Hungary, GAARs – A Key Element of Tax Systems in the Post-BEPS World

in Michael Lang, Jeffrey Owens, Pasquale Pistone, Alexander Rust, Josef Schuch and Claus Staringer (eds), GAARs – A Key Element of Tax Systems in the Post-BEPS World (Amsterdam: IBFD, 2016), pp 307-320.

14 Pages Posted: 27 Jun 2016 Last revised: 1 Aug 2016

See all articles by Richard Krever

Richard Krever

University of Western Australia Law School

Borbala Kolozs

Corvinus University of Budapest

Date Written: June 1, 2016

Abstract

Hungary was the first post-socialist country in eastern Europe to adopt a general anti-avoidance rule (GAAR). The original GAAR adopted in 1990, best described as a "form and substance" GAAR, was supplemented by a second GAAR in 1998, best described as a "proper use of rights" GAAR. The tax administration also attacks tax avoidance arrangements using the ordinary Civil Code, arguing the transactions fail as a matter of substantive civil law. There are three elements to the second GAAR, the taxpayer's purpose, inconsistency with the principles of a tax law, and the use of multiple steps to replace simpler transactions that would have attracted a higher tax liability. The GAAR contains an explicit reconstruction rule allowing the tax authority to reassess all parties on the basis of the transaction that would have been used if the tax avoidance transaction had not been used. The GAAR is supplemented by three rules considered specific anti-avoidance rules -- a rule substituting arm's length prices, a thin capitalization rule, and a rule restricting use of carried-forward losses. The law is silent on whether the GAAR can apply to a transaction covered by a tax treaty, although some recent treaties include recognition of anti-avoidance rules.

Suggested Citation

Krever, Richard and Kolozs, Borbala, Hungary, GAARs – A Key Element of Tax Systems in the Post-BEPS World (June 1, 2016). in Michael Lang, Jeffrey Owens, Pasquale Pistone, Alexander Rust, Josef Schuch and Claus Staringer (eds), GAARs – A Key Element of Tax Systems in the Post-BEPS World (Amsterdam: IBFD, 2016), pp 307-320., Available at SSRN: https://ssrn.com/abstract=2800010

Richard Krever (Contact Author)

University of Western Australia Law School ( email )

M253
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Borbala Kolozs

Corvinus University of Budapest ( email )

Hungary

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
146
Abstract Views
924
Rank
411,876
PlumX Metrics