Ákos Baráti

Due to the state of emergency related to the coronavirus outbreak, sooner or later many business owners, company managers, and chief legal or financial officers will be relieved of their more routine, day-to-day work. This is a time when it might be worthwhile to sort out the company’s legal or financial issues that you may not have had time for during your day-to-day operations. Here are five tips worth considering.

Legal and tax tips for the coronavirus shutdown

Review your contract templates

Everyone negotiates and signs numerous contracts on a day-to-day basis. Many of these contracts are based on pre-existing templates or ones taken over from others. However, in many cases, whether due to changes in the company’s life or operation or due to regulatory changes, these contract templates are no longer up-to-date and need to be revised. The time freed up by slow business is a great opportunity to update these contracts as needed and bring them into line with the changed realities of the company’s operation. 

Clarify certain legal and tax issues in your operations

In their day-to-day operations, many companies run into issues whose tax or legal implications are unclear. Given the frequent pressures of time, we often overlook these issues. Because of this, they often remain unclarified until an official audit – when the stakes are already high. Therefore, it may be worthwhile to look at these processes during this less busy period. And if we are unable to arrive at a clear position on a particular issue, it may be advisable to seek a legal opinion or even a ruling of the authority on the matter.

Develop the company structure

In the course of the growth and development of a company, business owners tend to focus primarily on meeting business needs, and so they may neglect thinking about whether the company’s organisational structure is still appropriate for the company’s activities. Yet, the structure established for a start-up may no longer be optimal for a company with more serious business potential – either from a taxation or from an asset protection point of view. Therefore, it may be worth considering restructuring the company. Would it make sense setting up a holding company over the existing companies? Would it be a good idea to spin off some of the company’s assets into a separate company or companies? The expected temporary shutdown provides a great opportunity to think these options over. 

Making the most of corporate tax allowances

Many businesses are unaware of what corporate tax benefits are available. In fact, in the current uncertain business environment, a tax benefit could come in twice as handy. Fortunately, before the 31 May deadline for submitting corporate tax returns, we still have enough time to look at what benefits or allowances we can avail ourselves of. Almost all financial managers should pay particular attention as to whether or not their company is eligible for any kind of R&D tax breaks or royalty-type allowances related to intellectual property. By reviewing the company’s operations, with a little thinking and possibly by supplementing a few documents, there could well be a chance to take advantage of these breaks. 

VAT on non-recoverable claims – a windfall

From a business point of view, it’s always a nasty shock if one of our customers fails to pay us due to insolvency. In addition, under the old rules, this also means that you lose the VAT content of the invoice issued to a non-paying customer. However, under the rules that came into force on 1 January, the amount of VAT on bad debts became reclaimable, subject to strict limits. It may be worth considering which of our invoices we can reclaim the VAT on. More importantly, by 21 April, according to the ruling of the European Court of Justice in the Porr case, it is possible to reclaim the amount of VAT on non-recoverable claims where Hungarian law does not allow for such a refund. Given the short deadline, it’s worth considering this issue as soon as possible.