Virtual office: stricter regulations from 1 July

A regulation effective from 1 July tightens up the operation of virtual offices in Hungary. New rules may make some of them to close down their businesses.

A virtual office provides communication and address services for a fee, without providing dedicated office space. This is a convenient solution for businesses without presence, working from home office, or serving other special business needs. However this may also serve as a mean to hide from unwanted attention – which is very practical in many life situations, but at the same bothers tax offices.

By the new rules virtual offices will have to have written contract with their clients. Contract needs to be concluded for indefinite period; definite period contracts won’t be allowed. Virtual office provider will need to own the property, or shall have proper title for the usage that is registered with the national land register. Companies will need to acquire land registry extracts from the virtual address providers and check whether they indeed possess the necessary title.

Documents at the virtual office

In case of inspections tax officers often face virtual office providers cannot present any documents of their clients. Also they are unable to confiscate at the headquarter address any means of wealth in forced collection proceedings. Act on taxation requires tax payers to keep their documents at a place reported to the tax office, though it’s not necessarily the headquarter address. However in most cases these companies declare the virtual address as their place for keeping their company documents. By the new rules the contract for virtual address shall also deal with the types of documents kept at the particular address. These shall include at least company documents, licenses, tax related declarations, and financial statements.

Virtual address providers will be required to maintain a comprehensive list of documents and movables of their clients at their virtual address.