This title is unusual and out-of-the-box, but it is not intended to be a puzzle; it does make sense and we will reveal the answer at the end of the article. Each profession has its own unique language, which is difficult for an outsider to understand.
NAV, ÁFA (VAT), EKAER: the Hungarian hits
Nowadays, reading and understanding a letter written by a tax adviser can be a challenge in itself, considering the special terminology and the rapidly changing environment of international taxation. Clients also expect us to provide brief, concise and comprehensible articles. This is not helped by EU and OECD tax bodies, since incredible amounts of material have been prepared during the past 3-4 years to prevent tax fraud and aggressive tax planning, and of course, new terminology means new abbreviations.
We can happily add Hungarian specialities to this. Investors coming to Hungary are not familiar with many Hungarian abbreviations, but as they quickly learn about Hungarian tax regulations they know that if they hear 27%, that is surely the world record holder of value added tax in Hungary, the VAT rate. They also know that if they receive a letter from the NAV (National Tax and Customs Administration) it rarely means good news. Those who know the abbreviation EKAER (Electronic Public Road Trade Control System) understand that tax administration in Hungary is not negligible by any means (and although there is a common interest to fight against the black economy, unfortunately the extra administration involved definitely increases costs).
BEPS, ATAD, AEOI and other newcomers from abroad
Having learned the most common Hungarian abbreviations, let’s take a look at the terminology created by the EU and OECD to please taxpayers. There is no need for further explanation in the case of BEPS (base erosion and profit shifting), we already know this includes actions related to direct taxes and against tax evasion. The European equivalent of the Action Plan is ATAD I and ATAD II (the anti-tax avoidance directives). We have already written about MLIs (multilateral instrument). This instrument provides a practical and effective “facelift” solution for bilateral agreements reached between countries.
We already know the legal framework of the fight against tax evasion, but what is even more important is how tax authorities will be able to collect information about transactions in which more than one country is involved. We should never think that the NAV will not gather information about incomes arriving from abroad. There are a number of tools facilitating the automatic exchange of information on bank accounts. AEOI (automatic exchange of information) and CRS (common reporting standards) supplemented by FATCA (foreign account tax compliance) regulations of the United States of America provide enough munition for tax inspectors. It is perfectly conceivable that we might receive a reminder letter from the Hungarian tax authority about declaring the income sitting on our foreign bank account.
DAC: abbreviated directives
EU Member States also exchange information about transactions previously made bulletproof by conditional agreements. This is all the result of Directive DAC3, and supplemented by CbCR (country by country reporting), which is based on the BEPS Action Plan and Directive DAC4, as well as the obligation to provide information about beneficial owners as stated in Directive DAC5, we can happily say that the lives of taxpayers will be an open book in the case of companies as well now.
Based on our short and hopefully light summary, in keeping with the summer season, we can now translate the title: The BEPS Action Plan supplemented and supported by EU regulations against tax evasion spell good news for the Hungarian tax authority too. The question is how much fun taxpayers will have due to the increasing administrative burden, and whether they will be able to follow the turbulent changes in legislation?
