Hidden paragraph in the Hungarian Civil Code (Tax & Fiscal Alert)
In this newsletter we would like to draw your attention to a paragraph hidden in the Hungarian Civil Code (effective from 1 July 2013), which should have tax/accounting impact for the companies.
Based on Paragraph 301/A/2 of the Hungarian Civil Code, if the parties supply after the respective deadline included in the agreement, there is payment obligation to cover the expenditure of the late supply (minimum amount EUR 40). Any provision, which is included in the agreement to restrict this payment is not valid. In practice this means that the amount of EUR 40 (minimum) should be recognized as a liability of the party which provides the supply lately, until this amount is effectively paid.
It may be a question how this liability can be qualified if the parties would not like to apply this Paragraph. Based on our interpretation this amount should be qualified as a released liability. The released liability should be accounted as an extraordinary income (subject to corporate income tax) and an extraordinary expenditure, which increase the corporate income tax base (excluding the liability released towards a related party of a private individual).
We suggest to review the existing agreements and modify them accordingly – if it is necessary to do so.