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The Exchange of Tax Information Portal is an initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Global Forum conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard. The standard provides for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. Effective exchange of information requires that jurisdictions ensure information is available, that it can be obtained by the tax authorities and that there are mechanisms in place allowing for the exchange of that information. The Global Forum's peer review process examines both the legal and regulatory aspects of exchange (Phase 1 reviews) and the exchange of information in practice (Phase 2). The EOI Portal will track the development of these peer reviews, including changes that jurisdictions make in response to the Global Forum's recommendations.

Peer Review: Peer Review - Hungary

This report for Hungary has been published on 1 Jun 2011. You can buy this report, or browse it online below.

You may also want to view the tables of determinations and ratings.


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Determinations and Recommendations

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 not in place.   In the case of public and private limited companies, the shareholders may request that their names be not noted in the register of shareholders and not disclosed by the securities intermediary.   Hungary should ensure shareholder information is available for exchange of information purposes even where the shareholder has requested that it not be disclosed. 
Companies incorporated out of Hungary but having place of management in Hungary, are not obliged to maintain ownership information or provide it to the authorities and thus, such information may not be available to the competent authority.   Hungary should require foreign companies with sufficient nexus to Hungary making them tax resident in Hungary, to maintain information on their ownership in Hungary. 
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. 
Hungarian law does not ensure that information identifying the settlors, trustees and beneficiaries of foreign trusts which are administered in Hungary or in respect of which a trustee is resident in Hungary, would be available to its competent authority.  Hungary should legally ensure that information that identifies the settlors, trustees and beneficiaries of foreign trusts, which are administered in Hungary or in respect of which a trustee is resident in Hungary, is available to its competent authority. 
Hungarian laws do not contain effective enforcement provisions obliging companies to keep registers of shareholders.  Hungary should establish sanctions applicable where companies fail to maintain share registers. 
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, but certain aspects of the legal implementation of the element need improvement.   Currently there are no requirements requiring the foreign trusts which are either administered in Hungary or in respect of which a trustee is resident in Hungary to maintain accounting records.  Hungary should ensure that accounting records in case of foreign trusts which are either administered in Hungary or in respect of which a trustee is resident in Hungary are maintained (including underlying documentation) for a minimum of 5 years. 
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.   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. 
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 powers of Hungary's tax authorities to obtain information for international exchange purposes are not unambiguously provided for in its laws.  Hungary's tax law should be clarified to remove any potential ambiguity as to whether tax authorities have the power to obtain information in response to a request for information under an international agreement. 
The scope of professional secrecy for attorneys 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.  It is recommended that legal provisions be put in place to reduce the scope of the professional secrecy of lawyers and auditors so this does not unduly prevent or delay the international exchange of information for tax matters as contemplated in the standards. 
Confidentiality of "business secrets" and "securities secrets" may prevent access to information, particularly shareholder information.  Hungary should ensure that its confidentiality rules do not impede effective exchange of information.  
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.   Tax authorities are required to compulsorily notify the customers affected regarding receipt of information from the financial institutions. There are no exceptions to this notification requirement, which may undermine the effective exchange of information.   It is recommended that certain exceptions from prior notification be permitted (e.g. where the notification is likely to undermine the chance of the success of the investigation conducted by the requesting jurisdiction). 
The rights available to witness to refuse testimony are wider than contemplated in the standards for international exchange of information.  Hungary should legally ensure that the privilege available to witnesses should not unduly prevent obtaining information from them. 
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Lack of clarity concerning access to information may prevent Hungary's tax authorities from giving full effect to its obligations under its exchange of information agreements.  Hungary should ensure that its domestic laws allow for effective exchange of information.  
Hungary DTCs with eight treaty partners (Austria, Belgium, Brazil, Kuwait, Luxembourg, Malaysia, the Netherlands and Singapore) do not meet the international standard.  Hungary should ensure that all its DTCs meet the international standard. 
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.     Hungary should continue to develop its EOI network to the standard with all relevant partners. 
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.      
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 all professionals covered by attorneys, lawyers 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. 
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.