With the advance of new technologies, the market for products and services increasingly transcends borders. International trade is a must not only for large companies, but also for businesses of all sizes seeking access to a wider, more diverse and decentralised consumer. The Internet has democratised the marketplace and it is up to businesses to discover ways to approach consumers efficiently. To this end, one of the traditional methods is through distribution agreements, in which a business can reach a wide audience through all of a distributor’s channels, thus allowing efforts to be focused with increased efficiency.
However, do we know the necessary legal frameworks in the countries in which we conduct business when we sign one of these distribution agreements? Are there specific regulations for these kinds of contracts? Does Europe operate as a single market? Can an agreement be concluded by choosing a different jurisdiction agreed to by the parties?
The second edition of European Corporate Legal Insights, the magazine published by Andersen’s Corporate Legal Service Line in Europe, analyzes all of these issues to be taken into account in distribution agreements in the different European countries.
sbarbara
European Guide to Support Employers: Teleworking in Europe
by sbarbara
The global spread of Covid-19 is forcing employers worldwide to introduce teleworking. In Europe there are no uniform regulations for the introduction of telework, except for the voluntary European framework agreement from 2002, which only contains a general legal framework. However, this agreement is not binding law for the EU member states.
In the absence of uniform rules, employers who employ workers in different European countries live with the constant risk of violating country-specific regulations. To help employers, make the best decision for their company, the European Employment Group of Andersen have developed a practice guide that provides employers with important information on the introduction and implementation of telework in the individual European countries.
In this sense and on top of that, the Employment Group of Andersen will celebrate a webinar on Thursday November 19th, 2020 (4.00 pm CET), where a general and updated overview of the regulatory situation of teleworking in Europe will be given, focusing on aspects such as its voluntary or compulsory nature, how telework (remote from home) works with the right to digital disconnection, business obligations regarding health and safety during teleworking, as well as other issues of interest such as data protection, confidentiality or the obligation of companies, if apply, to pay the expenses derived from teleworking.
The webinar will serve to provide a general overview of these and other issues of maximum interest in relation to teleworking, as well as explaining the methodology used in the guide (publication on teleworking in Europe) drawn up by the Andersen Employment Law through its lawyers located in the different countries in Europe, so that it can be a useful tool in the face of many of the doubts that may arise in this area in the near future.
To attend this webinar you must reply to this e-mail by clicking on the registration button. Once you have done so, you will receive the data to access it.
We hope that the webinar will be of interest and we will be delighted to have you.
Download the guide HERE
Gyula László Nagy – Zsombor Incze – Erik Landgraf: Mortgage Bank Refinancing – Proposals for Implementation of the European Covered Bond Directive in Hungary
by sbarbara
“In this study, we summarise the operational models of mortgage banks and the new EU mortgage bond regulations. We analyse the most important challenges facing refinancing mortgage banks in the current framework. These are basically grouped into three subjects: (1) for historical reasons, the characteristics of refinancing loans do not support more efficient portfolio refinancing; (2) the refinancing loan guarantee scheme does not ensure fulfilment of the conditions laid down in other legislation in case of statutory portfolio assignment; (3) overcollateralisation in the current purely refinancing model cannot be achieved from ordinary collateral. On this basis, we propose the development of an alternative regulation for “refinancing mortgage banks”, while fully maintaining the current operation; with this alternative regulation, a revised collateral system would help to solve the problems and develop a more efficient mortgage loan structure.”
https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-19-3.pdf
The article was published in the Hungarian National Bank’s online scientific journal, Financial and Economic Review, September 2020 Vol. 19 Issue 3
Entry Rules in Passenger Traffic
by sbarbara
As of 21 September 2020, the most important entry rules in passenger traffic are:
1. New piece of legislation is Gov.Decree no. 408/2020. (VIII. 30.). The regulations are based on citizenship, the classification by countries (green-yellow-red) terminates.
Further amendments were enacted by Gov.Decree no. 432/2020. (IX. 18.) which we highlighted in red.
2. Rules applicable to Hungarian citizens:
2.1 She/he is treated in the same way as a Hungarian citizen[1]
– who is entitled to permanent residence in Hungary and a member of his family, if he proves this right by a document, or
– who has a valid residence permit issued by the immigration authority for a period exceeding 90 days, entitling her to stay in the territory of Hungary, and presents the relevant document upon entry.
2.2 The Regulation does not apply to a person who,
– enters in freight traffic, or
– is a diplomat, or
– upon entry into Hungary, provides credible proof that he/she has contracted COVID-19 within 6 months prior to the date of crossing the border.
2.3 A Hungarian citizen arriving from abroad or a family member of a Hungarian citizen who does not have Hungarian citizenship shall undergo a medical examination during his/her entry into Hungary – with the exception specified by law or government decree – , which he/she must tolerate.
If, in the case of a Hungarian citizen, the medical examination reveals a suspicion of infection, it shall be placed in quarantine designated by the competent epidemiological authority or, if it does not pose an epidemiological risk, in official home quarantine.
If the medical examination does not reveal the suspicion of infection, the person concerned shall be placed in official home quarantine for 10 days if he/she has a Hungarian residence or temporary place to stay. If he/she has no such, he/she is placed into designated quarantine.
At the request of the quarantined person, the epidemiological authority competent to issue the quarantine decision may allow the quarantined person to undergo, within 5 days, at least 48 hours apart, twice a molecular biological test in accordance with health professional rules – SARS-CoV-2 PCR test – participate in order to grant an exemption.
The first molecular biological test, i.e. SARS-CoV-2 PCR test, which complies with the professional health rules, shall be taken into account as well, if it was made in one of the countries belonging to the Schengen Area, in the United States or Canada and its results were verified by the person concerned by a document in Hungarian or English
If the two molecular biological tests, the SARS-CoV-2 PCR test, show that the quarantine virus was not detectable in SARS-CoV-2 coronavirus at the time of the test, the epidemiological authority competent to issue the quarantine decision shall grant an exemption from the quarantine.
It is not possible to use 2nd test result which was issued not in Hungary!
3. Rules applicable to foreigners (i.e. who, according to 2.1, are not subject to the same treatment as Hungarian citizens):
3.1 A non-Hungarian citizen – with the exception specified by law or government decree – cannot enter the territory of Hungary in passenger traffic.
3.2 Exception from general rule: Leniency Request
Foreigners may enter within the framework of a leniency request issued by the competent police authority. The conditions and method (see electronic form – Ügyfélkapu, Cégkapu, via the police website) of the leniency request are the same as the previous regulations[2].
A non-Hungarian citizen arriving from abroad shall undergo a medical examination when entering, which he/ she is obliged to tolerate.
In case of COVID-19 infection, he/she cannot enter, otherwise he/she will be quarantined for 10 days at a designated quarantine or in official home.
At the request of the quarantined person, the epidemiological authority competent to issue the quarantine decision may allow the quarantined person to undergo, within 5 days, at least 48 hours apart, twice a molecular biological test in accordance with health professional rules – SARS-CoV-2 PCR test – participate in order to grant an exemption.
The first molecular biological test, i.e. SARS-CoV-2 PCR test, which complies with the professional health rules, shall be taken into account as well, if it was made in one of the countries belonging to the Schengen Area, in the United States or Canada and its results were verified by the person concerned by a document in Hungarian or English.
If the two molecular biological tests, the SARS-CoV-2 PCR test, show that the quarantine virus was not detectable in SARS-CoV-2 coronavirus at the time of the test, the epidemiological authority competent to issue the quarantine decision shall grant an exemption from the quarantine.
It is not possible to use 2nd test result which was issued not in Hungary!
4. Exceptions from general rule:
4.1 Managing Directors and employees of affiliated companies
A person coming from abroad may enter the territory of Hungary without restriction from the territory of the states determined by the Minister of Public Security[3] if he/she is a Managing Director or employee of a domestic or such a company, which registered in one of the foreign states specified by the Minister of Public Security, which is also a registered company in at least one of the states designated by the Minister responsible for public security and in an affiliated business relationship pursuant to Section 4, Clause 23 of the Act LXXXI of 1996 on Corporation Tax and Dividend Tax.
Unrestricted entry may be granted if the person concerned makes the fact of the business trip probable.
4.2 Provisions for travels related to business or economic purposes
If the purpose of the departure from Hungary is an activity related to business or economic purposes, the fact of which is proved by the Hungarian citizen at the return to Hungary, the Hungarian citizen may enter the territory of Hungary without restriction after the departure.
If, during the entry of a Hungarian citizen into Hungary, there is any doubt as to the authenticity of the proof of the reason referred to above upon entry, the procedure shall be conducted in accordance with Section 2.3 of this memo.
If the entry into Hungary is a business or economic activity, the fact of which is proved by the non-Hungarian citizen upon entering the territory of Hungary, he/she may enter the territory of Hungary without restriction.
If, during the entry of the non-Hungarian citizen into Hungary, there is any doubt as to the authenticity of the proof of the reason referred to above upon entry, the procedure shall be conducted in accordance with Section 3.2 of this memo.
5. FYI There are additional rules for military convoys, transit, neighbouring countries (for 24 hours term and within 30 kms from the border), sportsmen and sports professionals, cultural and sport events.
[1] FYI There are 2 more categories related to athletes and sport professionals, employees of cultural institutions (which we don’t detail herein the lack of relevance).
[2] Should you need summary of the detailed rules, please let us know.
[3] 33/2020. (VIII. 30.) of the Ministry of the Interior on the states belonging to the scope of business travel between affiliated companies currently states that the 408/2020. (VIII. 30.) within the framework of a business trip pursuant to Section 9 (1) of the Government Decree, a person arriving from the territory of any state may enter the territory of Hungary. THE SCOPE OF THE COUNTRIES CAN BE CHANGED TIME TO TIME.
Summer tax package 2020
by sbarbara
Before the beginning of the summer break, the Parliament has amended several tax laws and adopted new rules as well. The most important changes are summarized in our newsletter below.
SIGNIFICANTLY STRICTER RULES REGARDING THE SMALL TAXPAYERS’ („KATA”) TAX REGIME
As a result of the amendment, the regulation on the tax payable by small taxpayers („KATA”) becomes significantly stricter:
- If a business partner provides income to a small taxpayer who is considered to be a related party of the business partner, the business partner (as a disburser) should assess, report and pay 40% KATA surtax on this income by the 12th day following the month of the payment. The business partner shall indicate the tax number, name, and address of the small taxpayer concerned in its tax return.
- In case of non-related parties, if a business partner provides income to the same small taxpayer in excess of HUF 3 million aggregated from the beginning of the calendar year, the business partner (as disburser) should assess, report and pay 40% KATA surtax on the income provision exceeding HUF 3 million per annum. Certain amounts should be excluded from the tax base (e.g. the amount mentioned in the above point, i.e. income provided to small taxpayers considered to be related parties of the business partner).
- The business partner first assesses, reports and pays the KATA surtax by the 12th day following the month in which the said threshold has been exceeded. These tax compliance steps are to be repeated following each month in which the business partner (the disburser) provides income to the small taxpayer that is exceeding the threshold.
- The business partner is obliged to inform the small taxpayer concerned about the annual amount after which the business partner paid the 40% KATA surtax by 31 January of the following year.
The provisions regarding the cases when the small taxpayer receives income exceeding HUF 3 million from a foreign payer become stricter as well:
- If a foreign business partner (foreign disburser) provides income to a small taxpayer with whom they qualify as related parties, the small taxpayer pays a 40% KATA surtax on this income by the 12th day following the month of the payment.
- If the total income received by the small taxpayer from the same foreign non-related party business partner exceeds HUF 3 million aggregated from the beginning of the calendar year, the small taxpayer should pay 40% KATA surtax on the amount exceeding the HUF 3 million threshold. Similar to the case when the income is provided by a domestic business partner, certain amounts specified by law should be excluded from the KATA surtax base.
- If the small taxpayer is obliged to pay the KATA surtax based on the above, the small taxpayer shall report the income subject to KATA surtax, as well as the name and address of the business partners concerned broken down on a monthly basis on the annual tax return of the small taxpayer to be filed by 25 February of the following year.
It is important that the income subject to KATA surtax should be disregarded when calculating the general annual KATA threshold of HUF 12 million. Furthermore, the KATA surtax obligation does not exempt the small taxpayer from the itemized tax payment obligation.
The small taxpayers will be obliged to provide certain additional information to their business partners as well. Upon entering a contractual relationship, the small taxpayer should inform the business partner in writing about its small taxpayer status. Moreover, the small taxpayer should inform the business partner about the termination or re-establishment of its small taxpayer status before any of these changes by indicating the effective date of the change.
The above amendments will enter into force as of 1 January 2021.
5% VAT ON HOUSING DEVELOPMENTS IN A „RUST ZONE”
After consulting the local municipalities, the Government might designate so-called „rust zone action areas” by its decree. In these areas, the sale of new flats with a maximum useful floor area of 150 square meters constructed in apartment buildings will be subject to 5% VAT.
The reduced VAT rate should be applied for the first time where the tax point of the transaction or the determination of the payable VAT falls on or after the date the amendment entered into force. The amendment will enter into force on the 8th day after its publication.
The concept of the rust zone action area is defined by the amendment of the Act on the development and protection of the built environment. According to the act, this area should be considered as an area equipped with transport, utility, and institutional infrastructure (or where these can be established in a sustainable way), which is suitable for residential and other purposes, including typically brownfields. Investments made in this area are considered as investments of high importance for the national economy, therefore, the investors can obtain the necessary permits much faster and easier.
CHANGES TO THE ELECTRONIC PUBLIC ROAD TRANSPORTATION SYSTEM („EKÁER”) OBLIGATIONS
The bill passed amends several points of the current EKÁER system. The amendments were mainly justified by the requirement to comply with the European Union law, and the tax audit experience in the last five years was also an important aspect when drafting the changes. The amendments do not include certain detailed rules (e.g. the exact scope of products subject to reporting), these will be covered in a ministerial decree to be issued later.
Based on the above, the EKÁER reporting obligation for non-risky products will be completely abolished from 1 January 2021. It was also confirmed that reporting via a direct computer data connection is considered to be identical to the reporting made via the electronic interface of EKÁER.
If the obligor fails to fulfil its reporting obligation or performs its reporting obligation incorrectly in terms of weight or value of the transported goods, a default penalty up to 40% of the net value of the goods can be imposed. In all other cases (e.g. swapping letters, typos etc.), a default penalty up to HUF 200,000 for natural person taxpayers and up to HUF 500,000 for non-natural person taxpayers might be imposed.
In addition to the above, the definition of „product unit” is now included in the law.
For risky products, reporting and risk guarantee obligations are expected to be maintained. However, taking into account that the ministerial decree governing the detailed rules is not yet available, it is still in question whether the scope of risky products are subject to change and under which conditions those products should be reported (i.e. type of the transport vehicle, value and weight limit of the risky products transported).
NEW INTEREST CALCULATION FOR TAX RECLAIMS
Based on the case-law of the Court of Justice of the European Union (hereinafter: CJEU), it became necessary to modify the interest calculation rules in special proceedings under articles 195-197 of Act CL of 2017 on the Rules of Taxation.
According to the opinion of the CJEU, the current regulation based on which the tax authority pays interest on the refundable tax at the same rate as the central bank prime rate does not comply with the European Union law, since the market interest rates available for economic operators are higher than the central bank prime rate and thus, interests equal to the central bank prime rate are insufficient to compensate the taxpayers for their financial loss. In light of this, the Parliament modified the interest rate payable to the central bank prime rate increased by two percentage points.
The above amendments will enter into force on the day following the publication of the modifying act. However, in the opinion of the CJEU, the higher interest rates should be provided in cases where the tax authority has already fulfilled the taxpayer’s interest claim under the current rules. Therefore, the amended law clarifies that the new rules should apply also to ongoing proceedings as well as proceedings closed by a final decision, in certain cases.
CHANGES TO LOCAL TAXES
- Following the changes in the corporate income tax rules, from this year onwards, the tax advance top up on local business tax will not be due before the end of the tax year. This favorable change also applies to enterprises with financial year deviating from the calendar year, even if their respective tax year has not yet ended when the law enters into force.
- Associations and foundations will be exempt from paying building tax and property tax in connection with the asset management of state-owned real estate, even if the real estate is not only used to perform their core business or main activity specified in their deed of foundation.
- To simplify the tax system, the local building tax liability for advertising media (e.g. billboards) will also be abolished.
The above amendments will enter into force on the day following the publication of the modifying act.
PERSONAL INCOME TAX
The bill passed clarifies the personal income tax treatment of health care contribution (this year’s rate is HUF 7,710 / month) charged to individuals but paid by another person. Health care contribution taken over by another person (e.g. by foundation, local government, former employer) does not qualify as income, thus it should not be taken into account when calculating the individual’s income.
To encourage investments, the Government has previously allowed corporate taxpayers to reduce their pre-tax profit as a development reserve with their total pre-tax profit, but up to HUF 10 billion. The amendment extends the allowance rate to private entrepreneurs: private entrepreneurs can reduce their entrepreneurial income as a development reserve by the full amount of entrepreneurial income remaining after deducting the entrepreneurial costs, but they are still subject to the HUF 500 million limit.
The above amendments will enter into force on the day following the publication of the modifying act.
SOCIAL SECURITY
According to the existing legislation, the base of social security contribution and social contribution tax for employees (including part-time employment) is at least 30 percent of the minimum wage (minimum contribution base). However, this condition could not currently be met in certain cases, since the Economic Protection Action Plan against the Coronavirus Epidemic has allowed employers to employ workers in significantly lower working hours than before. According to the bill passed, if the income subject to social security contribution does not provide sufficient funds for the social security contribution withholding, the employer is obliged to pay the social security contribution on the difference between the minimum contribution base and the actual income of the employee. For social security benefit calculation purposes, the payment on the above difference by the employer will deemed to be paid by the insured person. The bill passed provides a grace period, therefore the payment liability for the difference described above does not have to be applied for July and August 2020, in these months the contribution base should be assessed based on the general rule. The provision will enter into force on the 30th day after the modifying act is put into effect.
An indexation system will be introduced from 2021 for determining the monthly and daily amount of the health care contribution. The results of the calculation will be published on the website of the tax authority by 31 October of the year preceding the given year.
A new provision has been added to the law, in order to clarify when the Social Security Identification Number („TAJ number”) of an individual concerned would become valid again. Nevertheless, it is important to emphasize that subsequent settlement of the unpaid contribution does not result in the retroactive validity of the TAJ number.
As a result of the amendments, the TAJ number will be invalidated only if the health care contribution is unpaid for at least a six-month period.
The above amendments – excluding the provisions relating to the minimum contribution base – will enter into force on the day following the publication of the modifying act.
DEFERRAL OF THE APPLICATION OF DAC 6 DIRECTIVE
The DAC 6 Directive imposes a reporting obligation for consulting firms (e.g. tax advisory firms) established in the European Union relating to any advice on establishing a cross-border (aggressive) tax arrangement covered by the scope of the Directive. This reporting is primarily the obligation of tax and legal professionals (“intermediaries”) providing advice for the establishment of international tax arrangements resulting in significant tax saving in certain Member States.
This obligation would have originally entered into force on 1 July 2020, which was postponed by 6 months. Thus, under the new rules, the obligation should be met as follows:
- Intermediaries (or taxpayers) concerned and involved in tax planning should report by 28 February 2021 if the reportable cross-border arrangement was implemented between 25 June 2018 and 30 June 2020.
- For reportable cross-border arrangement implemented between 1 July 2020 and 31 December 2020, the 30-day reporting deadline starts on 1 January 2021.
- In case of standardized structures, the first reporting should be made by the intermediaries (or taxpayers) involved in tax planning by 30 April 2021.
- The Member States should transfer the data collected on cross-border arrangements to other Member States first time by 30 April 2021.
The above amendments will enter into force on the day following the publication of the modifying act.
Andersen rebranding – special note from Karoly Radnai, Office Managing Director of Andersen Adótanácsadó Zrt., founder of OrienTax
by sbarbara
18 short years. This is how much time has passed since the Andersen brand was in Hungary. The traditional brand, which many of us (including ourselves) thought was gone forever, was reorganised a few years ago. It did not take long for the old brand to soar again and start an unprecedented international expansion. 23 US tax partners launched their own firm, based in San Francisco, under a new name (WTAS). Trusting their own competence and perseverance, they soon became stronger and opened offices first in 5, then in 10 further cities. The Andersen brand has now been launched in over 100 offices outside the USA, and it is back for good.
Andersen’s trajectory shows many similarities with the story of OrienTax. Both companies were largely started from scratch, with the mission from the very first moment that there is a need for a fifth player on the tax services market. Finally, both Andersen and OrienTax needed 8-10 years to catch up with the big ones, overtaking all other firms on the market. When we started to cooperate in 2018, we only had a little more than 20 employees, now we have over 40. The past two years have proven that OrienTax and Andersen are an inspiring combination that can bring about a profound shift in the Hungarian market as well.
Many ask if we feel sorry to let go the OrienTax brand overnight that we put so much hard work in developing in the past ten years. The truth is that the decision could not have been easier and there was no real alternative. It also helped, of course, that three members of the present management started their careers at Arthur Andersen, so, for us, it is a little bit like returning home. However, the real challenges will only face us now. We must prove it also in Hungary that we are able to succeed even without an audit practice and become a market leader solely in the tax and legal services. As, in fact, besides OrienTax, Szabo Kelemen & Partners Attorneys also took the Andersen name, the two firms now being linked in name as well, with 90 colleagues on board.
Besides the brand, our website and e-mail address also change, replacing the old domain ‘orientax.hu’ with the new one ‘hu.Andersen.com’.
Thank you for your continued trust and support in the past ten years.
On behalf of Andersen Adótanácsadó Zrt.,
Károly Radnai
Office Managing Director of Andersen in Hungary
Andersen Debuts in Hungary
by sbarbara
Hungarian market welcomes independent firm providing seamless tax and legal advice
8 July 2020, Budapest – Hungarian tax consulting company, OrienTax Zrt. and Szabo Kelemen & Partners Attorneys will adopt the Andersen brand in Europe and continue their activities jointly. The two firms began their collaboration with Andersen Global in 2018, became full members in 2020, and now adopt the Andersen brand along with member firms in 11 other countries in Europe.
The adoption of the Andersen brand in Europe is a milestone for the global organization, which began in 2002 when 23 former Arthur Andersen tax partners created the tax-only firm WTAS. In 2014, the group adopted the brand Andersen Tax as it best represented the firm’s values, culture of clients-first, stewardship and transparency. The organization has grown exponentially in Europe since the establishment of Andersen Global (formerly WTAS Global) by founding U.S. member firm Andersen Tax LLC in 2013. The European region began with just two locations in 2013 and has since expanded to more than 50 locations, nearly 2,000 tax and legal professionals, and over 300 partners today. Globally, Andersen Global now has more than 5,000 professionals worldwide and a presence in over 177 locations through its member firms and collaborating firms.
In Hungary, Andersen’s independence and global footprint are a particularly attractive alternative to the large international consulting firms that dominate the market.
According to Károly Radnai, the Office Managing Partner of Andersen in Hungary (formerly OrienTax Zrt.), “There has long been a great demand for a fifth player on the Hungarian consulting services market. Andersen provides independent and synergistic tax and legal services without the inherent conflict associated with an audit practice. Our clients and publicly-traded companies throughout the market welcome the opportunity to work with an independent provider that can provide best-in-class services around the world.”
László Kelemen, Office Managing Partner for Andersen Legal in Hungary, added, “Apart from the Big Four, there is no other collaboration of a tax consultancy and a law firm with such closeness and size currently on the Hungarian market. The two firms together comprise 90 employees, including nearly 70 tax and legal professionals, making the partnership a player on par with the biggest companies in the market. The strategy of Andersen is to provide global coverage with the help of its partners, making its high-quality legal services available to their clients anywhere in the world.”
The integration of OrienTax and Szabo Kelemen and Partners under the Andersen brand has been in the works for several months and clients are already seeing the benefits of integrated tax and legal services. “With the international background provided by Andersen Global and by taking advantage of the synergies inherent in the collaboration of the three partners, we have every chance to double our market share in the short term,” said Károly Radnai, who was also elected Tax Committee Lead of the American Chamber of Commerce (AmCham Hungary) last year.
For further information:
info@hu.Andersen.com
+36 70 3 174 146
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