The changes of the Act on Rules of Taxation that entered into force on 1 January 2017 raised several issues in respect of registered office services. The amendments made during the spring clarify the definition of providers of registered office services, and require the companies using these services to report to the NAV. Deadline: 29 September 2017! A ministerial decree details the conditions of registered office services, stating that from 19 July 2017, the company’s nameplate should be placed in a position that is easily visible from public areas.
What are registered office services and who are the providers?
In the law amendments this spring, the definition of registered office service provider was clarified in the Act on Rules of Taxation. In short, those who perform their obligations related to registered office services based on an engagement, and ensure the receipt and safekeeping of business and official documents during working hours are deemed providers of registered office services. The change valid from 20 June 2017 clarifies that providers of registered office services do so as a business-like economic activity.
Using this service is mainly a good idea for companies whose activity does not necessarily require an office, or which are able to operate more efficiently by using the administrative services offered by providers of registered office services.
The firm action by the tax authority and the reporting requirement are justified by the fact that a significant portion of tax evaders are registered at addresses of registered office service providers.
The changes that entered into force on 1 January 2017 triggered some uncertainty for those affected in terms of the reporting obligation as well. While the reporting obligation seemed to be clear for companies using these services for the first time, the interpretation of the related law was not clear regarding legal relationships established before 1 January 2017.
The Act on Rules of Taxation also received some clarification in this respect from the spring-time amendments. Those who used registered office services until 31 December 2016 (and where there has been no change in the legal relationship since then) must report the name, registered office and tax number of their registered office service provider, as well as the start date and, in the case of a fixed-term engagement, the end date of the legal relationship, to the NAV by 29 September 2017.
What else should you look out for?
Decree No. 7/2017 from the Minister of Justice, in effect from 1 July 2017, introduced much stricter rules on the conditions for registered office services. The decree was quickly amended and the relevant legal text was published in the issue of the Hungarian Gazette dated 18 July 2017. Here we highlight the following.
- Essentially, only properties owned exclusively by the engaged provider of registered office services can be used as registered offices, or properties where the provider has a right of use registered in the property register. The amendment eased this stringent provision and also allows the provision of registered office services if the owner of the property has given prior written consent for the provision of registered office services and there is a long-term bookkeeping engagement between the parties in addition to the registered office services.
- The company’s nameplate has to be well visible from public areas.
- The decree limits the parties’ contractual freedom at several points, so for example, a contract for registered office services may not be for a fixed period, except where the company is established for a fixed period of time. The parties cannot exercise their rights of ordinary termination for one year after the conclusion of the contract. Some relief has been introduced, however, in that legal relationships for registered office services, which existed when the decree entered into force, only have to be modified by the parties by 30 June 2018, and if no written contract was concluded before, this contract must be in a written form.