tag: foreign companies

One of the less visible yet potentially serious pitfalls of Hungarian tax law is the concept of the “payor” (kifizető). Many foreign companies assume that, if they have no permanent establishment or branch in Hungary, they are outside the scope of the Hungarian tax authorities. The reality is more nuanced. Moreover, a Hungarian individual employed by a foreign payor may also find themselves in an uncomfortable position as a result.

Doing business in Hungary can expose foreign individuals and companies to Hungarian tax obligations – and, consequently, to the scrutiny of the Hungarian Tax Authority (Nemzeti Adó- és Vámhivatal, or NAV). A common misconception is that a foreign entity or individual cannot be audited by the Hungarian authorities simply because they are not Hungarian residents or do not have a Hungarian registered office.

While efforts to hunt down offshore companies may appear to be yielding results, there’s been no slackening of demand for setting up companies abroad. However, tax avoidance and tax evasion, as the primary motives for doing so, are giving way to other objectives.