In previous articles of our series we reviewed how to prepare for a voluntary liquidation, what the voluntary liquidation procedure is, what taxation issues can arise, what to look out for when selecting a liquidator and which accounting reports have to be prepared during this period. In this article we elaborate on the duties and issues arising when completing a voluntary liquidation procedure in Hungary.
How long can a voluntary liquidation last, and when can it be completed?
Voluntary liquidations must be completed by the liquidator within three years of the start date.
Completing a voluntary liquidation procedure can happen if the liquidator has finished its duties and no legal proceedings or administrative investigations are pending. In addition to these conditions, completing a voluntary liquidation procedure is possible in Hungary when:
- the company has terminated its activities,
- lender demands have been settled,
- collectible receivables have been recovered,
- employment contracts have been terminated,
- contracts with customers and suppliers have been terminated,
- assets intended for sale have been sold.
Once these have been done, and the relevant authorities have been notified of the voluntary liquidation, the liquidator’s only task is to prepare the financial statements closing the voluntary liquidation procedure and to divide the remaining assets among the owners.
How to start completing a voluntary liquidation procedure in Hungary?
The owners make the decision on the date for completing a voluntary liquidation procedure. The liquidator prepares the financial statements closing the voluntary liquidation procedure for the last financial year of the voluntary liquidation, as well as the proposal for the distribution of assets, as of this date (reporting date). In Hungary, the closing tax returns must be submitted together with the financial statements closing the voluntary liquidation. The financial statements must be prepared, filed and published and the closing tax returns must be submitted within 60 days.
Features of financial statements for last period of voluntary liquidation
In the financial statements prepared for the last period of the voluntary liquidation, all assets and liabilities other than liquid assets must be recognised at market value. The impact on profit/loss of differences accounted for due to valuation at market value must be recognised in the income statement. If the company’s assets include ones subject to value-added tax upon the distribution of assets, pursuant to the Hungarian VAT Act, then the amount of value added tax payable must be recognised as a liability against other expenses.
Final report, proposal for distribution of assets, and deregistration request
Having prepared the financial statements for the last period of the voluntary liquidation, the liquidator has to summarise the significant economic events that took place during the period of the voluntary liquidation in a final report. Additionally, he/she has to prepare a proposal for the distribution of the remaining assets. If the owners have accepted the financial statements closing the voluntary liquidation along with the proposal for the distribution of assets, the liquidator’s final report and the closing tax returns, a request has to be submitted to the Court of Registration to deregister the company at the same time as filing and publishing the financial statements closing the voluntary liquidation and submitting the closing tax return.
Based on the above it is obvious that there are tasks when completing a voluntary liquidation procedure that may require the involvement of experienced professionals. Feel free to contact the professionals at the financial & accounting advisory division of WTS Klient Hungary, who, as consultants, will be happy to support you with the special taxation and accounting issues that may arise during a voluntary liquidation.