Hungary: NAV to Access Dubai-Based Shell Company Data

A new international standard has been adopted, allowing Hungary’s tax authority (NAV) to access key financial data of companies registered in tax havens, including Dubai-based shell companies.

For years, taxpayers operating in offshore jurisdictions such as the British Virgin Islands or the Cayman Islands have been subject to the exchange of information. But until now, Dubai has remained a blind spot. The United Arab Emirates only began participating in international data exchange in 2018 and, even then, excluded data from Dubai’s free zones, where thousands of holding companies and trusts operate under light substance requirements.

That’s about to change.

The New OECD Standard

The OECD’s “Global Forum on Transparency and Exchange of Information for Tax Purposes” now requires the United Arab Emirates to automatically exchange financial data — including that of Dubai-based entities — with over 100 participating jurisdictions, including Hungary.

This data includes:

• Information on beneficial owners

• Financial statements and account balances

• Other data relevant to tax enforcement

The first reports are expected in September 2021, with updates annually thereafter.

What This Means for Hungarian Taxpayers

Hungarian businesses and individuals who previously used Dubai-based structures to shield income or assets should be aware that these arrangements will soon become visible to the NAV.

In practice, this may lead to:

• Reclassification of income

• Additional tax assessments

• Penalties or legal action in the case of non-disclosure

NAV will have access not only to account information, but also to data that can link offshore structures to beneficial owners, making enforcement easier and more targeted.

What’s Next?

Taxpayers who currently hold Dubai-based entities or have used such structures in the past should consider:

• Reviewing the legal and tax position of their offshore assets

• Disclosing previously undeclared structures, where appropriate

• Preparing documentation in anticipation of inquiries from NAV

While Hungary has not yet released a specific framework on how it will use this information, the direction is clear: transparency is expanding, and traditional tax minimisation strategies are under increasing pressure.