Moreover, public limited companies classified as reliable taxpayers will enjoy further benefits as the value added tax reclaimed by them will have to be refunded within 30 days starting from 1 January 2017, as opposed to 1 January 2018 for all other taxpayers.
Another key change from 1 July 2016 in respect of the condition of reliable and risky taxpayer classification associated with the amount of the tax difference is that the total amount of the tax difference assessed in favour of the taxpayer shall be deducted from the total amount of the tax difference assessed against the taxpayer.
As of 1 July 2016, the following taxpayers shall also be classified as risky taxpayers:
- taxpayers that are subject to compulsory strike-off procedure,
- where the total tax difference assessed by NAV against the taxpayer in the current year and in the preceding 5 years exceeds 70 percent of the taxpayer's tax performance for the current year,
- the amount of the default fine assessed by NAV against the taxpayer and falling due within the 2 years preceding the current year exceeds 70 percent of the taxpayer's tax performance for the current year.
These entities will first be classified as risky taxpayers in the course of the Q3 classification process.
Suspension and cancellation of the tax number
Under the current rules, if the taxpayer has failed to complete and return the KOCKERD questionnaire within the deadline specified in the resolution assessing the related default fine, there is no way to reverse the cancellation of the taxpayer's tax number.
It is welcome news that the rules will change as of the date of the enactment of the amendment. If the completed questionnaire is submitted before the issuance by NAV of the resolution ordering the cancellation of the tax number, it will not be possible to issue a resolution to cancel the tax number, and if the taxpayer concerned returns the completed questionnaire after the issuance of the resolution ordering the cancellation of the tax number but before it becomes final, then the resolution to cancel the tax number must be withdrawn. The same rules will apply to the cancellation of tax numbers due to the failure to deposit the financial statements or to comply with the disclosure obligation.
It is an important transitional provision that, prior to entry into force, for tax numbers finally cancelled due to the failure to submit the completed KOCKERD questionnaire, if the Registry Court has not yet declared the taxpayer to be terminated, then it is possible to request the withdrawal of the resolution on the cancellation of the tax number until 31 December 2016. In order to do that, it is necessary to submit the completed KOCKERD questionnaire simultaneously with the request for the withdrawal of the cancellation resolution at the latest. The proposed amendment also provides that the tax filing obligations must be continued also during the "period without a tax number" until the date on which the resolution on the withdrawal of the cancellation becomes final, otherwise, a default fine is likely to be imposed.
Audit of the facts serving as the basis for a binding ruling
A new type of audit is introduced under the name of audit of the facts serving as the basis for a binding ruling. As a result, NAV will have an opportunity to conduct a specific audit to find out whether the facts serving as the basis for a binding ruling genuinely exist and thus whether such ruling is indeed binding on the tax authority.
During this audit, NAV may request the taxpayer to submit any documents that were required to prove the existence of the facts described in the resolution containing the binding ruling. It is a key rule that the tax authority is obliged to issue a resolution after the completion of the audit in all cases. Such resolution will be binding upon NAV and the tax authority will not be allowed to deviate from it during any subsequent audits at the taxpayer.
The avoidance of parallel audits is the aim of a new rule whereby if an audit related to a binding ruling request is commenced at a taxpayer, a tax-type specific subsequent audit of the tax returns for the period concerned may only be conducted once the first audit is completed.
The tax law amendment proposed for 2017 contains an important transitional provision also in relation to the above type of audit, namely that for binding ruling resolutions becoming final before 31 December 2015, the taxpayer submitting the request for binding ruling may request an audit to establish the facts serving as the basis for the binding ruling. If NAV concludes at the end of this audit that the facts serving as the basis for a binding ruling do not exist, the tax authority will also assess the tax payable on the taxable income, if requested by the taxpayer.
EKAER (Electronic Public Road Trade Control System)
According to the proposed amendment, starting from 1 August 2016, an EKAER disclosure is required if non-hazardous goods are transported with a vehicle that is not subject to toll payment, but the total laden weight of the vehicle exceeds 3.5 tons.
Currently, in order to ensure the identicalness of the goods, NAV may apply a seal if the taxpayer involved in the transport refuses to disclose the data associated with the EKAER number and the transport or if it is justified by enforcement proceedings or other risk factors. According to the proposed amendment, starting from 1 August 2016 it will be the haulier's responsibility to keep the seal intact. Accordingly, the unauthorised removal of the seal applied by NAV will be subject to a default fine. Furthermore, the means of transport may be detained until the default fine is paid, provided that the haulier subject to the default fine liability does not have a Hungarian tax number and its registered seat, domicile or place of habitual residence is not in Hungary, or if the default fine liability is not guaranteed or secured by a financial institution, or if the default fine liability is not assumed by an entity with a Hungarian tax number and the taxpayer subject to the default fine fails to furnish satisfactory evidence thereof.
If a foreign haulier prevents NAV from removing the seal, then the tax authority may impose the default fine in respect of any other means of transport used or owned by the foreign haulier and may detain any such means of transport.
Starting from 1 August 2016, in cases where the quantity of goods notified to the EKAER system exceeds the actually transported quantity (or if the truck is completely empty) then a default fine up to 40 percent of the value of the goods not actually transported may be imposed.
The term of limitation applicable to tax debt is reduced from 5 to 4 years.
According to the proposed amendment, any tax debt below HUF 10 000 shall be finally cancelled due to uncollectability, provided that the attempt at collection against the taxpayer's payment account with a payment service provider was unsuccessful. Any tax debt below HUF 100,000 may be finally cancelled as uncollectible if NAV has taken all actions for collection, however, the procedure was unsuccessful due to the lack of enforceable assets. These debts will no longer be recorded by NAV. In accordance with the practice so far, in the absence of enforceable assets, NAV shall declare any debt equal to or above HUF 100 000 uncollectible and shall record it until it becomes enforceable or until the term of limitation of the right to enforcement.
Contrary to the former HUF 10 000 amount, municipalities shall only have the right to resort to NAV for the collection of public-law debts as taxes whose amount exceeds HUF 50 000.
In the case of the confiscation of vehicles, the tax authority will be authorised to issue a resolution containing a warrant for the detention of the vehicle and thus to involve the Police in the search for confiscated vehicles whose whereabouts are unknown.
For mortgage on property, NAV may refrain from the enforcement of the property if the tax authority's claim is not likely to be satisfied from the proceeds of the sale. In such cases, the taxpayer's property may be mortgaged.
Other important changes
As of 1 January 2017, the threshold for invoices subject to a recapitulative statement will be further reduced. Instead of the former HUF 1 million, invoices equal to or higher than HUF 100 000 will need to be disclosed. As of 1 July 2017, the above disclosure will only apply to invoices issued in hard copy, in view of the fact that NAV will have real-time access to the data content of invoices issued with an invoicing software from that date onwards.
From 1 January 2017, it will be possible to provide on-line access ensuring direct data queries to NAV in respect of the data content of invoices issued with an invoicing software. However, starting from 1 July 2017, all taxpayers will be required to provide real-time access and direct data queries for the tax authority.
The operator taxpayer already has a disclosure obligation in respect of automatic food and beverage vending machines. Starting from 1 January 2017, automatic vending machines must be equipped with an automatic control unit ("AFE"). The taxpayer will have a regular data disclosure obligation in this regard that will be implemented by the tax authority through direct data queries, similarly to invoicing software.
The payment by installment option without a penalty already available for PIT and SSC will be extended. At the taxpayer's request, NAV shall automatically authorise payment by installment for taxpayers not engaged in business activities and not subject to value added tax ("VAT") in any tax type up to HUF 200 000.
The rule that NAV may make the reduction/forgiveness conditional on payment of a certain part of the tax debt will also apply to private individuals in the future. The tax authority may not reduce the tax and contribution debt deducted by the payer from the private individual at the latter's request.
Starting from 1 July 2017, a self-audit may be submitted for time-barred periods provided that the court takes a final decision also affecting the taxpayer's tax liability.