Tag Archives: New Civil Code

ILN Today Post

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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ILN Today Post

End to an unjust fine?

Under current practice the Tax and Customs Administration (NAV) fines taxpayers that are caught with a VAT shortfall even if the budget has sustained no losses. An opinion recently published by the Advocate General of the European Court of Justice could spell the end for this extremely unfair and much criticised procedure.

The VAT treatment of certain transactions can often be problematic, and it is by no means uncommon for the parties in the transaction to end up misinterpreting – together and in good faith – the relevant provisions of the VAT Act. The parties may, by mistake, treat a transaction that is subject to a reverse charge as a regular transaction, or vice versa.

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ILN Today Post

Innovative employee incentives – are they are the doorstep?

One of the most efficient ways to motivate employees is to make them owners. In Hungary, however, plenty of legal and tax obstacles have restricted the introduction of such incentive so far. Changes made to the legal and tax environment in the recent years may yet boost the spread of employee stock programmes in the future.

The past: neither share, nor option

The most straightforward way to involve employees into the company’s ownership is to provide them with business quotas or shares directly. This raises, however, several complications. Upon the receipt of a share the employee also receives the right to participate in the decision-making procedure of the company, which is not always a desirable outcome. Furthermore, unfavourable tax consequences may come up: the unpaid part of the fair market value of the share is taxed at the same way as if salary was paid to the employee. This makes such type of incentive rather unattractive.

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