The present and future of tax planning through Hungary with respect to hybrid mismatch arrangements

Absztrakt (kivonat)

Throughout my paper I analyze the mechanism and nature of hybrid structures, examine the effects of certain regulations, point out the most notable tax planning options with regard to both double taxation and double non-taxation issues, and most importantly I look at the future possibilities of these arrangements. I have made my study in light of the recent developments of tackling international tax avoidance that has given high importance and current relevancy to this topic. The question I am about to answer is how the disadvantageous effects of hybrid structures (both double taxation and non-taxation) can be mitigated in Hungary in line with domestic and international regulations and recommendations. The purpose of my paper is to point out the problems arising from the lack of regulation in this field and to show why further cooperation and legal development are needed in this respect. In the first part of my paper, I provide basic information on international taxation, international tax planning, hybrid problems and scrutinize the recent developments against these structures in the international arena. The second part of my paper, which I find the main part of the study, deals with mismatch arrangements especially with those that are interesting from a Hungarian tax perspective. In this part, while going through the mechanism of the common structures, I add the Hungarian treatment of the arrangements in question and highlight the future possibilities of the certain tax planning options in light of the OECD and EU regulations that are discussed in the first part of the study. I targeted my research on legal resources (i.e. relevant domestic laws and case law, EU legislation), OECD publications, and on regular tax advisory and tax authority practice. For this purpose, I relied significantly on the database of the International Bureau of Fiscal Documentation (IBFD). As my study is based on international taxation, I analyze tax consequences from the perspective of business entities. In order to effectively explain the mechanism of structures, I attached figures and a legend of symbols to the application of them in Annex I. A further guideline/ summary on the recent endeavors against hybrid mismatches is also attached in Annex II.