Mária Lakatos

Taxation in General: Hungarian Tax System

IX. Chapter. Fundamental principles of international taxation, structure of the model agreements taxation of salaries

By the economic and commercial relations becoming international and the flux of capital becoming all the more intense, the operation of legal persons and other organizations and the work of natural persons extend to ever more countries. Just as multinational enterprises produce profits in various countries, private persons can also obtain income (e.g., royalties, copyright, and scholarships) from other states.

If several countries are involved in obtaining the income, completing a business transaction or owning property, then, under different titles, though, the one and the other country is also entitled to tax the income, transaction or property, meaning that the states concerned shall subject the business activities performed on and the income acquired in their territories to their taxation powers. As a result, income, profits or the growth of wealth can be doubly or even multiply taxed. The system of treaties concluded with the aim to avoid double taxation is a voluntary undertaking by the parties to limit their sovereignty to tax.

A prerequisite to avoiding double (multiple) taxation is, thus, the willingness of the states concerned. Taking into consideration the mutual benefits such treaties offer, they must limit their rights to levy/collect taxes. They must waive certain income, even if in the one or the other form, it was generated at them.

Double taxation, or its opposite: undertaxation, are possible if there is no mutual willingness to make compromises. If there is no treaty, both states can apply their own laws without taking into consideration the burdens levied on the taxpayer in the other country. This is how double taxation arises. Double taxation has two forms: the one is juridical, the other economical.

Definition

Juridical double taxation is, when the same tax client (natural person or company) for the same subject (income, interest or dividends) is subjected to the same or similar taxes (corporate, dividends or property tax) for the same taxation period.

Economic double taxation is, when for the same type of income for the same or another period another type of tax is levied. Hungarian local taxation is a good example for this, as that and the same person or property can be taxed under several titles in such a manner that the principles of local taxation, namely, that one and the same property or person can be taxed under one title only are not infringed.

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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