EC deems practice by Hungarian porn magnate not abusive

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The European Unionʼs Court of Justice ruled yesterday that the transfer of know-how by a Hungarian company owned by György Gattyán, who made his fortune in online pornography, to a peer in Portugal where the VAT rate is lower than in Hungary, did not amount, in itself, to an abusive practice, Hungarian news agency MTI reported.

The court said, however, that the transfer, which enabled the operation of a porn website, would amount to an abusive practice if the objective was to conceal that the site was in fact being operated from Hungary.

Hungaryʼs National Tax and Customs Authority (NAV) argued in the case, referred to the Luxembourg court by the Administrative and Labor Court of Budapest, that the transfer of WebMindLicencesʼ know-how to Portugalʼs Lalib was not a genuine economic transaction and that the know-how was in reality exploited by WebMindLicences from Hungary. Accordingly, NAV required WebMindLicences to pay HUF 10.3 billion in VAT, a HUF 7.9 bln fine and HUF 3 bln in penalties.

“The mere fact that a licensing agreement has been concluded with a company established in a Member State which applies a standard rate of VAT lower than that of the Member State in which the company granting the license is established cannot, in the absence of other factors, be regarded as an abusive practice,” the court said in a press release.

“It is incumbent upon the referring court to analyze all the circumstances of the main proceedings in order to determine whether that agreement constituted a wholly artificial arrangement concealing the fact that the services at issue were not actually supplied by the company acquiring the license, but were in fact supplied by the company granting it,” the court said in its ruling.

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