slowly achieving their objective.

One of the most frequent areas of dispute between the tax authority and taxpayers relates to the conditions under which a taxable entity participating in a chain transaction can deduct the VAT passed on to it. The tax authority (NAV) was recently struck another blow in the tussle when the Supreme Court, in a precedent-setting ruling, took issue with the tax authority’s practice of regularly reclassifying the participants in chain transactions as agents. What’s more, the Curia’s ruling goes significantly further, and questions in general the tax authority’s right to reclassify the transactions of taxable entities on a whim.

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.