Changes to tax enforcement law

tax enforcement lawAmong other tax laws, on 14 November 2017the National Assembly accepted the law on enforcement proceedings to be implemented by the tax authority (hereinafter: “tax enforcement law”), which will enter into force on 1 January 2018. The bill brings several modifications to the current provisions of the Act on Rules of Taxation regarding enforcement proceedings. Consequently, the tax enforcement law makes up for old deficiencies whilst also introducing new elements. In our article we highlight the most important changes.

New rule on income garnishment among provisions of tax enforcement law

The law introduces a new information obligation for the employer, according to which employers are obliged to inform both the tax authority and the employee of the employee’s income that can be garnished every month, along with any changes and other circumstances, within 15 days.

The collateral swap

The law introduces a new, customer-friendly option, which means assets seized by the tax authority can be released from enforcement proceedings. This opportunity applies if the debtor offers another asset as collateral, whose market value reaches or exceeds the value of the movable to be swapped, and if recovery of the debt is still ensured after the release. Additionally, the application has to be submitted by the debtor prior to the setting of the auction date at the latest.

Suspension of enforcement proceedings

The tax enforcement law provides new rules for cases when enforcement proceedings can be suspended. In line with the former rules, proceedings will still be suspended in future if deferred payments or payment in instalments are approved. However, the rules have been tightened for debtors in that only an application for payment relief submitted within 8 days of the due date of the debt will suspend the enforcement.

Options to appoint a trustee

The tax enforcement law regulates the cases when a trustee can be appointed. This is necessary when debtors have assets that can be seized, but their whereabouts are unknown, they live abroad, or have resided abroad for a long time, and they have no representatives. In such cases, the assets can be seized and sold after the appointment of the trustee.

Changes regarding challenges of enforcement

The law contains several new features in respect of challenging enforcement: firstly, it increases the scope of cases when applications containing an enforcement challenge can be rejected, and now includes enforcement challenges that do not contain any reason for annulling or changing the measure. Secondly, as opposed to the current 8-day deadline, the proposal allows for a much longer period, i.e. 15 days, for the submission of enforcement challenges. Additionally, the law revises the rules on the postponing effect of enforcement challenges. An enforcement challenge does not suspend further enforcement actions, except for challenges submitted for the first time after the setting of the auction date to dispute the lawfulness of setting such date; this helps to avoid time-wasting and the submission of challenges related to false grievances.

Other changes

The tax enforcement law did not change the fact that enforcement proceedings can be freely launched without notifying the debtor in any way. One change, however, is that in the case of a debt of HUF 10,000 (approx. EUR 32) or less a payment reminder is sent out, and the tax authority will at most only implement an enforcement-related internal transfer to recover the debt.

According to the reasoning in the tax enforcement law, one of the main new concepts is that movables can be physically taken from the debtor right after they are seized, in order to prevent any sale from being undermined or prevented.

In addition to the stricter rules there are some positive changes for debtors in relation to the seizing of properties. In the case of a residential property used directly as the residence of a natural person or private entrepreneur (debtor) and their close relatives living with them, such property cannot be seized if the amount of debt does not exceed HUF 500,000 (approx. EUR 1,600), even if the value of the residential property is proportional to the extent of the debt.


A new Act on Rules of Taxation and tax administration procedure law

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