HUNGARY Law and Practice Contributed by: Szabolcs Mestyán, John Fenemore, Balázs Rokob and Nóra Kertai, Lakatos, Köves & Partners
3.2.14 Perfection of Domestic Law Mortgages Under Hungarian law, an aircraft mortgage is perfect - ed upon its registration with the Hungarian Aircraft Register. A mortgage over the engines should be reg - istered with the online Security Interest Register. 3.2.15 Differences Between Security Over Aircraft and Spare Engines Under Hungarian law, regardless of the on-wing or spare nature of the engines, it is unclear whether the engines and replacement engines qualify as a “com - ponent” or an ”accessory” of the aircraft and, as such, whether or not a mortgage covering the airframe (as principal asset) automatically extends to the engines. Accordingly, as an additional perfection requirement, the aircraft mortgage should also be registered with the Security Interest Register to ensure that it is duly perfected in respect of the engines. 3.2.16 Form and Perfection of Security Over Bank Accounts Typically, an account pledge would be used to take security over a bank account. The account pledge would be perfected upon its registration with the Security Interest Register. Other typical forms of account security include: • a bank account security deposit on the basis of a tripartite security deposit agreement between the secured creditor, the security provider and the account bank; and • a collection right on the basis of an authorisation letter granted by the owner of the account for the benefit of the secured creditor. 3.3 Liens 3.3.1 Third-Party Liens Under Hungarian law, liens, similar possessory rights or rights of detention in favour of third parties can - not be exercised (with the theoretical exception of the rights exercised under the 1933 Rome Convention) if the person owing such taxes or dues is not the owner of the aircraft. Accordingly, no third-party creditors of the lessee or operator will be entitled to exercise any such right in respect of the aircraft.
less of its governing law). Such registration is not mandatory and is not a perfection requirement under Hungarian law; however, it ensures creditors’ priority position under proceedings. 3.2.10 Transfer of Security Interests Over Aircraft/ Engines Under Hungarian law, in most cases, security interests over aircraft or engines can be transferred together with the relevant secured obligations and to the same secured party 3.2.11 Effect of Changes in the Identity of Secured Parties The effects of any change in the identity of the secured parties on a Hungarian law security assignment depend on the specific terms of the relevant security agreement. A security trustee or other secured creditor should not be deemed to be resident, domiciled, carrying on business or liable to pay tax in Hungary as a result of being party to a security assignment. The secured party does not have to pay any taxes on the basis of it being party to the contract. If, due to the enforcement of a security assignment, the title to the aircraft or the engine would be trans - ferred, the transfer could be subject to Hungarian VAT (27%). Where any asset is received by a secured creditor due to the foreclosure, the gain can be subject to Hungar - ian corporate income tax (9%) and local business tax (the maximum rate is 2%) provided that the creditor is a Hungarian tax resident entity or has a Hungar - ian permanent establishment to which the security assignment is related. Under the GLOBE Act, the taxpayer entity can be sub - ject to additional tax on the income from the foreclo - sure of the title until the effective tax rate applying to the taxpayer reaches 15%. 3.2.12 “Parallel Debt” Structures See 3.2.3 Trust/Trustee Concepts . 3.2.13 Effect of Security Assignments on Residence of Secured Parties
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