Trust in the Hungarian Law 6.
Legal status of the trust asset
The trust asset may be anything, which is allowed to be lawfully owned; cash, securities, intangible or tangible assets, rights or claims. Mutatis mutandis, goods which ownership or possession is prohibited cannot be part of the trust assets.
Section 6:312 of the Civil Code provides rules on the separation of the trust asset from the trustee’s own and other trust assets. The trust asset constitutes separated property from the trustee’s own assets and other trust assets managed by the same trustee. The trustee is obliged to record the trust asset separately from his own and other trust assets. The parties’ derogation from this rule is null and void. The recorded trust asset is deemed to fall within the scope of trust asset until proven otherwise. Any asset substituting the trust assets, insurance indemnities, damages or other value and profits thereon, constitutes part of the trust asset, whether recorded or not. Assets not recorded by the trustee as comprising part of the trust asset are deemed to be the private property of the trustee until proven otherwise.
The Trustees Act contains further detailed rules regarding the separation and administration. The most important among these rules that the trust is a separate and independent entity from the accounting perspective but it is not a legal person. Therefore, the trust asset must be separately accounted in HUF or EUR but these records, contrary to the corporate loss and profit statements, are not publicly accessible.
The transfer of assets from the settlor to the trust is tax-free, there is no hidden taxation or transfer duty. The trust’s income is taxed independently from the trustee’s other income. The trust is a Hungarian corporate taxpayer, whose registered seat must be maintained in Hungary. The trustee is obliged to file an annual return on behalf of the trust to the Inland Revenue Service. The trust’s annual income is taxed as corporation income with corporate income tax. Capital distribution is tax-free for Hungarian tax resident private individuals. In the case of a foreign tax resident individual beneficiary, the tax rules of beneficiary’s residence are applicable. The trust income distribution to private individuals is treated as dividend and it is taxed with 16% personal income tax in the case of a Hungarian tax resident individual. If the beneficiary is a foreign tax resident individual, withholding tax may be applicable but the Hungarian double tax treaty network may reduce it to zero. Hungarian tax resident companies may pay corporate income tax on capital distribution. In the case of a foreign entity, there is no withholding tax on capital distribution in Hungary. Hungarian tax resident companies receive the income distribution as tax-free dividend. If the beneficiary is a foreign corporation, there is no applicable withholding tax in Hungary.
The spouse, life partner, personal creditors of the trustee, and creditors of other trust assets managed by the trustee cannot lay claim to the assets of the trust asset. The trust asset does not constitute part of the trustee’s inheritance. The beneficiary and the settlor may take action against the spouse, life partner, personal creditors of the trustee, and creditors of other trust assets managed by the trustee, to secure the separation of the trust assets.