Read the First part of this article here: Hungarian Stability Savings Account part I: General rules
Offshore amnesty has been offered by almost every European country for a longer or shorter period of time. There are many forms of tax amnesties, but essentially they are alike in their main aspect: They were made to take previously untaxed money back to the economical circle by encouraging the owners to pay a normally higher standard amount of tax.
During the process of recirculation, the owners must pay certain amount of penalty taxes, but this still worth it for the owner, because this way, they can avoid harder punishment – what can be imprisonment as well. There are many national and international political debates around tax amnesty. Some of the politicians argues, that the penalties are not hard enough, some says it’s too rigorous already, and that’s why it’s not working as efficient as it should be. But this is an international matter.
The Stability Savings Account is an interesting construction for tax amnesty. For example, the NAV (the Hungarian Tax Authority) is not investigating the origins of the money as long as it worth less than 5 million HUF, because during the payment it’s considered as earned income. However, in case of any other form of market investments – as long as it worth more than 3.6 million HUF – the investor has to be revised. It’s obligated by law.
At first sight, the stability savings account seems to be an excellent option to bring foreign money back to the country. However, if we’re taking a closer look at the offer, the inspection exposes its risks.
Does bringing offshore money to Hungary by using stability savings account worth it?
By looking from an economical aspect, it’s important to highlight that, the difference resulted from the exchange of foreign currency to HUF has to be added to the tax payment, because the payment on the stability savings account, can only be made in HUF based denominated government annuity.
From a taxing aspect, there are certain other risks involved as well, because there are no regulations – or information in the legislation, which states, that the pecuniary source of wealth used to pay up the tax, will be exempted from taxing. In previous tax amnesty laws, this was fixed. In this case, the NAV can do a throughout investigation of his clients, as long as they suspecting, that their resources came from tax avoidance. The investigation can not be based on the fact of inpayment, but in case the investor previously hid his assets, or he broke the taxation laws, than the NAV can visit them to account despite of the tax amnesty.
Not only interested phone calls are recorded, but from the first of January 2016 data is collected for the global and automatic tax information exchange system. For more information, see our earlier article. This new standard means that in a few years virtually every bank in the world will be required to report to the various national tax authorities about the accounts of their clients. This exchange of information inevitably changes the traditional offshore tax structures, since all relevant information related to the bank account of the taxpayer will be transferred to the tax authorities automatically, without any special request. Because of the global and automatic tax information exchange system, tax planners will have to choose between using one of the structures offered by the modern corporate, foundation and trust management structures or the opportunities offered by the tax amnesty laws. Let us keep in mind though, that the holders of assets held abroad are mostly motivated by not the more favorable interest rates abroad, but the degree of security available. Since the opening of the Stability Savings Account in 2013 till the 31th of March, 2015, 708 individual accounts were opened, and the state received a total of HUF 45 billion, reports HVG. This is a huge amount, but obviously only a fracture of the size of all Hungarian assets held abroad. Although this amount is often and happily estimated, but there is no hard information about its true size. We can only guess how it would affect the owners of offshore wealth, if the tax authorities leave them to be, whether they would bring home those funds lying dormant in foreign banks remains an open question as for now, it seems that other solutions are preferred.
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