European Tax and Transfer Pricing Firm of the Year Central European Tax Firm of the Year International Tax Review European Tax Awards 2013.

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1 European Tax and Transfer Pricing Firm of the Year Central European Tax Firm of the Year International Tax Review European Tax Awards 2013 Tax News+ 7 August 2013

2 Contents Sponsoring popular team sports...3 Quick Reaction Mechanism and extending the scope of the reverse taxation modification of Community rules to tackle VAT fraud more effectively...::..3 QRM....3 Scope of reverse taxation to be extended Contacts

3 Tax News+ Below you will find the tasks and potential issues arising from key tax law changes of the past month and recent weeks. We would be ready and glad to discuss with you any of your company specific issues. Sponsoring popular team sports As we informed our Clients in the frame of our newsletter about the changes in tax laws, as of 19 May 2013 the rules on corporate income tax allowance related to the sponsoring of popular team sports were amended. Besides the already presented significant changes, we would like to draw the attention to the following. The 1 per cent payment liability to be exercised on the payment account kept by the minister responsible for sport politics simultaneously with the amount of sponsoring should not be considered as an additional payment but it should be included directly in the amount of sponsoring. During the implementation, it was not clear whether the aim of this modification is to dissolve the prior uncertainty (i.e. the clarification of the rule) or to put a new, different rule into force. The answer of the tax authority to this question was given in the guideline published on 6 June In the guideline, the tax authority states that this liability in opposition to the prior practice is not to be fulfilled additionally but to be included in the amount of sponsoring. Consequently, this 1 per cent shall be considered upon determining the tax allowance. Based on the wording of the tax authority, we are of the view that the prior practice was different, i.e. the 1 per cent payment liability was to be fulfilled as an additional payment. However, the amended guideline published on the website of the tax authority on 15 July 2013 does not include the expression "in opposition to the prior practice" anymore, thus we can conclude that the tax authority has modified its position in this respect. Quick Reaction Mechanism and extending the scope of the reverse taxation modification of Community rules to tackle VAT fraud more effectively In order to fight more effectively against VAT fraud, the European Council approved the Quick Reaction Mechanism (QRM) as of the end of July, furthermore the optional and temporary extension of reverse taxation. The two directives adopted on 22 June 2013 amend the community rules accordingly. QRM The aim of QRM is that the Member States facing severe abuses in any sector of their economy can initiate the reverse taxation mechanism concerning the given economic sector in the frame of an accelerated procedure. The practice might replace the current complicated and long procedure. As per the amendment, the requests of Member States in case the State provides the Commission with all necessary information shall be approved or rejected by the Commission within one month. According to the new regulation, the Member State is required to initiate simultaneously a derogation procedure, but as of the date of the approval received through the QRM the reverse taxation can be temporary effectuated for the requested transactions and for a period no longer than nine months. 3

4 Scope of reverse taxation to be extended Besides the initiation of the above procedure, the directives extend the list of products and services which the reverse taxation can be optionally initiated for, for a period of a minimum of two years. Such transactions include the sale of mobile phones, devices of integrated circuit, videogame consoles, tablets, laptops, cereals and industrial plants including oil seeds and sugar beet, raw or semi-manufactured metals, the sale of gas and electricity to resellers, furthermore the telecommunication services. Nevertheless, reverse taxation can be used by Member States only in case the usual measures against fraud should not be effective. By extending the scope of reverse taxation and by the QRM, the long term goal of the European Union is not to make the reverse taxation generally accepted but to provide a temporary solution for the period during which the Commission sets out measures to make the VAT system more resistant on a long term basis. Accordingly, the above measures are to be used only in reasonable cases during a limited period until the end of 2018 to repel VAT fraud. Considering the above, the list of transactions falling under reverse taxation in Hungary will likely be broadened. 4

5 Contacts If you have any questions or comments concerning the above, please contact one of our tax experts below: Dr. Attila Kövesdy in Charge Tel: Dr. Gábor Kóka Tel: Dr. Géza Réczei Tel: László Szakál Tel: István Veszprémi Tel: Dr. István Falcsik Senior manager Szarvas, Falcsik and s Law Firm Customs and global trade Tel: ifalcsik@deloittece.com Péter Gémesi Transfer pricing Tel: pgemesi@deloittece.com Dr. Eszter Gyuricsku Global employer services Tel: egyuricsku@deloittece.com Babett Korponai Senior manager Mergers and acquisitions Tel: bkorponai@deloittece.com Dr. Csaba Márkus R&D and government incentives Tel: csmarkus@deloittece.com Zsolt Sándor Deloitte CRS Ltd. Business Process Outsourcing Tel: zsandor@deloittece.com Dr. Júlia Szarvas Attorney Associate Szarvas, Falcsik and s Law Frim Tel: jszarvas@deloittece.com Dr. Anna Katalin Papp Attorney Senior Associate Szarvas, Falcsik and s Law Firm Tel: apapp@deloittece.com 5

6 These materials and the information contained herein are provided by the Deloitte Hungary and are intended to provide general information on a particular subject or subjects and are not an exhaustive treatment of such subject(s). Accordingly, the information in these materials is not intended to constitute accounting, tax, legal, investment, consulting, or other professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. These materials and the information contained therein are provided as is, and Deloitte Hungary makes no express or implied representations or warranties regarding these materials or the information contained therein. Without limiting the foregoing, Deloitte Hungary does not warrant that the materials or information contained therein will be error-free or will meet any particular criteria of performance or quality. Deloitte Hungary expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. Your use of these materials and information contained therein is at your own risk, and you assume full responsibility and risk of loss resulting from the use thereof. Deloitte Hungary will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials or the information contained therein. If any of the foregoing is not fully enforceable for any reason, the remainder shall nonetheless continue to apply. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence Deloitte Hungary.

TAX News+ Recent amendments to tax legislations. Central European Transfer Pricing Firm of the Year International Tax Review European Tax Awards 2012

TAX News+ Recent amendments to tax legislations. Central European Transfer Pricing Firm of the Year International Tax Review European Tax Awards 2012 Central European Transfer Pricing Firm of the Year International Tax Review European Tax Awards 2012 Hungary Tax Firm of the Year International Tax Review European Tax Awards 2011 TAX News+ Recent amendments