Hungary

Abstract

Hungary features a civil law system. A general substance over form principle provides that a tax benefit is available only if the transaction accords with the purpose of the legal rule. More particularly, Hungary has codified a GAAR, the first among the Middle-Eastern-European countries. The GAAR provides for: classification of a transaction in conformity with its real content, adherence to proper legal practice, reference to rules of connected transactions, limitation on transfer pricing among related parties. The adoption of GAAR rules was motivated by growing tax avoidance which increased in tandem with the complexity of tax law.