Based on the data of the first quarter of this year, the tax authority rated more than 540 thousand VAT-registered companies entered in the trade register classifying them in one of three categories – reliable, general and risk.
Reliable taxpayers – criteria and benefits
You should know that newly founded companies cannot receive a reliable rating in the first three years of their operation and may therefore not enjoy the benefits relating to the fulfilment of tax liabilities and to tax audits either.
As a result of the taxpayer rating, 39 percent, 210,587 of the companies reviewed satisfied all of the conditions for reliable rating according to the evaluation of NAV.
The newly introduced and already existing criteria in this regard are as follows:
- From January 2017, the new condition that the current year tax performance of the rated company has to be positive was introduced. This narrowing down excludes the companies not performing an actual activity from the group of favourably rated taxpayers.
- From this year, the tax authority not only checks default penalties but also the ratio of excise penalties to tax performance. This ration may not be higher than 1 percent.
- From 2017, NAV checks if there was an execution procedure against the companies rated for the past 4 years. This does not cover reclassification and the exercising of withholding rights.
- The company has been in operation for at least three years or has qualified as a VAT-registered taxpayer for at least three years.
- The total amount of the tax differences established by NAV to the debit of the taxpayer in the current year and in the previous five years may not exceed 3 percent of the tax performance of the taxpayer established for the current year.
- The company was not undergoing bankruptcy, liquidation or forced cancellation proceedings in the current year and in the five previous years.
- In the current year and in the five previous years, the company is/was not subject to a suspension of its tax number due to non-fulfilment of return filing or tax payment obligations.
- In the current year and in the five previous years, the company is/was not undergoing a cancellation of its tax number.
- In the current year and in the five previous years, the company is/was not under enhanced tax authority surveillance.
- The company does not qualify as a risky taxpayer.
- The company’s tax performance established for the current year is positive.
- The company does not have net tax debt exceeding 500 thousand forints.
The companies satisfying all of the above conditions can be classified as reliable taxpayers.
A public company limited by shares will also qualify as a reliable taxpayer if it has been in operation for less than three years and its tax performance established for the current year is not positive but it must fulfil the other conditions.
- In the case of certain non-compliances, e.g. non-compliance with announcement, return filing or data supply obligations, the companies having reliable taxpayer rating do not have to pay penalty or only half of the standard penalty is imposed on them.
- Tax audits may last for a maximum of 180 days and reliable taxpayers are automatically given a payment relief opportunity once a year.
- The tax authority disburses the value added tax reclaimed to public companies limited by shares within 30 days and to other reliable taxpayers within 45 days.
Risky taxpayers – criteria and adverse consequences
Being rated as a risky taxpayer implies more stringent surveillance, more administration and more frequent audits. This is what the approximately 36,500 companies rated in this category after the first quarter of 2017 may expect. The criteria relating to risky taxpayers were also supplemented this year. Fulfilment of any of the conditions below will result in risky taxpayer rating:
- The company’s seat is registered with a registered office service provider and default penalty was effectively imposed on the company by NAV after 1 January 2017 due to the hindrance of tax administration proceedings (in the current year or in the previous three years).
- In the past one year, the company was included in the public list of taxpayers with high-amount tax shortages or tax debt.
- In the past one year, the company was put on the public list of taxpayers employing non-registered employees.
- The tax authority repeatedly applied a shop close against the company within one year’s time.
- The company is undergoing a forced cancellation procedure.
- The total amount of tax differences established by NAV in the current year and in the previous five years to the debit of the taxpayer exceeds 70 percent of the tax performance of the company established for the current year. (The total of the tax differences established by NAV in the current year and in the previous five years to the credit of the taxpayer shall be deducted from the total amount of tax differences established to the debit of the taxpayer.)
- The amount of default penalties imposed on the company and due in the two years before the current year exceed 70 percent of the tax performance of the company established for the current year.
These companies have to face the following consequences of a risky taxpayer rating:
- The audit deadline is 60 days longer than normal;
- The deadline for VAT disbursement is 75 days;
- The late payment interest established in an audit procedure increases to five times one 365th of the central bank base rate per day;
- The minimum and maximum of tax penalties and default penalties are higher than the standard minimum and maximum and the tax authority may not waive these penalties.
Notice is given of the result of taxpayer rating to the taxpayers who are rated by the tax authority for the first time and those whose rating changed relative to the rating of the previous quarter.
The status of the companies which do not receive notice did not change in the previous period. Companies may file an objection against their ratings within three months.
Result of taxpayer rating, Q4 2016 to Q1 2017
|Quarter||Total number of rated taxpayers||Reliable||General||Risky|
|Q4 2016||544 306||190 076||319 450||34 780|
|Q1 2017||540 468||210 587||293 414||36 467|