A section on claims for a flat-rate debt collection fee was incorporated into the Civil Code on 1 July 2013 and it also features in Act V of 2013 on the Civil Code (the new Civil Code) in effect from 15 March 2014. Pursuant the section referred to, if – based on a contract between business undertakings or business undertakings and authorities – the obligor defaults on payment, he is obliged to pay the obligee EUR 40 to cover the obligee’s costs related to the collection of his claim. The fulfilment of this obligation does not mean exemption from the other legal consequences of late payment (default). However, any flat-rate debt collection fee is set off against damages. Any contractual stipulation that either rules out a flat-rate debt collection fee or sets one in an amount of lower than EUR 40 is null and void.
Amount of the flat-rate debt collection fee
Under the applicable law, the creditor is entitled to claim a flat-rate debt collection fee of at least EUR 40 without any further condition having to be met. This fee is completely independent of the amount of the debt increased by any transactional or default interest, and constitutes part of the amount of damages, but not of any penalty. It is important to stress the adjective “at least”, for contracting parties are obliged to set the flat-rate debt collection fee in an amount of at least EUR 40; however, they may stipulate an amount higher than that. The clause “without any further condition having to be met” means that this amount (at least EUR 40) falls due on the first day of the default, and that the creditor is entitled to it without his having to make any demand for payment. Furthermore, this amount is due to the creditor irrespective of anything else, including that the debtor has provided an excuse for his default or the creditor has not incurred any costs related to the collection of the debt.
The flat-rate debt collection fee is payable and is due to the creditor concurrently with default interest. However, it can be claimed and enforced in addition to the amount of the default interest.
A flat-rate debt collection fee can be claimed on each occasion of default rather than on a per-invoice basis (the two often coincide, though). If the parties concerned agree on payment in instalments, a flat-rate debt collection fee can be demanded on each defaulted instalment.
This section only applies to contracts concluded on or after 1 July 2013 and to those amended after this date. However, the law does not stipulate an obligation to amend the contracts concluded earlier. The legislative provisions effective prior to the amendment to the Civil Code apply to them.
Regulations are consistent in respect of contracts between business undertakings and those between business undertakings and authorities. Entitlement is, however, separate from the enforcement of a claim. There is no statutory obligation to enforce the claim.
Under the generally adopted practice, accidental financial claims share the fate of the main debt in legal terms. It follows that they must be denominated in the same currency as the main debt. If the underlying claim is denominated in Hungarian forints, the amount of the flat-rate debt collection fee (denominated in EUR) must be converted into forints at the central rate quoted by the National Bank of Hungary in force on the starting date of the default interest payment obligation. Naturally, the parties concerned may stipulate different terms.
No tax liability (including any gift tax liability) is incurred if the creditor waives or relinquishes his claim for the flat-rate debt collection fee.
The flat-rate debt collection fee does not qualify as the supply of goods or services; therefore, it does not need to be substantiated by an accounting document either. Nor does it constitute a VAT base (payable or reclaimable).
From the point of view of corporate tax, the flat-rate debt collection fee is not a tax base increasing item because the obligor can state it in his books as a cost incurred in the interest of the business undertaking.
In line with the change to the Civil Code, the Accounting Act has also been amended to include the concept of the flat-rate debt collection fee. Accordingly, the following applies to accounting:
- The obligor must state flat-rate collection debt fees as other expenses. Such fees qualify as debt. The payment obligation is incurred upon default. It follows that it must be recognised at a value converted into HUF at the due date, irrespective of actual payment. Similar to default interest, any flat-rate debt collection fee that becomes known before the balance sheet date and is related to a period before that date must be stated as other expenses.
- The creditor must recognise flat-rate debt collection fees as other income, however, strictly upon payment with the principle of prudence borne in mind. The obligee must state any flat-rate debt collection fee pertaining to the reporting year and paid until the balance sheet date as other income. Any unpaid flat-rate debt collection fee can only be recorded on a registration account.
A creditor is entitled to a flat-rate debt collection fee in the amount of at least EUR 40 (or higher) upon providing evidence that the debtor has defaulted, without the creditor having any obligation to provide further evidence. However, the creditor can claim any flat-rate debt collection fee – in the form of damages or litigation expenses - in excess of the flat-rate debt collection fee stipulated in the relevant contract only if he can provide proof of its actual incurrence. A flat-rate debt collection fee can also be claimed in out-of-court proceedings and even if the creditor has not incurred any such fee at all.
Entitlement to a flat-rate debt collection fee does not depend on the amount of the debtor’s financial debt or the length of default.
Parties entering into a contract may not exclude the obligation to pay a flat-rate debt collection fee or determine such obligation in an amount of lower than EUR 40. However, there is no statutory regulation that requires the obligee to collect flat-rate debt collection fees.