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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: Hungary Phase 2 Review

This report for Hungary has been published on 16 Mar 2015. You can buy this report, or browse it online below.

Skip directly to the Executive Summary. 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 in place, but certain aspects of the legal implementation of the element need improvement.   Hungarian law does not contain obligation 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 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. 
Phase 2 Rating Factors Recommendations
Largely Compliant.   Rules governing trusts were introduced into Hungarian law in March 2014 so there is very limited.  Hungary should monitor implementation of new trust regulations in practice to ensure that the information on settlors and beneficiaries of trusts operated by Hungarian resident trustees is available. 
The Civil Code containing rules on formation of legal entities and maintenance of ownership information came into force only in March 2014 and is therefore not tested in practice.   Hungary should monitor maintenance of ownership information required to be kept by legal entities and effectively apply enforcement measures where such information is not kept in accordance with the Civil Code.  
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
Largely Compliant.   There is no experience with implementation of accounting obligations of trusts as regulation of trusts was introduced in March 2014.  Hungary should monitor implementation and effective enforcement of accounting obligations of Hungarian resident trustees so that accounting records and underlying documentation in respect of all trusts are available in practice. 
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. 
Phase 2 Rating Factors Recommendations
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 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. 
Phase 2 Rating Factors Recommendations
Largely 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 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. 
Phase 2 Rating Factors Recommendations
Largely Compliant.   Rules providing for notification of customers simultaneously with sending the information to the requesting jurisdiction were introduced in November 2014 and therefore are not sufficiently tested in practice.  Hungary should monitor implementation of the new notification rules so that the customer is not notified of receipt of the banking information earlier than when the information is provided to the requesting jurisdiction. 
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.     Hungary should continue to develop its EOI network to the standard with all relevant partners. 
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, but certain aspects of the legal implementation of the element need improvement.   Disclosure of information rules do not prevent the taxpayer from inspecting the information provided by the requesting jurisdiction including the EOI request at any time.  Hungary should ensure that the received request and accompanying documents are not disclosed to the taxpayer or his legal representative unless necessitated by exercise of his/her appeal rights and that the EOI request will not be disclosed to the taxpayer in cases when the requesting jurisdiction indicated that it should not be disclosed. 
Phase 2 Rating Factors Recommendations
Partially Compliant.      
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. 
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
Largely Compliant.   Hungary introduced an obligation to provide status updates to the requesting jurisdiction in all cases where the requested information cannot be provided within 90 days in December 2014. The practical implementation of this obligation is not sufficiently tested in practice.  Hungary should monitor provision of status updates to ensure that the requesting authority is updated on the status of the request in all cases where Hungary is not in position to provide the information within 90 days. 
Although Hungary’s peers were generally satisfied with the timeliness of responses, there are a few factors in Hungary’s processes and resources that appear to inhibit timely responses in all cases.  Hungary should ensure that appropriate resources and measures are put in place so that the requested information is provided in a timely manner in all cases.