7/Jun/2021
Due to the continuous development of technical possibilities and the pandemic situation, the use of various electronic services, including electronic signatures is becoming more and more popular.In our newsletter we provide information about the possibilities and conditions of validity of electronic signatures.
Due to the pandemic, travelling possibilities are restricted, and the restrictions are holding back the flow of business. An electronic signature can be of great help in bridging this problem. Its use can facilitate the daily business life, but there are strict conditions for the validity of a signature, as the signature technically is not linked to the person using it, so the provability that the electronic signature was actually placed on the electronic document by an authorized person is particularly important.
1. THE DEGREES OF SECURITY OF ELECTRONIC SIGNATURE BASED ON THE LAW
The uniform EU regulation defines (i) electronic
signatures, (ii) electronic signatures with advanced security, and (iii)
qualified electronic signatures. The three categories mean different degrees of
security of the electronic signature, with different probative force. Thus, in
the case of a document affixed with a qualified electronic signature, the
courts presume that the document was signed by the person named in the
signature, while in the case of a simple electronic signature, the document is
only considered as a written instrument, but is not associated with the legal
effect of a private document with full probative value. The reason for the
differentiation is the usability in different situations; for example, an
electronic signature with advanced security may be appropriate for issuing a
statement within an organization, but the use of a qualified electronic
signature may be required towards third parties.
In order to enable an executive officer of the company
to sign on behalf of the company by an authorised electronic signature, it is
necessary as a general rule to have a qualified electronic signature.
For the record of a qualified electronic signature in the company register, the preparation of a specimen of the electronic signature, which can only be made by a public notary. Based on this, at the request of the company, the company register may also contain the specimen of the electronic signature of the person entitled to sign on behalf of the company, which certifies that the given certificate is an authorised electronic signature of the representant. If the electronic signature of the given person is also indicated in the company register, the authenticity of the signature is certified by the registry excerpt of the company and no further certification is required to either a Hungarian or a foreign party.
In the framework of the uniform regulation of the
European Union, a specific register lists the service providers that are
mutually recognized by the Member States for cross-border authentication; thus,
in the course of company registration proceedings in Hungary, even a qualified
electronic signature provided by a trust service provider operating under the
laws of another Member State may be used. The list of these service providers
is available at https://webgate.ec.europa.eu/tl-browser/#/. In Hungary, three
service providers provide qualified electronic signatures, these are NISZ Zrt,
Netlock Kft and Microsec Zrt.
The registration of an electronic qualified signature
of a company into the companies’ register requires three steps: 1. concluding a
contract with the appropriate service provider; 2. preparation of an electronic
specimen of signature certified before a public notary; and 3. conducting the
registration procedure at the court of registration.
It is important to emphasize that an electronic signature with adequate security (qualified signature) is valid even if it is not registered in the company register, however, in this case the proof of authenticity may be required.
2. THE DEGREES OF SECURITY OF ELECTRONIC SIGNATURE BASED ON THE LAW
In addition to the above, an important alternative of
signing with a qualified electronic signature is when the rules of signing
electronically is regulated by the concluding parties in their contract or it
is set out in the general terms and conditions. On this basis, an electronic
signature can be endowed with the probative value corresponding to the
qualified electronic signature, even if it is not meeting the necessary
requirements regulated in the relevant provisions of law. If the use of any
type of electronic signature is thus recorded in a paper-based contract, as a
signature having full probative value between the parties, it has to be
recognized by the courts in relation to the parties concerned, that the
subsequent documents signed electronically are authentic and legally binding.
The possibility of electronic signatures and company
signatures greatly facilitates the stationary case management and the
uninterrupted course of the proceedings caused by the epidemic situation.
*
This summary is intended to
raise awareness and does not constitute legal advice.
Should you have any further question or need assistance in the company procedure concerning electronic signature, or the preparation of the relevant contractual clauses, please do not hesitate to contact us.
11/Jan/2021
1. VALUE ADDED TAX
AND CORPORATE INCOME TAX
As of 1st January
2021, the system of online invoice data reporting also applies to invoices
issued to private individuals and foreigners. The tax authority will also
prepare the draft of the VAT return for companies, which the taxpayer can
modify.
From January, the scope of
possibilities for reducing or reclaiming the tax base in relation to
irrecoverable claims is also extended to claims against private individuals. As
a transitional measure, VAT reclaiming will be possible retroactively back
until 31 December 2015.
As of 1st July 2021,
as a general rule, distance sales in the European Union will be taxed based on
the VAT rate of the country of destination of the product (the state of
establishment of the end-user). In order to lighten administrative burdens, for
sales not exceeding the value threshold of EUR 10,000 the state of
establishment is deemed as the place of performance, though the taxpayer can
also opt for taxation under the general rule below the value threshold too.
In 2020, the corporate tax rate
could already be reduced by the amount carried over from the profit reserve to
the reserve, but only up to the amount of the profit before taxes. The upper
limit of the allowance was HUF 10 billion, which upper limit was abolished as
of 1st January 2021.
2. SMALL BUSINESS
TAX AND SIMPLIFIED ENTREPRENEURIAL TAX
The rate of the small business tax (“KIVA”) is reduced to
11%, while the value limit of KIVA taxpayer status for revenue and the balance
sheet total is increased to HUF 3 billion, and the value limit for exiting KIVA
taxpayer status is increased to HUF 6 billion in 2021. The value limits shall
be applied with consideration to the aggregated turnover of the affiliated
companies.
The most significant change in KATA (simplified
entrepreneurial tax) taxation is that as of 1st January 2021, if a
customer pays a given KATA-subject enterprise more than HUF 3 million in a
year, this customer shall declare and pay tax at a rate of 40% for the amount
in excess of HUF 3 million. Having regard to this, when engaging sole trader or
corporate service providers providing various services to companies (e.g.
translator, interpreter, IT professional, certain marketing services, coaching,
trainer, etc.) who (which) are KATA taxpayers, special attention has to be paid
during the year to the fact that payments made to such KATA taxpayers are
subject to the aforementioned 40% extra tax above the HUF 3 million limit. In
connection with this, we recommend a review of the expenses of recent years in
order so that such expenses can be identified and planned beforehand.
The above value limit can only be observed if the customer
company (principal) is aware that the contractual partner is a KATA taxpayer.
For this purpose, the legislation requires that KATA-payer businesses notify
their business partner regarding their KATA taxpayer status in writing at the
time of conclusion of the contract, or in the case of an already existing
contractual relationship, until 15 January 2021. This notification may be made
by any written means (email, postal letter, personal handover of declaration).
3. LOCAL BUSINESS TAX
Administrative
burdens related to local business tax will be lightened in 2021 for businesses
having more than one premise in a way that it will be sufficient to send one
local business tax return to the National Tax and Customs Administration (NAV),
and the municipalities will not need to be notified separately. Further, having
regard to the economic challenges posed by the coronavirus pandemic, for the
year 2021, the rate of the local business tax will be cut by 50% for micro,
small and medium enterprises having a balance sheet total or net revenue under
HUF 4 billion.
4. ELECTRONIC PUBLIC
ROAD TRADE CONTROL SYSTEM (EKÁER)
The reporting obligation
will fully cease for products that are not risky with respect to EKÁER, and
only so-called “risky products” – based on the value or weight limit – will be
subject to the EKÁER.
*
This summary is intended to raise awareness and does not constitute legal
advice.
If you have any questions or need further information, please do not
hesitate to contact us.
28/Aug/2020
Pursuant to Government Decree No. 408/2020 (hereinafter:
the “Government Decree”), business actors have two options for entering Hungary:
1. Travel between
affiliated enterprises according to Article 9 of the Government Decree
If the entry is required for a
business travel between related companies in
accordance with the regulation of the Government Decree, then a prior
application for entry is not needed and nor it is necessary to present negative
SARS-CoV-2 PCR test results to avoid quarantine.
This unrestricted entry for business purposes is
possible if the person coming from abroad
- enters the
territory of Hungary from the territory of the states specified in the Decree
of the Minister of Interior,
- she/he is an executive officer or employee of a
domestic company which is a related company with a company incorporated in one
of the states specified in the Decree of the Minister of Interior; or she/he is
an executive officer or employee of a company registered in a state specified
in the Decree of the Minister of Interior, which is a related company with a
company registered in Hungary, and
- the fact of a business trip has been made presumable.
The originals of the documents proving the fulfilment of the conditions listed in points (i)-(iii) above must be presented upon request. These documents are the following: declaration of the executive officer (see below) required for making the business purpose of the travel presumable; the registry excerpt of the foreign company, the registry excerpt of the related Hungarian company and the labour contract – if the entering person is an employee).
Regarding the entry conditions, please note the
following:
The detailed definition of an “affiliated
undertaking” is set out in Act LXXXI of 1996 on Corporate and Corporate
Income Tax. It is an important principle that when relying on business entry
one of the affiliated companies must always be a Hungarian company (with a
registered seat in Hungary).
The most important cases when one may talk of affiliated
undertakings are:
- if one company has
majority ownership or majority influence in the other, either through an
intermediate company (e.g. a foreign company is the majority owner of a
Hungarian company);
- if a third party
has majority ownership or majority influence in both organizations, either
through an intermediate company (e.g. a foreign company is the majority owner
of another foreign company and the sole owner of a Hungarian company);
- a company is under
the control of an entrepreneur as mentioned in point a)-b) and an establishment
of the entrepreneur in another country (e.g. a Hungarian establishment of a
foreign company and another foreign company owned by the foreign company);
- two entities which
have the same management which can exercise decisive influence over business
and financial policy.
We note that the exercise of influence may take place
not only through (majority) ownership, but also through the exercise of certain
privileged rights.
Currently, according to the decree of the Minister of
Interior, entry is possible from any state in the world, and it is possible to
refer to a related company registered in any state of the world in order to
fulfil the condition of unrestricted entry for business purposes.
2. Business entry permitted on equity basis
If the case of entry for business purposes pursuant to
Section 9 of the Government Decree is not applicable, an entry permit may be
obtained after the submission of a prior application. However, even if the entry
permit is granted, the entrant must go into quarantine in Hungary, or ask for the
release of the quarantine based on negative SARS-CoV-2 PCR test results.
The case of business entry permitted on equity basis
may be applied by a foreign national who cannot enter for business purposes on the basis of
a related business relationship.
The Hungarian Police may grant an exemption from the
general entry ban upon request if the applicant proves that there is a reasonable cause
for the entry. According to our information from the Hungarian Police, a
business travel may be an acceptable reason for exercising equity. The
application must be submitted at the following link in English
(https://ugyintezes.police.hu/en/meltanyossagi-kerelem) or in Hungarian
(https://ugyintezes.police.hu/meltanyossagi-kerelem). It usually takes 48-36
hours to get the answer (permit or refusal) of the Hungarian Police, but please
note that due to the increased workload, the administration time may increase.
However, the exemption of the Hungarian Police does
not release the general obligation of the 14-day
home quarantine after entry. Exemption from
this must be requested separately and may be granted in the following cases:
- the applicant
presents two negative SARS-CoV-2 PCR tests at least with a difference of 48
hours within the 5 days prior to entry, or
- certifies that she/he has already been infected with a
coronavirus disease during the six months prior to entry.
Otherwise, the person entering must go into home
quarantine and may carry out testing in Hungary to request the release of the quarantine.
In the case of entry from some “yellow countries”, the
entrant is entitled to free movement already after the result of the first
domestic SARS-CoV-2 PCR test, but the entrant is obliged to perform the second
test in order to maintain the release of the quarantine.
*
This summary is intended to raise awareness and does not constitute legal
advice.
If you have any questions or need further information, please do not
hesitate to contact us.
1/Jan/2020
Dear Madam, dear Sir,
The following is a summary of relevant amendments/innovations which are expected in 2020, with regards to (1) value added tax; (2) corporate income tax; (3) personal income tax; (4) simplified entrepreneurial tax and small business tax and (5) some other areas related to accounting/administration.
This summary only contains the major lines of the most significant modifications, due to the numerous detailed rules. The analysis of the details goes beyond the scope of this newsletter, however at your request we gladly give further information about their essential contents.
1. VALUE ADDED TAX (VAT)
From January 1, 2020 – under the conditions specified in Act CXXVII of 2007 on Value Added Tax –, it is possible to reduce the VAT base related to uncollectible claims through self-auditing. This rule may also be applied to transactions executed after December 31, 2015, so the option for VAT reduction is enforceable for claims which were created in the past and have become uncollectible.
It might be an important help for companies that if VAT was wrongly passed onto a company and the partner is not willing to refund it, there is an opportunity for a tax-refund in a separate procedure after taking the necessary steps.
From the beginning of 2020, deliveries to Hungary for the purpose of customer stock are exempt from registration and reporting obligations, if all of the following conditions are concurrently met:
when moving the products, an agreement is already available regarding who the purchaser of the product is;
the customer has a tax-number in the Member State of the place of shipment or the destination of the product and the sending company knows the customer’s Community tax-number and declares the shipment of the product in the summary statement;
the products are sold within 12 months;
the transporter does not have a business establishment where the customer stock is located;
both parties keep itemized and continuous quantitative registers.
2. CORPORATE INCOME TAX
The development tax benefits were decreased from July 24, 2019 for small businesses to HUF 300 million, for medium-sized businesses to HUF 400 million. A significant change is that these limits will be the following in the future: in the year 2021 HUF 200 million / HUF 300 million and from January 1, 2022 HUF 50 million / HUF 100 million. It may be worth scheduling development investments in the coming years in consideration of this.
3. PERSONAL INCOME TAX
Hungary provides a lifetime personal income tax exemption for any mother, who has given birth or adopted and is raising or already raised at least 4 children in her household, in terms of her incomes from work. This exemption will be applicable for the first time for income earned after December 31, 2019 – that is for the tax year 2020.
4. SMALL BUSINESS TAX, SIMPLIFIED ENTREPRENEURIAL TAX (EVA)
As of January 1, 2020, the legislature terminated the Simplified Entrepreneurial Tax (Hungarian abbreviation: EVA), as an option.
At the same time, as of January 1, 2020 the rate of the small business tax and tax-advance payment has been reduced from 13% to 12%.
5. OTHER PROVISIONS
However, the amount of the health-care contribution is increasing: the amount of payable contribution will be HUF 7,710 per month (HUF 257 per day) instead of HUF 7,500 per month (HUF 250 per day), as of January 1, 2020.
From the year 2020, the Electronic Trade and Transport Control System (EKÁER) will be modified to deal with problems encountered in practice: It will be possible to subsequently modify some data (such as the EKÁER numbers, which are finalised or became inactive due to timeout) within 3 business days after their closing, by paying a surcharge. This will help the involved companies.
Provisions regarding that the suspension of the advertising-tax is expected to remain in force until December 31, 2022: According to the rules in force from July 1, 2019, the advertising-tax rate of the publisher as well as the customer was temporarily reduced to 0 %. This provision was initiated by the Government, with special regard to the ongoing appeal procedure against the decision of the European Commission. Therefore, the relevant regulation may be amended, when the appeal procedure is completed.
*
This summary is intended to raise awareness and does not constitute legal advice.
If you have any questions or need further information, please do not hesitate to contact us.
18/Jul/2019
In our newsletter, we would like to introduce
the amendment of Act LIII of 2017 on the Prevention and Combating of Money
Laundering and Terrorist Financing (the Act), which provides that the concerned organizations and financial institutions have received a grace period for client identification.
The service providers
(banks, credit institutions, etc.), subject to the previous regulations of the Act, were
mandated to fulfill their obligation until the original deadline, that is
by 26 June
2019 to provide client identification with regards to all their clients. Prior to the expiry of
the deadline, the Hungarian Banking Association informed the Hungarian Government
that in the case
of numerous service providers this identification procedure had not been fully completed. The Hungarian Parliament
reacted to the problem as a matter of urgency: according to the new amendment of the Act, the
new deadline for identification is 31 October 2019. After the entry into force of
the amendment on 25 June 2019, the service providers had three business days to inform their affected clients if the client audit procedures had not been
conducted yet or the audits were incomplete.
Based on the above, we suggest
cooperating with the concerned financial
institutions.
*
This summary is intended to
raise awareness and does not constitute legal advice.
If you have any questions or
need further information, please do not hesitate to contact us.
3/Jun/2019
This summary is not exhaustive and only contains the most significant modifications. The analysis goes beyond the scope of this newsletter and in case of request, we gladly provide you further information on essential content.
Following the
entry into force of the GDPR last year, the amendment and harmonisation of several
Hungarian laws became necessary, which was carried out by the legislator by adopting
recently the Act XXXIV of 2019 on the
legislative amendments required in order to implement the data protection reform
of the European Union. The amendments entered into force on 26th
April 2019. Out of the numerous detailed rules, the amendment of Act CXXXIII of
2005 on the protection of persons and
property, and the activities of private detectives (hereinafter referred as:
the “Act”’) is the most
relevant in the view of the commercial entities.
1. THE RETENTION
PERIOD OF THE RECORDINGS OF THE SET ELECTRONIC OBSERVATION SYSTEM
The Act regulated the retention period of the image and/or sound recordings
produced by the applied electronic systems. According to the repealed
regulation, the general retention period was 3 workdays, afterwards the
recording had to be deleted (under certain circumstances, exceptionally the
retention period could be 30 or 60 days).
From 26th of April 2019, the legislator excluded the detailed
rules concerning the recordings by the electronic observation system. Instead of this, it declares that the reason and period of the recognition of
the image and sound recordings during the operation of the electronic
observation system, as well as the persons who acquired knowledge of it, shall
be registered.
Bases on this, the Act does not include a limit for the retention period
of the recording, because the records shall be retained only for the minimum period
of time which is strictly necessary. For example, the recording of the territory
of a depository could only be retained until the end of the inventory period.
The documentation of these reasoning and the determination of the retention
period is essential, considering the principle of accountability of the GDPR.
2. THE RULES
RELATED TO THE APPROVAL TO THE APPLICATION TO THE SET ELECTRONIC OBSERVATION
SYSTEM
The repealed regulations concerning the application of the electronic observation system included that the recording
can only be made with the consent of the persons located at the controlled
area. Implicit behaviour (e.g. entering into such area) was qualified as consent,
if proper caution of the observation was placed (a sign of the surveillance).
In addition, the Act established in detail which areas can be controlled by
electronic observation systems.
With the amendment of the Act, the requirement of consent has been
excluded, and regarding the method of the application, the Act only includes
the following:
- the company shall only apply camera surveillance at private areas;
- camera surveillance is prohibited in all areas where
the observation can violate human dignity, in particular in the following
areas:
- in changing rooms,
- in fitting rooms,
- in bathrooms,
- in restrooms.
Because of the new
rules of the Act, the conditions, from a data protection point of view, of the
application of the electronic observation system will be determined by the GDPR,
the regulations were excluded from the Act. We would like to highlight that in
case of using an electronic surveillance system, it might be necessary to determine
individually, which camera records which area, for how long the recording shall
be retained, what the reason is behind the use, etc., in order to comply with the
rules of the GDPR.
Based on the above,
it might be appropriate to review the internal control standard concerning the camera
surveillance.
*
This summary intends to raise awareness and does not constitute legal
advice.
If you might have any question or need further information, please do not hesitate to contact us.
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