For two years, new rules apply to proceedings at the ordinary courts, which make litigation a lot more difficult and formalised. As a result, lawyers are increasingly confronted with the question of whether the arbitration court or the ordinary court is more appropriate for ruling on any potential disputes. Of course, the time-worn answer is: it depends… But on what?
One does not simply walk into the courtroom and hope for the best. To win a civil case you will need to navigate through the strict formalitites that were introduced by the new Hungarian civil procedure code. It closed many well-known paths of litigation tactics and antics but also opened up new possibilities.
It has long been a problem that the tax authority refuses to refund to a supplier the VAT that has already paid by him, even if the customer has not paid the gross purchase price at all. However, in a recent ruling, the European Court of Justice has clearly ruled that if the claim has become definitively unrecoverable, the Hungarian tax authority NAV is also required to refund the VAT on that claim to the seller. This decision now also allows other affected taxpayers to request a refund of the VAT on their unrecoverable receivables within a maximum of six months.
It has been clear for some time that Hungary is in breach of EU law by not allowing the refunding of VAT on bad debts. The fact that cases of Hungarian taxpayers have now been brought before the European Court of Justice (ECJ) has forced Hungarian lawmakers to move on the issue. While the package of tax amendments submitted last week provides an opportunity to reclaim such VAT, in certain cases – due to the planned administrative restrictions – it will still only be possible to enjoy this right with reference to EU law.
The deductibility of the VAT content of incoming invoices has long been a source of consternation both for equity investors and for the holding companies heading up corporate groups. In a relaxation of the general ban on VAT deduction in these cases, the European Court of Justice (“ECJ”) has given ‘active’ holding companies a way around the restrictions. Meanwhile, other recent judgments by the Court have further expanded the opportunities for VAT deduction. Nevertheless, the ECJ’s decisions also show that it’s better to err on the side of caution.
The rules on VAT-exempt intra-Community supplies of goods have long been a source of worry for businesses. It is not uncommon for the tax authority to deny tax exemption on such transactions on the grounds that the goods never left the country. Although a recently accepted proposal by the EU clarifies the rules, complying with them entails a great deal of bureaucracy for companies that deliver to EU markets.
The law is constantly in flux. While many people may find this intimidating, for us it’s precisely what makes it so exciting. We’d like to share this attitude with businesspeople and managers, and with those who just have an interest in business law, in the form of a regularly updated blog that discusses the latest tax law and commercial law issues in an accessible style. Feel free to send your questions and suggestions for topics you’d like us to cover to firstname.lastname@example.org.