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“I may be gone for some time” – tax implications of moving abroad

Numerous tax advantages can be gained if someone switches to being subject to the tax laws of another country (i.e. changes his tax residency). Although the country in which a private individual has residence is not a matter of choice, with careful planning of his personal circumstances it is possible to influence where he is taxed. And this affects anyone who takes on work abroad, whether for a short or a longer period.

Nowadays many of our compatriots are trying their luck abroad, and it’s also at least as common for foreign citizens to settle for relatively long periods in Hungary. Everybody has a different attitude to staying abroad: some are already planning their return home as they pack their suitcase, some get homesick later during their stay, while others really do settle in to live their life abroad for the long haul. But all these circumstances can have a major impact on your tax payment obligations: it certainly makes a difference whether somebody’s income is subject to the 45% tax burden of the United Kingdom, the 15% rate applied in Hungary, or the 0% of Dubai.

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The road less travelled – companies’ by-laws can be customised

The “new” Civil Code, which entered into force more than two years ago, has made it possible for businesses to shape, in their own image, the regulations governing their organisation and operation. This opportunity has certainly captured the imagination of legal practitioners. All sorts of extreme ideas were mooted. For example it was suggested that a limited liability company (Kft.) could issue shares or other securities embodying members’ rights. The company courts soon put a dampener on things, however, creating the category of “status rules”: no matter how flexible the law, it still isn’t possible to depart from the rules that constitute the defining features of a particular form of business entity.

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To be continued? There’s still demand for setting up companies abroad

While efforts to hunt down offshore companies may appear to be yielding results, there’s been no slackening of demand for setting up companies abroad. However, tax avoidance and tax evasion, as the primary motives for doing so, are giving way to other objectives.

Automatic information exchange, restrictions on bank secrecy, tightening of anti-money laundering rules and strict KYC rules… These are just some of the measures being deployed by developed countries around the world to stop hot money being hidden away in tax havens. Meanwhile, in developed countries income tax rates have fallen. In Hungary, for example, earnings can be withdrawn from companies with single-digit corporate tax and only 15% personal income tax. But has this removed the need for businesses to transfer their income streams and activities to foreign companies? Not in the least.

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How to win a tax lawsuit… easily, quickly and simply

Winning a tax lawsuit is a difficult and lengthy process, and often there are no guarantees of victory even when you’re totally confident that you correctly accounted for every transaction. So it’s worth paying particular attention to the opportunities for triumphing over the tax authority relatively easily and without any complications. What is more, recent case law has expanded the range of these options.

Okay, but who’s signature is that?

Tax authority resolutions have to be signed, just like any other official document. But the matter of precisely who signs a given resolution is by no means irrelevant. The laws specify who is authorised to sign a given resolution, but the rules aren’t always followed to the letter.

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Separating the titles of land and buildings – what is the point?

Under a less-known rule of the new Civil Code it’s now possible for a property owner to separate the titles to a plot of land and the buildings built on it, and to manage or commercially exploit these as separate properties. Businesses are taking a cautious approach to making use of this opportunity in practice: although splitting titles can make property development or borrowing more flexible, for the time being legal uncertainties are preventing it from becoming more widespread.

The old Civil Code set out, as a fundamental principle, that the owner of the land has the right to own the building built on the land, and there were only limited cases in which it permitted a person other than the land’s owner to obtain stand-alone title to the building, thus enabling the land and the buildings on it to be separately sold or encumbered.

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Better the devil you know? Which governing law should I choose?

The issue of governing law often arises in cross-border M&A deals or contractual relationships. At such times – either due to the UK domicile of a contracting party, or to the widespread use of the Anglo-Saxon templates – it is often the English law that is chosen. It may turn out to be important to understand the difference it can mean to the parties’ positions if instead of Hungarian law they were to opt for English law – for example, when drawing up the documents for a company acquisition.

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Catch 22 for company managers – changes in liability under bankruptcy law

A rule in the bankruptcy act that had been in effect for over 10 years presented an impossible dilemma for the senior officers of companies under threat of insolvency. An amendment of the law that recently took effect, however, resolves the stalemate and opens the possibility for managers to make sound business decisions in crisis situations.

You’re damned if you do, and damned if you don’t…

There comes a time in the life of almost every business when it finds itself unable to meet all its due payment obligations at the same time. It’s often unclear, however, whether this inability to pay is just a temporary cashflow problem for the company, or indicative of a deeper problem that’s likely to lead to the company’s bankruptcy.

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VAT on public-purpose investments: property developers can breathe a sigh of relief

In 2009 the Supreme Court made it clear that the VAT on public-purpose investments related to property developments is deductible if it would not be possible to implement the development without such investment. Recently, however, some alarm was unexpectedly caused by the preliminary opinion of the advocate general of the European Court of Justice (ECJ) in a similar, Bulgarian case, which recommended prohibiting the tax deduction right. Although the ECJ’s judgement published in the middle of last week did not follow the advocate general’s opinion, it did make exercising the deduction right subject to some strict conditions.

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When does a tax lawsuit begin? New tactics will be needed in tax lawsuits from January

New laws taking effect on 1 January next year will transform the tax audit procedure and the way tax lawsuits unfold. While some of the amendments are business-friendly, they also conceal a number of traps that are clearly detrimental to taxpayers’ interests. For example, the rights of taxpayers to defend themselves against the tax authority, and to make use of experts, will be compromised.

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Performance Certification Expert Board grows in stature – but some legal pitfalls remain

The Performance Certification Expert Board (PCEB) is playing an increasingly important role in disputes between construction-industry firms. Nevertheless, a few legal questions relating to the PCEB remain to be clarified, including that of for how long an expert opinion issued by the organisation can prevent the enforcement of contractual security (e.g. a bank guarantee). Until this issue is resolved, a party to the dispute that would otherwise possess legitimate security could be put at a disadvantage.

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