The aim of the legislator was to create a clear, comprehensible regulation as a result of which the rules of the taxation significantly modified formally. These are briefly described below.
Until now, the tax regulation procedure was described in the Act on the Rules of Taxation. However from 1st of January 2018 the related rules will be found in several different laws:
- The general rules of tax regulations (e.g.: representation, tax audit, legal remedy) are regulated in the Act on Tax Administration Procedure. The regulation of the law shall be applied in proceedings started from 1st of January 2018.
- The Act on the Rules of Taxation contains the requirements for certain tax liabilities and the penalties applicable to violations (e.g. announcement, notification of change, tax assessment, tax payment, data supply, and default penalty). The regulation of the law shall apply in procedures started after 1 January 2018.
- In the Act of judicial enforcement to be implemented by the tax authority
From 1st of January 2018, NAV (National Tax and Customs Administration of Hungary) will perform the function of the general implementing body in administrative matters. This means that not only collecting public debt in form of taxes, but also acts in the interest of recovering of outstanding amounts of other public administrations bodies (e.g. Hungarian State Treasury, government offices). The law enters into force from 1st of January 2018, it must be applied at pending procedures as well.
- In acts related to each tax categories
Due to the recodification of rules of taxation the rules of procedure related to each tax categories can be found in the act of each tax.. (E.g.: the subject for the tax exemptions option and the recapitulative statement can be found in the act on VAT from 1st of January 2018.)
- Government Decrees
In some cases (e.g. compliance audit, electronic administration) the detailed rules are regulated in Government Decrees.
We introduce below briefly the most important content changes and new legal institutions. The purpose of the content changes was to speed up the tax audits and tax procedures and to create a service-provider tax authority.
Changes related to sanctions:
- Tax number suspension, increased tax authority supervision
Legal institution for tax number suspension and increased tax authority supervision will be terminating to exist from 1st of January 2018. Tax authority will terminate the pending procedures from 1st of January without issuing a decision in administrative term of view. The tax number will be cancelled by the tax authority after 1st of January 2018 in the cases listed in the act.
- Exemption from the 50% of the penalty amount
If the following conditions are met the taxpayer is exempted to pay 50 percent of the penalty amount imposed:
- payment of the tax difference included in the decision of the first instance until the due date
- to resign from right of appeal
- Tax payment security
Deposit of tax security is required for a decision making person, represented by a person who has held this position in the company which had tax debt in the previous 5 years and terminated its activity without successor. This regulation should be applied in cases for a person entering to a newly established or already active company.
For the purpose of imposing a tax payment security, the sum of the tax debt is limited by 1million HUF in net term, for the tax payers with higher capacity is limited by 2 million HUF.
- Late payment surcharge
Late payment surcharge is not imposed by the tax authority for an amount which is not exceeding 5,000 HUF. (Before the amount limit was 2000 HUF.)
- Automatic payment installment
Individuals (making business activity and individual taxpayer with VAT liability ) who have submitted application and whose tax debt does not exceeding 500.000 HUF the tax authority allows a free-of-charge payment installment for 12 month once a year.
Changes in proceedings
- Electronic contact
As we informed previously the companies with Hungarian seat are obliged to register to the business gate from 1st of January 2018. In proceedings by tax authority the business gate usage will be obligatory only from 1st of January 2019.
- Tax inspection
From 1st of January 2018 the tax authority will carry out the following 2 types of control (against the previous 7 types of control):
- Legal compliance audit, which means checking the fulfillment of each tax liabilities;
- Tax audit, which is the "classic" tax audit when the tax authority examines the tax basis and the amount of the tax base and its legality. This type of control results a period closed by tax audit. The duration of the tax audit may not exceed 365 days.
- Obligation to submit evidence
The most important innovation is the compulsion of submission of evidence. Brief summary of legal remedy of the tax procedure:
- The tax authority sums up their statements in a protocol during the tax audit. In connection with the protocol, it is possible to submit remarks.
- Thereafter, the tax authority makes the 1st intense decision; an appeal can be submitted in connection with content of this decision.
- This is followed by the final 2nd intense decision by the tax authority; against it a court review can be initiated by a submission of claim.
Until now the evidences could be submitted at any phase of the procedure.
From 1st of January 2018 all evidences, new facts should be submitted in remarks.
According to related regulation, in the appeal cannot refer to new facts, evidences if they were already known at the time of submission of remarks. Regarding to this, it is important the utilization of an assistance of an expert from the beginning of the tax audit in order to the controlled taxpayer doesn’t lose any possibility for legal remedy.
- Publishing the classification of taxpayer on the website of the tax authority
The tax authority publishes the name and tax number of reliable taxpayers.
- Preliminary announcement of self- revision
Preliminary announcement of self- revision can be declared to tax authority in this case 15 days from the announcement; a tax audit cannot be initiated in this period and on the related tax category. Only one announcement can be done for the same period and tax category.
- Mentoring of beginner companies
For a period of 6 months from the date of establishing the tax number, the tax authority can assist beginner companies if needed in the fulfillment of their tax obligations.
This summary provides general information, does not constitute as an expert advice for a decision. For this reason, please turn to our colleagues if you have any specific questions regarding the content of this brochure.
Budapest, 18th of January 2018.
Dr. Boros Anikó Emese, tax advisor
Gubicza Krisztina, cert. tax expert managing director