The restrictions imposed by Hungary on the foreign financing of non-governmental organisations are in breach of European Union law, says a top EU legal advisor.
On Tuesday, EU Advocate General Manuel Campos Sanchez-Bordona said the rules are disproportionate and unjustified.
Sanchez-Bordona added the restrictions are “an interference in the private life of those persons as regards the processing of their personal data".
The EU Court of Justice will now deliberate the case in Luxembourg.
The controversial restrictions on NGOs
In 2017, Hungary adopted legislation that forced NGOs to identify themselves as foreign-funded, if they received finances of more than 7.2 million forints (€21,615) per year.
Civic organisations would also have to list foreign sponsors who fund them more than 500,000 forints (€1,500) annually.
The rule was introduced to increase transparency among NGOs and enhance efforts against money laundering and the financing of terrorism.
But the non-binding opinion of Sanchez-Bordona has found that the threshold was "excessively low given the gravity of the resulting interference'' and that there is no difference between donations from other EU countries and outside the EU.
The Advocate General also stated his belief that foreign donors may be dissuaded from funding NGOs in the future.
Viktor Orban and the 'Soros network'
The Hungarian government had said that restrictions on NGO funding from abroad vets the "Soros network" - companies that receive funding from the Open Society Foundations of billionaire George Soros.
Hungarian Prime Minister Viktor Orban has accused Soros of seeking to influence Hungarian politics.
In a statement to Euronews, Budapest said they stand by the Act on the Transparency of Organisations Financed from Abroad, because it "serves the interest of Hungary’s security".
The Hungarian government also said the legislation "increases the transparency of pro-immigration Soros organisations financed from abroad".
"The Soros network is mobilising billions of forints in order to implement the Soros plan throughout the whole of Europe, and in order to turn Hungary into an immigrant country."
The Hungarian government repeated went on to repeat their accusation that the Soros network "seeks to influence immigration policy, but also Hungarian elections".
"The governing parties are enforcing the will of the Hungarian people and insist that there continues to be a need for the Act".
Hungarian NGOs have said they are confident that the EU court would rule against the restrictions.
If Hungary is found to be in breach of the EU regulations, the country must repeal the law or face financial penalties.