Hungary

To see the determinations and rating of all published reports click here.

Overall Phase 2 Rating is Largely Compliant

Table of Determinations and Ratings of the Combined Review

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Hungarian law does not contain rules ensuring timely reporting of changes in ownership of a private limited company.   Hungary should ensure that the register of shareholders in respect of private limited companies contains updated ownership information. 
Companies incorporated out of Hungary but having place of effective management in Hungary, are not obliged to maintain or file legal ownership information and thus, such information may not be available to the competent authority.  Hungary should ensure that legal ownership information on foreign companies with sufficient nexus to Hungary is available. 
Hungarian law and administrative practices do not ensure the availability of information that identifies the partners in a foreign partnership which carries on business in Hungary or have income, deductions or credits for tax purposes in Hungary.  Hungary should ensure that information that identifies the partners in a foreign partnership that carries on business in Hungary or has income, deductions or credits for tax purposes in Hungary, is available to its competent authority. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  Although beneficial ownership information should be available in practice, verification measures carried out by the relevant AML obligated professionals do not ensure that the identification of beneficial owners kept by these professionals is adequate, accurate and up to date in all cases.   Hungary should take measures to further strengthen the reliability of the beneficial ownership information kept by attorneys, notaries, auditors and accountants. 
   
   
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Although opening of anonymous passbooks was prohibited in 2001, some pre-existing passbooks are still in existence and identity information on their holders is not available unless a transaction takes place.  Hungary should strengthen measures so that information on the holders of anonymous passbooks is available to its competent authority. 
Beneficial owner(s) of account-holders may not be identified in cases where simplified CDD is performed. However, simplified CDD is allowed only in respect of customers representing low risk for AML/CFT purposes.   Hungary should ensure that beneficial owners of all account-holders are required to be identified.  
Phase 2 Rating Factors Recommendations
Largely Compliant.     
   
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   The scope of professional secrecy for attorneys, notaries and auditors is very broad (not limited to giving advice or conduct of legal proceedings) which has potential for rendering the exchange of information ineffective in particular when beneficial ownership information is requested.  It is recommended that legal provisions be put in place to reduce the scope of the professional secrecy of attorneys, notaries and auditors so this does not unduly prevent or delay the international exchange of information for tax matters as contemplated in the standards. 
Phase 2 Rating Factors Recommendations
Partially Compliant.     
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   The tax authority is required to notify the customer in respect of whom banking information is requested 90 days after transmitting the requested information to the requesting jurisdiction. The notification requirement does not provide for an appropriate exception for exchange of information purposes.  Hungary should ensure that there is an exception from the time-specific, post-exchange notification requirement that would allow it not to notify the customer in cases where notification is likely to undermine the chance of success of the investigation conducted by the requesting jurisdiction and the requesting jurisdiction has made a request for the application of such an exception on this basis that is founded on reasonable grounds. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Largely Compliant.  The new rules regarding inspection of exchanged information came into force only in January 2018 and therefore some uncertainties remain regarding their implementation and practical impact on EOIR. These uncertainties mainly relate to the application of exceptions from the right to inspect exchanged information and proper communication of these rules to Hungary's EOI partners.   Hungary should monitor implementation of the new rules and if necessary take further measures so that confidentiality of the exchanged information in line with the standard is ensured in all cases. 
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Tax treaties do not define the term “professional secret” and the scope of the term “professional secret” under the domestic law of Hungary does not allow exchange of any information held by attorneys, notaries and auditors.  Hungary should restrict the scope of the protection under the term “professional secret” in its domestic laws so as to be in line with the standard for the purpose of agreements for exchange of information. 
Phase 2 Rating Factors Recommendations
Largely Compliant.     
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.      
Phase 2 Rating Factors Recommendations
Compliant.  Although the proportion of cases where status updates were provided in line with the standard raised from 10% during the first year under the review to 38% in the last year, overall status updates were provided only in 21% of the cases where they should have been provided. Nevertheless it is noted that Hungary provided the requested information within 90 days in 54% of received requests over the reviewed period and appropriate procedures to provide status updates seem to be in place.  Hungary should ensure that status updates are provided in all cases where Hungary is not in position to provide the requested information within 90 days. 

Earlier self-assessment based annual reports entitled Tax Co-operation 2010: Towards a Level Playing Field are also available.