On 22 November 2016 the Hungarian Parliament approved the autumn tax package we dealt with in our previous newsletter. The tax changes for 2017 are probably still ongoing, the public dues paid by employers are planned to be reduced by 5% next year and a single, flat-rate 9% corporate tax will also be introduced. Until these important amendments are included in the law, we would like to try to give you a brief outline of the tax changes already approved for next year that could be of interest for most companies. First we introduce the accepted changes in the Act on the Rules of Taxation.
Act on the Rules of Taxation
Tax authority support procedure
The NAV support procedures not only cover private individuals not pursuing business activities, the tax authority can also apply the procedure for any taxpayer. As part of a support procedure the NAV is entitled to initiate contact with taxpayers to remedy disclosed errors and shortcomings with the professional assistance of the tax authority without the intent of imposing sanctions.
Amendments related to reliable / risky taxpayers
The NAV classifies any taxpayer registered in the company register or for VAT purposes as reliable if (besides meeting all other conditions) its tax performance for the reporting year is positive. As intended by the legislators for reliable taxpayers, automatic payment relief will become available in the future not only for payment in instalments but also for deferred payments, and raising the threshold from HUF 500,000 to HUF 1.5 million means the relief can be claimed by a wider range of taxpayers.
The NAV categorises any taxpayer registered in the company register or for VAT purposes and not subject to insolvent or solvent liquidation as risky if their registered office is registered at a provider of registered office services, and they received a legally binding default penalty for hindering tax authority procedures in the reporting year or in any of the three prior years. The Act on the Rules of Taxation defines registered office service providers as someone who, on behalf of a taxpayer, manages the handover of business and official taxpayer documents during working hours, registers, keeps and provides access to these documents and fulfils the obligations connected to the registered office pursuant to specific laws, in particular, tolerating the enforcement measures of authorities in connection with the registered office and the company documents of the taxpayer.
Changes in the threshold of invoices to be included in the domestic summary report – connecting invoicing software products to NAV
Currently, taxpayers need to submit a report retrospectively together with their VAT return regarding issued as well as accepted and deducted invoices where the amount of VAT charged is equal to or more than HUF 1 million. From next July this threshold will be HUF 100,000. The conditions of the announced online reporting obligation are still unclear at the moment, but it will be implemented according to the new provision effective from July 2017, which states that companies will have to submit electronic reports to the NAV according to specific laws with regard to the data of invoices defined in specific laws and regulations and issued using software with an invoicing function if the amount of VAT charged to another domestic taxpayer is equal to or more than HUF 100,000. The taxpayer must also report data on amendments or cancellations of these invoices electronically, as defined in specific laws and regulations.
The legislator’s commitment in this area is well illustrated by the fact that the ceiling on the default penalty levied if the data provision obligation is not met, or if it is late, incomplete, incorrect or contains false information, is the product of the number of affected invoices and documents qualifying as invoices and the maximum penalty rate otherwise legally mandated for the taxpayer.