Wednesday, April 8, 2015

Frequently Asked Questions regarding the Hungarian Residency Bond Program

1. As regards the territory of the Hungarian Residency Bond Program, to which countries do you provide assistance?

We provide assistance for clients all over the world, including e.g. UAE, Quatar, Kuwait, Iraq, Iran, Egypt, Jordan, USA, Canada, China, India and all other third countries as well.
2. What is the purchase price of the bond and what are the additional costs? How this payment shall be provided?

The investment amount for the bond is 300.000,-EUR and the procedure fee is 60.000,-EUR.
Please note that the purchase price of the bond (i.e. the 300.000,-EUR) is refundable, and will be return to the applicant/ investor at the end of maturity.

This payment must be provided in cash payment by bank transfer, so no in-kind contribution is accepted.
Besides of the above, there are no further costs.

3. How long is the residency bond valid; what is the maturity period?

The minimum time period of the investment is 5 (five) years, which can be prolonged and the residency can be used as long as the applicant/investor needs it – even for lifetime – and without any further payment obligation.

4. Under the program it appears that residency is in perpetuity after the initial six month probation period. Is this true?

Yes, the applicants will get a temporary residence permit at first, which will be converted automatically to a permanent residence permit after 6 months. 

5. Is it true that no matter whether only the main applicant or also their family members apply, the residency bond purchase price is the same?

Yes, in the frame of one application the whole family (wife and children under 18 years old) of the applicant can obtain the residency permit for the same price.

6. In the event that residents under the above programs opt to apply in the long term for citizenship, what are the conditions for obtaining such?

In order to apply permanent residence permit, all applicants:
- shall have a clean criminal record,
- shall not be considered as a threat to the national security of Hungary
- payment of the financial contribution. 

No further requirement is necessary to obtain permanent residence permit.

Please note that the permanent residence permit does not guarantee the Hungarian citizenship automatically. In order to obtain Hungarian citizenship further conditions must be met by the applicant.

7. Does the applicant must travel to Hungary to apply and participate in the Hungarian Residency Bond Program?
No, it is not required. The applicant with his/her family may perform the personal meeting and client identification at the Hungarian embassy/consulat which is near to his/her location and available easiest.
8. What is the precise role of the six entities participating in the transaction bonds? Are these companies essential to the process?
 These entities are the exclusive ones, who are fully entitled to carry out this special immigration procedure and technically they can only register the bonds.

Their major role in the Program is the following:

- All personal documents (passports or other identification documents) shall be submitted to them and they forward the file of the application to the Hungarian Immigration Office.
- They take care of the previous backgroud scanning of the applicant as regards to the clean criminal background.
- They organize and assist on the meetings at the Hungarian embassies, if the applicant is identified at his/her own country (where the applications shall be submitted and the biometric identifications will be performed).
- They register the government bonds on behalf of the applicant.
- They issue purchase declarations to the applicant (which shall be submitted to the Immigration Office proving that the investor paid the amount completely).

9. The 300.000,-EUR purchase price and the 60,000,-EUR procedure fee for the Program is distributed how? 

The fee of EUR 300,000 is the value of the residency bonds, which amount will be returned after the 5 years or after the prolonged period. The 60.000,- EUR procedure fee is not refundable. The investment and the administration fee cover the residence permit for the whole family and shall be paid at once by bank transfer.

10Are the Hungarian consulates fully briefed on the procedural aspects of these programs? (this has been a weakness in some territories for our existing activity)

The Hungarian embassies or consulates have been properly informed on the procedural aspects of this Program, since this kind of immigration procedure is regulated by law as well (Act II of 2007 on the Admission and Right of Third-Country Nationals).

The representatives of the mentioned 6 entities maintain continuous contact with the consulates, therefore, the administrative tasks are completed quickly and smoothly at the consulate, which is the simplest available to the applicant. Moreover, for the comfort of the applicant, the representative of the relevant entity is present at the time of personal arrangement of the application and client identification.

11. What is the form of the documentation to be submitted, and does this go initially and uniquely to the consulates?

The investors can decide whether they would like to apply: at the local Embassy or Consulate of Hungary, or in Budapest at the Immigration Authority. The Embassy or Consulate is not entitled to take a decision in this matter, therefore the file of applications will be sent directly to the Hungarian Immigration Office. As mentioned above the responsible company fills out and sends the required application forms to the applicants.

The following documents need to be attached to the application:
By the investor:
- good quality copy of the passport (which should be valid for at least one year)
- 2 passport-sized colour photos

In case of the family members:
- good quality copies of the passports (which should be valid for at least one year)
- marriage and birth certificates
- 2 passport-sized colour photos for each person

If the documents are not in English, they have to be officially translated to English or Hungarian and apostilled.
Képtalálat a következőre: „faq”

Thursday, February 5, 2015

Tax changes in 2015 Part II.: Changes in the rules on taxation and Guidlines to the EKAER system

Changes in the rules on taxation

We have begun the introduction of the amendments and news brought by the „tax package“ adopted in the end of year 2014 in our previous newsletter (in December) regarding the retail sector.
This time we provide a summary on the most important changes of the Act on the Rules of Taxation („Art“), within which our more detailed priority topic is the EKAER system - deserving a great deal of interest - and the most important questions arising in connection to it, further we provide a guidance for registration.
-Stemming from a new general fundamental principle, the income can be taxable in Hungary, if the legal relationship, and the income arising therefrom is affected by an international contract and the differing taxation system among the member states and its legal classification would result in the fact that the given income could not be taxed in none of the states. Tax authority determines the tax – if the tax base cannot be determined, with estimation - taking into account all circumstances.
Tha arts provsions of general principles have been supplemented on guarantee basis and for the purpose of clarification of the legal practice with such fundamental principles eleveted to statutory level as the requirement of same classification of identical legal relationships.
Thus the tax authority could not determine a different classification for a legal relationship already covered by and classified during an audit when auditing the parties to that legal relationship.
-From now on an auditor may also act as a representative in the procedure before tax authority, although they did not figured in the list of the Art as persons entitled to proceed.
-Notification rules pertaining to the persons obliged to pay health services contribution have been supplemented to the extent that the tax authority deletes upon request with retroactive effect the contribution payment obligation of the private individual living abroad, if the private individual credibly demonstrates that it did not use health services in the given period. Further condition to abolish the contribution payment obligation is that the private individual did not use health service financed by Health Insurance Fund in the given period.
Exemption from notification obligation has been supplemented in case of foreign taxpayers As a general rule to pursue Hungarian taxable activites the taxable person must register at the state tax authority for the determination of a tax number.
The act stipulates among the notification rules – as exception from the general rule – that a certain foreign scope of subjects (domestically non-established, or not obliged to establish domestically, but established in other country of the Union) may be exempted from the registration obligation if its domestic activity is exclusively limited to the sale in VAT warehouses, or to export products to third countries from those, whereas these legal acts are tax exempted. In these cases instead of the foreign taxable person – based on agreement – the tax obligations pertaining to the tax-exempt intra-Community supplies are conducted by the operator of the tax warehouse. However, simultaneously by reporting the commence of the taxable activity whether the taxable person acts as the operator of the tax warehouse.
New reporting obligation (!): mandatory notification of the food and beverages automatic vendor machines. As of 2015 the operators of the automatic vendor machines carrying out food sales without operating personnel are obliged to notify the beginning of the sale and its termination and the alteration of the data content of the notification. The notification must be submitted until the 31 March, 2015 and it is subject to administrative service fee, of which amount is HUF 30 000,-. The tax authority registers the automatic vendor machines based on the notification and defines a registration number.
The tax reports and equivalent declarations of taxpayers subject to increased tax authority supervision will not have to be countersigned by tax advisors, tax experts or certified tax experts as of 2015 taking into account that this obligation was causing both the tax authorities and taxpayers administrative burden and extra costs; therefore, the provision prescribing such obligation was abolished.
In case of employer’s tax determination the new deadline is the 20th of May (instead of the earlier 10th of June), thus the deadlines for submitting the reports were unified. The employer determines the tax base and the tax upon the declaration of the private individual until the 30th of April following the tax year and provides certificate on that.
In case of VAT recapitulative statements the limit of the amount decreases to HUF 1 million. Pursuant to the respective regulations the taxpayer fulfilling the transaction is obliged to provide data, if the amount of the output VAT in the invoice issued by it reaches or exceeds HUF 2 million. As of 2015 this amount limit decreases to HUF 1 million.
Furthermore, the taxpayer obliged to VAT recapitulative statements may upon his choice fulfill this obligation without taking this limit into account (that is report every invoice not reaching HUF 1 million).
The scope of subjects obliged to provide data is extended, new deadlines for financial institutions!
The organizations providing telecommunication services are obliged to provide data on the traffic data of the internet purchases within 15 days upon the inquiry of the tax authority. The purpose of this is the promotion of the monitoring and exploration of the tax payment obligations.
The financial and payment institutions and investment firms are obliged to provide data towards NAV with regard to data managed by them and deemed to be bank secret. The provision of data happens electronically since 2013. The Art specifies this time that the inquiry on connection with enforcement procedure shall be fulfilled towards the tax authority with 8 days and inquiry necessary for monitoring procedure within 15 days.
The NAV may inform other subject taxpayers during the monitoring procedure inasmuch as the tax authority based on the data being its disposal and upon the facts and circumstances explored during its procedure observed such contractual or other connections (related with each other) and affecting more taxpayers, regarding to which conduct obeying tax acts can be presumed or defines or presumes tax evasion.
This provision was included in the act in accordance with the practice of the European Union for the purposes that the affected taxpayers (e.g. contractual partners) are to promote the proper and careful exercise of rights.
The lengthening of the limitation of the right to tax determination: The right to tax determination is prolonged by 12 months instead of 6 months, if the superior tax authority within the framework of the second instance proceeding, the minister responsible tax policy or the minister appointed for the supervision of the NAV within the framework of monitoring measures and in the case the court renders to conduct new procedure upon the judicial review of the tax authority’s order.
Higher amount of default penalty can be imposed as a legal consequence than the general amount of default penalty in case of hindering the tax investigation by failing to meet the obligation to appear by infringing the cooperation obligation or otherwise hindering the investigation. This amount was in case of private individuals maximum of HUF 200 thousand in case of other taxpayers HUF 500 thousand. From now on a higher sanction can be imposed, thus in case of private individual tax payer it may be HUF 500 thousand and in case of other taxpayer HUF 1 million.
The notion of affiliated companies have changed: the conceptual amendment figuring among the interpretational provisions is in connection with amendment of the act on corporate tax and dividend tax. The identity of the person of the managing director also creates the affiliated company relation; whilst via the identical management the decisive influence on the company’s business and financial policy is established.
Besides the notions in connection with the introduction of EKAER system – e.g. EKAER number, hazardous product, end user, recipient, dispatcher - have been defined as well.


One of the most significant tax changes in 2015 is the introduction of EKAER (Electronic Road Transportation Control System). The purpose of the system is the tracking of the way of goods, the insurance of the payment of public burdens and to hinder that goods are put in circulation in Hungary that were not previously reported to the Hungarian Tax and Customs Authority (NAV).
The Act on Rules on Taxation (Art.) for the above purposes regulates in detail the reporting obligation and sanctions applicable in case of failure to comply with the reporting obligation and providing security deposit, of which main rules we wish to introduce in summary hereunder as follows.
Reporting must be fulfilled in connection with transports initiated on and following the 1 January, 2015.
Who and what activity is concerned by reporting obligation
Reporting obligation concerns taxpayers involved in road transportation activity in as much as it is pursued with vehicles subject to a road toll (having a total weight of over 3.5 tons). The scope of hazardous goods constitutes an exception from the general rule; whereas in their case the reporting obligation applies if the product is not transported with vehicle subject to road toll (exemption from these applies only in case of specific conditions).
Road transportation activity shall mean and is mandatory to report to the tax authority:
-       the acquisitions of goods or importation for other purposes to Hungary from other member states of the European Union (obliged to comply with reporting: addressee/ recipient until starting the transportation the latest);
-       the supply of goods or exportation for other purposes from Hungary to other member states of the European Union (obliged to comply with the reporting: sender until starting the loading the latest); and
-       the first taxable supply of goods to non-final users within the territory of Hungary (obliged to comply with the reporting: sender until starting the loading the latest).
Certain taxpayers are exempt from the reporting obligation upon subjective right (e.g. vehicles transporting goods covered by excise duty, vehicles participating in preventing or averting damages caused by a disaster, vehicles transporting non-commercial (free of charge) humanitarian relief supplies etc.).
The act provides further exemptions from registering into EKAER system based on the nature and quantity of the cargo in case certain conditions are fulfilled, namely
-        if the weight of non-risky goods in one transport does not exceed 2500 kg or if the non-taxed value of those goods does not exceed 2 million HUF, or
-       if in one transport the weight of risky food products does not exceed 200 kg or its non-taxed value of 250 000 HUF, the weight of other risky products does not exceed 500 kg or its non-taxed value of 1 million HUF.
 Data content of the reporting
The notification must be fulfilled with the data content defined in the Annex 11 of Art, thus among the reportable data include especially, the name and gross quantity of the goods, customs tariff number, net value, date of loading and arrival to the place of receipt, further the personal identification data of the sender and the recipient as well.
It is extremely important to be informed with due caution about the precise statutory data content during every notification; whereas, the defective, or false reporting may trigger the validity of the notification and not least serious sanctions.
The mode of reporting
Reporting shall be made electronically through the electronic site of the EKAER system – accessible through the internet – by creating a username and password directly for this purpose ( The taxpayer may fulfill its reporting obligation personally or through a representative.
EKAER number
Based on the reporting the tax authority determines an identification number, a so called EKAER number, which is generated on the site of EKAER following the notification, in case it is of correct data content it is simultaneously registered. The EAKER number identifies the product unit transported by the given vehicle and thus to one EKAER number more product types identified with customs tariffs number can relate.
It is important that the EKAER number is only valid for 15 days, thus arrival to the place of receipt and date of the start of loading must fall under this period.

When shall the security deposit be provided?
Firstly on the 31 January, 2015 based on the value of the hazardous products registered on EKAER until this date. The security deposit must continuously reach the 15% of the joint - net (without VAT) – value of the hazardous products pertaining to a valid EKAER number. The deposit provision may be provided through payment into a separate deposit account or by providing a guarantee registered by the tax authority.
Tax authority reviews every day prior to the end of the month whether the taxpayer providing security deposit has tax debt, whereas in such case he is in position to set off the amount of the deposit with the debts and the taxpayer must repeatedly supplement the thus decreased security deposit.
Guarantee rule is that in case certain conditions exist it is possible to be exempted from the obligation to provide security deposit.
In case of failure to comply with the reporting obligation and other infringements related to the EKAER number various sanctions may apply, thus for example an unreported product will be will be regarded as having uncertified origin and the tax authority may impose a default penalty of up to 40 % of the consideration of the unreported goods. In relation to the default penalty sanction relating to non-compliance with the reporting obligation the goods qualifying as goods of uncertified origin may be seized up to the amount of the penalty. It is also notable that the tax authority may also demand a declaration from the addressee, the dispatcher and the carrier concerned in the case of transportation of goods of trading quantity on the transported goods and EKAER number.
Pursuant to the legal regulations the tax authority planned to introduce the sanctions as of 15th January, 2015; however, according to the report of the Ministry for National Economy as of 22nd January, 2015 coworkers of the tax authority will not impose default penalty until the end of the trial run, but until 1st of March, 2015, furthermore, until this date the taxpayers are also exempted from the payment of security deposit.
Based on the remarks and proposals received from the market actors and upon the experiences of the trial run the necessity and possibility of the alteration of the legal regulations pertaining to EKAER are also investigated.


In case of individual, specific questions, our experts remain available at your kind disposal.

Thursday, December 18, 2014

Tax Act changes in 2015 - Part I.

Tax law changes concerning retail trade

The tax package adopted by the Parliament for the next year will not introduce new tax type – the internet tax was withdrawn – and neither have to we calculate with radical tax law changes; but, with numerous new provisions and amendments. Out from these we firstly call the attention to the main changes affecting the retail trade sector.
1. Corporate Income Tax Act (the CIT Act) will tighten the concept of the income- / profit minimum
Cost of goods sold and the cost of mediated services cannot be taken into account – that is divided from total revenues - in the calculation of the so called revenue – (profit -) minimum relevant for the preparation of the corporate income tax report (however, the local revenues of foreign premises can still be taken into account).
Thus based on the above the CIT Act practically defines the income minimum as 2 % of the adjusted total revenue, not including the special adjustments – namely this calculation must be taken into account from now on as the corporate income tax base (10%, 16%) by companies, which choose taxation according to income- (profit-) minimum.
Nonetheless, we note that in certain cases the company may not decide on the taxation according to the above calculated income minimum (neither according to the current regulations):
Thus for example, if the pre-tax profit or the corporate tax base pursuant to the general provisions is higher than the profit minimum; or such tax year is concerned when functioning as a pre-company that is in the first year of the undertaking founded without predecessor; or if in the tax year or in the previous tax year natural disaster had sustained the company, and nor in the case, when a special organizational form (for example association, foundation, charitable non-profit organization etc.) excludes the applicability to that effect.

2. Changes pertaining to local taxes

- According to the amendment act the municipalities will have authorization to introduce municipality taxes in their administrative area to subjects, which are not already levied by a public burden, in addition, taxable person can be a private individual, not entrepreneur, business association or organization. This way the amendment will spare stores.
- Nevertheless, determination of the base of the local business tax (HIPA) is tightening as of 2015 as the consequence of the amendment act.
Combined tax base determining rules during the calculation of HIPA of affiliated companies have to be used proportionately for the period of existence of the affiliated companies.
Pursuant to the Act on Local taxes, taxable persons qualifying to be affiliated companies according to CIT Act may determine their local business tax base in a way that the total net revenue of affiliated companies and the total net revenue decreasing expenditure positive difference.
During the calculation of the tax base the amount of the cost of the goods sold and the cost of mediated services shall be taken into account as well according to the net revenue of the taxable person; however, pursuant to the amendment act by the increase of the revenue it can be deducted in a decreasing extent progressively (expressed in %).
Therefore, whilst according to the currently effective rules when determining the revenue of affiliated companies the above adjustment items can be taken into account without restriction, afterwards only proportionately in line with the existence of the affiliated relation and to % extent according to the net revenue

3. Establishing progressively and increasing the supervision fee payable by food traders
Stores and chain stores selling daily consumer products according legal provisions currently pay uniformly 0,1% food chain supervision fee upon the net revenue arising from the payable activity from previous year. The fee must be reported for the subject year and its base can be reduced with the amount of the already paid excise duty and the public health product tax.
Significance of the fee is that the food-chain supervising organ ensures the income of the National Food Chain Safety Office (NFCSO) and the governmental offices for the ensurance of the official supervisory activities pertaining to food chains. Authorities pursue hundreds of thousands of supervisions annually, and examinations of millions to the products of food stores.
As a result of the amendment of legal provisions the amount of the food chain supervision fee will increase and will be established progressively upon the net revenue of the business association according to the below:
·         up to HUF 500 million: no fee payment obligation;
·         up to HUF 500 million – HUF 50 billion: 0,1%;
·         above HUF 50 billion: the amount of the fee increases by 1-1% after each 50 billion;
·         above HUF 300 billion: 6% (this is the maximum extent).
The increase of the food supervision fee can mean additional burden of the value of billion to the food store chains, based on which it is likely that they will be forced to increase the consumer retail trade prices.
We will inform our Readers about further changes of the tax package from 2015 in our upcoming newsletters.

Figyelmeztetés / Alert

2015. január 1-jétől a Fővárosi Közigazgatási és Munkaügyi Bíróság új címe 1021 Budapest, Tölgyfa u. 1-3.
Felhívjuk a figyelmet, hogy a jövőben a Bíróságnak küldendő beadványokat az új címre kell címezni, valamint a munkáltatót a munkavállalóval szemben terhelő értesítési kötelezettség – úgymint a munkáltatói felmondás – estén is  a Bíróság új címét szíveskedjenek megjelölni. Ennek elmulasztása a beadványok elutasításához vezethet, különösen jogvesztő határidő– úgymint a keresetlevél benyújtása – esetén kimentésnek helye nincs.


From 1st January, 2015 the new address of the Metropolitan Court of Public Administration and Labour is 1021 Budapest, Tölgyfa u. 1-3.

We kindly note you that the petitions are to be sent to the Court shall be addressed to the new address, and also in the case of a notification obligation on employer towards employee – such as dismissal – shall note the new address. Please note, if you fail to do it your petitions may be rejected, in particular in case of a limitation period – such as application initiating – the exculpation is not allowed.

Tuesday, November 4, 2014

Is the Act on foreign exchange loans unconstitutional?

The new second package helping the foreign currency debtors has arrived.

The second package has been adopted by the Parliament two weeks before. The Hungarian Banking Association requested the President of the Republic not to countersign the Act. Finally president János Áder countersigned the Act on Saturday. Thus the financial institution have to reckon with the clients between 14 January 2015 and 30 September 2015 in connection that how much was the overpayment due to the exchange-rate spread, respectively due to unilateral contract modifications. This procedure concerns approximately 1,3 million contracts, of which almost half are forint credits. However for this procedure first of all the State have to win the legal proceedings initiated by banks, in which the banks try to prove that they played fair.

Up to now 65 judgments have been adjusted and altogether three plaints of the public institutions were partly accepted and three other cases are currently in front of the Constitutional Court. Last week the minister of Ministry of Justice said that the lawsuits might be permanently completed at the latest in the first half of January. „According to our hopes the appeal proceedings shall be completed until the middle of November. The judicial review, which is pending in front of the Supreme Court shall be permanently completed under our hopes until the end of the year or at the latest in the first half of January” – declared László Trócsányi, the minister of the Ministry of Justice.


The action of the EvoBank was the first from the actions initiated against the Hungarian state by the public institutions which has been negotiated on the second instance by the Court of Appeal of Budapest. On the court hearing the presiding judge emphasized in the oral preamble of the legally binding warrant that the council of the Court of Appeal asks the Constitutional Court to state several sections of the first Act on foreign exchange loans (Act XXXVII of 2014) unconstitutional and to obliterate those. Among other things for the section which adjusts that the contractual stipulation is void if the public institution did not initiate civil proceeding in the deadline stipulated in the Act or the action was rejected by the court or the civil procedure was terminated by the court. The Metropolitan Court would get the Constitutional Court to terminate that legal provision as well, under which the public institution has to reckon with the consumer according to separate Act.
According to the Metropolitan Court as appellate court additional 10 more sections of the Act are unconstitutional, principally those sections relating to civil proceeding which are fix that what kind of procedures are suitable for the public institutions to disprove the legal presumption of the unfairness.

According to the opinion of the Metropolitan Court of Budapest these legal sections harm the principle incorporated in the New Fundamental Law of Hungary, namely that Hungary is an independent, democratic rule-of-law state, harm the principle of division of powers, respectively harm that section under which everyone shall have the right to have any charge against him or her, or his or her rights and obligations in any litigation, adjudicated within a reasonable time in a fair and public trial by an independent and impartial court established by an Act. Furthermore the Act hurts the principle relating to the independence of the judges set out in the Fundamental Law, the principle of legal certainty, respectively hurts that the judges provide judicial activity according to the opinion of the Court of Appeal.

In his preamble the judge evaded that the unfairness of the contractual condition is an ethic conception, and the „logically conclusion based on public experience” of the judge has significant consequence by the judgment of the conception; however, the judge could not conclude conclusion, which requires expertise merely under the logical rules, without any help in this respect. The judge said that the realization of the seven principles set out in the Act can be mostly educed without any special expertise, but the legal knowledge of the judge is not always sufficient for the assessment of the effects of the economic procedures.

The judge added that because of the tight deadline set out in the Act, the conduction of the evidence procedure may solely confine to handing over the documentation, and enforcement of additional evidence instrument may jeopardize the observing of the deadlines, moreover it makes impossible that.

In the appeal the EvoBank Zrt. requested that the Constitutional Court sets out that the Act is unconstitutional, respectively it interferes international contracts and requested at the Constitutional Court the initiation of the procedure aimed at excluding the enforcement of the unconstitutional provisions. According to EvoBank in the preamble of the judgment passed by the Court of Appeal, the Court has acknowledged that „having unconstitutionally anxiety in the Act” as well.

The plaintiff Bank added in its appeal that the rising of the regular payments does not go hand in hand with the groundless „enrichment” of the creditor, since the creditor enforced in principle the plant of the fund costs in the course of the interest elevation, thus the balance between services did not fall over certainly in general aspect.

The respondent Hungarian State requested the approval of the judgment on first instance passed by the and state its cross-appeal that the Act on foreign exchange loans is not post legislation because the harmonized decision of the Supreme Court based on the “old” Civil Code and other legislations connected to consumer sales contracts.

According to the Hungarian State the legislator did not create such legal environment, so the disadvantage of the scope extended for the contracts technically concluded earlier shall be borne solely by the public institutions.

Should the decision of the Metropolitan Court does not suitable for the banks, so for the banks shall remain only the way of extraordinary remedy to dispute the judgment, whereby they could submit retrial or review request. Here we would like to indicate that constitutional challenge submitted to Constitutional Court on transaction stamp and concerned to banks has already rejected by the Constitutional Court.

Monday, October 6, 2014

MOSS to come into effect soon! - Rules governing the place of supply will change as of 2015

The tax authority has published a notification on the MOSS, the “Mini One Stop Shop”, which enables a mini one stop shop value added tax (hereinafter: the “VAT”) administration to taxpayers providing services, which can be supplied at a distance.

 The mini one stop shop (MOSS) coming into force as of 1 January, 2015 will allow taxpayers providing telecommunications, broadcasting or electronically supplied services to non-taxpayers in a Member State in which they do not have an establishment, to submit their community VAT return due on those supplies via a web-portal in the Member State where they are identified. This one stop scheme is optional and is merely a simplification measure following the change to the VAT place of supply rules as of 2015.

 In what ways will the rules pertaining to the place of supply in the EU VAT legislation change?

 Place of supply will not be the Member State in which the service is provided, but the Member State where the recipient (customer) is situated. The MOSS enables the taxpayers not to register for VAT purposes in each Member State of consumption.

 The European Commission with the cooperation of the respective Member States set up guidelines on the use of the MOSS scheme, which introduce the fundamental basis of its use in a comprehensible manner, making easier the deliberation regarding the entry and to bring decisions during the every-day use for the taxpayers. These guidelines can be already found on the webpage of the Commission (Guide to the VAT mini one stop shop; Explanatory notes on the EU VAT changes to the place of supply entering into force in 2015; Complementary guidance on data monitoring).

 Following the entry into force of the MOSS our further detailed article on the subject may be expected, but certainly until and thereafter our professionals will remain at your kind disposal to answer individual enquiries.

Tuesday, August 26, 2014

Labour Law : right of pregnant women to lie to employer

The Hungarian Constitution Court („CC”)issued a detailed decision [decision No. 17/2014. (V. 30.) AB] on the right of pregnant women and women under medical fertilization treatment to hide their pregnancy / fertilization process. The decision was published on 27 May 2014. The breakthrough ruling is introducing the “right to lie” in Hungary that is already recognized in some other EU member states.

In its decision the CC expressed its privacy concerns and eliminated a provision from Act No. I. of 2012 on the Labour Code, with retroactive effect.

The Fundamental Law of Hungary protects privacy and family life. According to Article II thereof, human dignity shall be inviolable and every human being shall have the right to life and human dignity; embryonic and foetal life and shall be subject to protection from the moment of conception. Further, according to Article VI of the Fundamental Law of Hungary, every person shall have the right to the protection of his or her private and family life, home, relations and good reputation, and every person shall have the right to the protection of his or her personal data, and to access and disseminate data of public interest.

Further, in Hungary, pregnant woman are protected by law from termination (during pregnancy and until the third anniversary of the child or when they terminated their nursing period without work). According to some judgments the protection is “objective” and consequently applies to the woman even if she was not aware of her pregnancy; however, such judgments are rare.

The consistent court practice relating to the interpretation of the above provision has always been controversial, most judges argued that the employee must inform the employer at the time of the termination (at the latest) in order to benefit from the protection. Moreover, an individual judgment even confirmed that if the employee hides her pregnancy from the employer, she is not protected from the termination since she is acting in bad faith.

In order to unify the court practice in this regard and to protect the employer’s interest, the parliament incorporated a provision to the LC that the protection applies only if the employee informs the employer about the pregnancy / medical treatment. According to the original section 65 (5) of LC, the pregnant women and women under fertilization process are subject to termination protection provided that they properly inform their employer about the fact of pregnancy / fertilization process.

The commissioner for fundamental rights (“Commissioner”) submitted to the Constitutional Court a petition for ex-post normative control, asking for the constitutional review of Section 65 (5) of the LC. According to his opinion formed on the basis of reviewing the studies dealing with the codification of the new LC as well as the Hungarian and the European practice of fundamental rights, there are serious justifiable constitutional concerns regarding the challenged regulation on the termination protection. As pointed out by the petitioner, the provision requiring an employee to talk about pregnancy is impossible if the employee is not aware of the pregnancy. He highlighted that those who are not aware of their medical status should also need protection. He referred to the Fundamental Law which ensures the right for privacy and private family life. The commissioner for fundamental rights held that the recent changes in the provisions of the Fundamental Law in the field of privacy do not imply the disregarding of the Constitutional Court’s judicial practice – based also on the practice of the European Court of Human Rights – related to the right to private life. Moreover, the Commissioner made a reference to a Curia decision from 2004 arguing that it is against the principles of law to require an employee to talk about her pregnancy to the employer or even to give false information.

 Decision of the Constitutional Court

The Constitutional Court accepted the claim of the Commissioner and canceled section 65 (5) from the LC with retroactive effect. In the decision the CC gives a detailed analysis on the concept of privacy and introduced the “right to lie” in order to prevent human dignity.

In the decision the CC gives a detailed reasoning relating to the practice of the European Court of Justice protecting the rights of pregnant women and the requirements for equal treatment. However, the CC explains that it is not only an equal opportunity question but also an issue relating to privacy protection. In its view, the CC must examine (within the frame of the petition of the Commissioner) whether making the protection against dismissal defined in the Section 65 (3) a) and e) conditional upon informing the employer about it – before giving notice of dismissal – by the employee infringes the right to privacy or private family life. During this scrutiny by the CC, the starting point was the determination of the protection scope of the referred fundamental rights.

The CC has interpreted the right to privacy and its relation to the right to human dignity in its previous decision No. 32/2013. (XI. 22.). It came to the conclusion that the Article VI (1) of the Fundamental Law – contrary to Article 59. § (1) of the previous Constitution – provides comprehensive protection of privacy: and covers the private and family life, home, communication and good reputation of the private individual. As regards the substance of privacy, it continued to deem sustainable the definition – representing the overall essence of the notion of private life - reached by the Constitutional Court in its earlier practice, according to which, the essential conceptual element of privacy is that others may not interfere or have access thereto against the will of the person concerned. The Court highlighted that there is a particularly close relationship between the right to privacy ensured by Article VI. (1) of the Fundamental Law and the right to human dignity guaranteed by Article II. of the Fundamental Law.

In the CC’s interpretation, Article II. of the Fundamental Law provides basis for the protection of the “untouchable area of the formation of privacy”, which is completely excluded from any kind of state intervention, since it is the basis for human dignity. Nonetheless, according to the Fundamental Law, the protection of privacy is not restricted only to the inner sphere or intimacy protected also by Article II of the Fundamental Law, but it also covers privacy of a wider sense (communication) and the territorial sphere, in which the private and family life unfolds (home). Beyond this, the image created about one’s life enjoys individual protection as well (right to good reputation).

 [30] Article XVII (3) of the Fundamental Law concretizes the protection of rights ensured in Article II and VI (1) of the Fundamental Law in relation to employment: „Every employee has the right to working conditions which respect his or her health, safety and dignity.” The safe working conditions, not endangering the health of employees are ensured by the Act XCIII of 1993 on labour safety; to respect employees’ dignity by the Act CXXV of 2003 on Equal Treatment and the Promotion of Equal Opportunities, furthermore during the employment by the provisions of the LC guaranteeing the protection of personal rights and Sections 2:42–54. § of the Act V of 2013 on the Civil Code.

Section 9 § (1) of the LC stipulates the general requirement of the protection of personal rights. Personality rights are named within the Civil Code, thus the right to privacy and the right to the protection of personal data as well [CC 2:43. § b), e)]. The protection of personality rights in labour law – according to the reasoning of the LC – is of high importance, primarily due to the imbalanced nature of the employment relationship. According to Section 10. § (1) of the LC, an employee may be requested to make a statement or to disclose certain information only if it does not violate his rights relating to personality, and if deemed necessary for the conclusion, fulfilment or termination of the employment relationship.

With view to the fact that the circumstances defined in Sections 65. § (3) a) and e) of the LC are regarded as personal data, the Constitutional Court referred to its previous practice regarding the relationship of the right to privacy and the right to protect personal data ensured by Section VI. (2) of the Fundamental Law. The Constitutional Court (since 1991) had not construed the right to protect personal data as a traditional protective right, but taking into account its active side as well, interpreted it as right of informational self-determination.

The CC highlighted that the right of informational self-determination is closely linked to the right to privacy, whilst it contains the right to decide as to when and within what limits will the individual reveal its data related to its person. The restriction of the right of informational self-determination – contrary to the right to privacy– is not aligned primarily to the character of the data, but to its use. The right of informational self-determination comprehensively protects the personal data of the private individual, irrespectively of how the data controller came to the possession of those.


Interpretation of the term “private life” in Hungary by other authorities

The definition of private life is a broad concept with no exhaustive definition in Hungary. Different interpretations are available in decisions adopted by criminal or civil courts. However, in general, the concept is wider than that of the right to privacy and it concerns a sphere within which everyone can freely pursue the development and fulfillment of his/her personality. In the interpretation of the CC, the right to private life is not only wider than to right to privacy, but it is covered by the “information self-determination” that requires active (pro-active) conduct from the affected individual.

The previous Data Protection Commissioner already analyzed in details the employee’s rights to protect certain information from the employer and he pointed out in several opinions and statements that the employee may not be forced to provide information on his /her private life to the employer unless the question of the employer affects the material part of the employment relationship. For example, pregnant women can only be requested to provide information on their pregnancy if the information is relevant to work schedule or to dangers involved in fulfilling certain positions. In any other case, it falls under the right of the woman’s information self determination whether to provide the information to the employer or not.

Under Hungarian law, the decision of the CC may serve as a basis for the re-opening of the closed litigation in which pregnant woman were affected. The case also shows that the interpretation of privacy law remains at the table of the Constitution Court, further refining its previous practice interpreting the notions of privacy, private life, and personal data protection.
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