A self-revision is one of the most important legal institutions of the Act on Rules of Taxation, which allows companies themselves to correct any tax bases filed incorrectly or any tax liability, so as to avoid these issues being detected by the tax authority during a potential tax inspection. Obviously, a self-revision is more expensive than managing to declare everything correctly in our tax return the first time round, since the general rule is that a self-revision interest has to be paid if the liability increases, but this is still much cheaper than when the tax authority finds the tax shortfall and imposes a 50% interest alongside a late payment interest.
What is the deadline for submitting a self-revision?
It is common knowledge that from the start of a tax authority inspection in Hungary, no self-revision tax return can be filed in respect of the tax subject to the inspection for the period in question; such tax returns are automatically rejected by the tax authority, or to use the technical term: “hibernated”. However, many forget that a self-revision only qualifies as being submitted prior to the tax authority’s inspection if this took place at least one day before. Consequently, if the inspectors’ engagement letter is received on the date of the self-revision, our self-revision will not be accepted. Indeed, there is reason to believe that the content of the tax return submitted as part of the self-revision will be reflected in the findings of the inspectors as the basis for a tax penalty. However, the tax authority knocking on the door does not always mean that we cannot perform a self-revision. On the one hand, there is a type of inspection that does not pose an obstacle on the other hand, as part of the cooperative procedure introduced from 2017 the tax authority in Hungary can itself call upon the taxpayer to submit a self-revision.
Not everything can be modified with a self-revision
It is important that a self-revision cannot be performed if we previously and lawfully availed of our statutory right to choose something, for example, our chosen method of cost accounting cannot be subsequently modified. By contrast, as a general rule, a tax allowance can still be claimed subsequently even if the tax return did not include a decision on it. This latter provision, however, may be overwritten by individual provisions under substantive tax law in Hungary. For example, we can claim a personal income tax allowance related to certain serious illnesses with a self-revision, provided the relevant conditions are fulfilled, but tax allowances affecting corporate income tax cannot be claimed in a self-revision. So it is worth being prudent and turning to an expert, such as WTS Klient, prior to submitting your corporate tax return.
An additional limitation is that no self-revision can be submitted in principle for a time-barred period or a period already closed by the tax authority with an inspection. In the latter case, initiating a so-called repeat inspection can be the only way to modify data previously determined. That said, a legal regulation valid since 1 July 2016 stipulates that if a court adopts a legally binding decision regarding the taxpayer’s tax liability beyond the time-barred period, then in order to resolve this tax liability the taxpayer is entitled to submit a self-revision for the time-barred tax assessment period.
How much does a self-revision cost?
The self-revision interest equals 50% of the late payment interest calculated using the central bank’s key rate of interest, while in the case of repeated, i.e. second and any further self-revisions, it is 75% of the late payment interest. The self-revision interest in HUF has to be calculated from the day after the deadline for submitting the original tax return expired until the day the self-revision tax return is filed. If we want to be very precise, we look at the calendar too since the deadline for filing tax returns can only expire on a working day. For example, 25 February was a Saturday this year, so the self-employed were able to submit their personal income tax returns on 27 February; this means the start date for the self-revision interest calculation is 28 February if they have to submit a self-revision for this tax return. The tax authority’s calculator is very useful when calculating the self-revision interest. The self-revision interest can theoretically be decreased in Hungary, but it has to be verified that the mistake was caused by circumstances that would also support a mitigated penalty.