Category: Hungary

The Constitutional Court of Hungary made a decision in July 2017 that the provisions concerning the applicability of tax registration procedure do not infringe the principle of non-retroactivity.

According to the Hungarian Act XCII of 2003 on the Rules of Taxation, those taxpayers who are obliged to be registered in the company registry may receive tax number only once the state tax authority has examined whether there is any impediment preventing the issuance of tax number. In general, during the tax registration procedure, the national tax authority refuses to issue a tax number for those companies whose managing directors or members have contributed to the accumulation of tax debts owed to the tax authority within a specific time period preceding the day when the application for tax number is submitted.

The Constitutional Court of Hungary considered whether the provisions relating to tax registration procedure infringe the Fundamental Law of Hungary, as they shall be applied retroactively with respect to the examination of the past conduct of the managing directors or members of the companies applying for tax number. The Constitutional Court of Hungary declared that the provisions of tax registration procedure shall apply to proceedings commenced after the entry into force thereof, and the fact that they set out the requirements towards the managing directors and members relating to their past taxpayer conduct, does not infringe the principle of non-retroactivity.

By Gabriella Galik, Partner, KCG Partners Law Firm

A number of changes to the Labor Code expected to come into force on July 1, 2017, will not do so. These amendments to the Code – which were submitted to the President of the Parliament by the head of the Economic Committee – would primarily have affected work-time scheduling provisions, making the Labor Code more sensitive to the needs of the improving economy and changing labor market. According to Parliament, the amendments would have significantly improved production for businesses over a period of six to seven years. 

Specifically, the amendments would have affected the legal definitions of the working day and working week. The changes would also have put work time scheduling into the focus of work organization instead of the operation of employers. Currently, if the employer organizes work within a time frame, only the start and the end dates of that time frame must be indicated and shared. According to the proposed (and now cancelled) changes, the employer would also have been required to share the work time to be fulfilled with employees. 

According to the current provisions of the Labor Code, a work time frame may be four months, which can be extended to twelve months on the basis of an agreement between the employer and a trade union. The planned changes to the Labor Code would have extended the length this time from 12 to a maximum of 36 months, and would have resulted in additional changes to the legal content of the work time frame. The planned amendments would have affected the provisions of general work time scheduling and its requirements, such as when work time scheduling must be shared with the employees. Additional changes would have been implemented concerning the questions of how and when the employer could modify already-announced work time scheduling.

According to available information, the above changes resulted from lobbying activity by the automotive industry and were submitted to Parliament without consulting employees’ representative bodies. As a result, the proposed changes triggered significant protest among trade unions and other organizations, which claimed that the proposed amendments – in particular the implementation of the 36-month work time frame – would substantially increase employee vulnerability and result in a significant increase in administration burdens. They also claimed that the proposed amendments were not in line with EU directives. They argued that the introduction of the 36-month work time frame would be acceptable if collective bargaining agreements could be sealed with entire business branches – which would guarantee employees’ interests – instead of the individual collective bargaining agreements which are fairly standard in Hungary. The employees’ representative bodies also insisted that the provisions in the proposed amendment allowing work time scheduling to be modified on the basis of employee consent be deleted, arguing that employees would be under great pressure from employers to provide that consent. 

Surprisingly, employers also criticized the proposed amendments on the ground that they would result in a significantly increased administrative burden.

Ultimately, the head of Parliament’s Economic Committee had a hearing with both employer and employee representatives and concluded that the proposed amendments, in their current form, inadequately fulfilled their economic purpose. Accordingly, he recommended the withdrawal of the plans. The Parliament’s Economic Committee agreed by an overwhelming majority. 

As a result, the changes to the Labor Code will not come into force on July 1, 2017, as expected. However, discussions on the matter have not ceased. According to employee representatives, the current negotiations should not only affect the cancelled amendments, but should also settle certain matters left unresolved when the new Labor Code came into force on July 1, 2012. 

By Gabriella Ormai, Managing Partner, and Gyorgy Balint, Senior Associate, CMS Hungary

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

From 1 January 2018, a broad range of business entities, including companies limited by shares, limited liability companies, limited partnerships, trade associations, private entrepreneurs, sole corporations, branch offices, cooperatives and law firms as of today, will be obliged to carry out an expansive list of administrative procedures by means of electronic communication. 

The business entities shall submit their ‘contact point’ for electronic communication to the so-called disposition register (“Rendelkezési Nyilvántartás – RNY” in Hungarian) until 30 August 2017. Such contact point for electronic communication could be a secure electronic delivery address or other means of electronic contact established by a government decree. In case it is mandatory to register a business entity into an official register under the law, then the above mentioned requirement may be completed by submitting its contact point for electronic communication to such official register. For example, a limited liability company may submit its contact point to the companies register.

Secure electronic delivery address will be granted to the business entities by a service provider appointed by the Hungarian Government, and is officially referred to as the ‘company gate’ (“cégkapu” in Hungarian). Each business entity shall register for its own company gate. The company gate system is currently in test run, however, a grace period with limited scope is granted to the business entities until 31 December 2017. Accordingly, in case the business entity’s contact point for electronic communication is not known to the authority, the authority shall communicate on paper with the business entity at the first occasion and shall simultaneously notify the business entity that it can only submit its motions and other documents electronically. 

By Rita Parkanyi, Attorney, KCG Partners Law Firm

In 2016 the president of the Hungarian Curia set up a new jurisprudence analysing working group for the purpose of examination of the lower courts’ practice in condominium related cases. The analysis involved cases between the period of 1 January 2014 and 31 December 2015, and covered 25 different questions.

The working group was unable to reach a common understanding about the question whether the condominium shall claim the common charges arrears from the seller, the buyer or from both of them in case of the sale of a unit in the condominium. In order to solve this problem and to strengthen the legal certainty in this area, the members of the working group have entitled the leader of the group to take the necessary measures at the Hungarian Ministry of Agriculture.

According to the recommendation, a so-called ‘zero certificate’ should be required from the common representative of the condominium and filed with the land registry for the registration of the ownership of the buyer, and such certificate shall be listed as a condition in the Hungarian Land Registry Act to prove that the seller has no common cost arrears at the time of the sale. This certificate would serve as a security for both parties.

In case the initiative of the Curia for the new legislation does not succeed at the Hungarian Ministry of Agriculture, a uniformity decision should be rendered to resolve which viewpoint will be applied by all Hungarian courts.

By Gabriella Galik, Partner, KCG Partners Law Firm