General Anti-Avoidance Rules in the Hungarian tax system

Absztrakt (kivonat)

The intention of this paper is to describe the anti-avoidance system of the Hungarian tax legislation, with special emphasis on general anti-avoidance rules (GAARs) and their connection with specific anti-avoidance rules (SAARs) and general judicial anti-avoidance doctrines (e.g. the abuse of rights doctrine and the substance over form doctrine) functioning in the Hungarian domestic tax regulations. The paper also deals with the functioning of GAARs within current tax treaties, the influence of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan on Hungarian tax system and the correspondence of domestic tax law with EU law. Hungarian GAARs provide for the proper use of rights in tax matters and lay down that tax practices shall be classified according to their true nature. These general rules have been designed to be broadly phrased to keep up with constantly changing aggressive tax planning structures. Additionally, SAARs target specific abusive arrangements that are known by tax authorities. The application of a SAAR does not supersede GAARs, specific and general rules are complemental. In tax treaties, it has always been essential to ensure that the principles match the requirements of international law. Besides, Hungary is firm to use its own general anti-abuse rules based on a principal purpose test and supplemented by specific rules. The Hungarian treaty policy does not take over optional anti-abuse clauses, but is ready to apply them when suggested by a treaty partner. Hungary is actively involved in the OECD BEPS project and aims to make several recommendations part of its tax legislation. Accordingly, Hungary is going to implement the Country by Country report and to amend its specification on beneficial ownership. Hungarian GAARs are also harmonized with EU law and their application has never been regarded as an infringement to the Fundamental Freedoms. Certain parts, however, need to be more detailed, as Hungarian GAARs do not specify the extent of artificiality, while EU law expressly targets wholly artificial arrangements. Nevertheless, Hungary has already implemented several EU proposals and regularly consults the European Commission in order to comply with Commission recommendations.