As one of our first tasks at the beginning of the year, it is high time we considered the data reporting obligations that companies as taxpayers have to comply with in January. In this article we will present three reporting obligations to the tax authority that are relevant for companies with international relations and shortly have to be fulfilled. The legal background for the data reporting obligations is included in Act CL of 2017 (the new “Act on Rules of Taxation”) and Act CLI of 2017 (the Act on Tax Administration Rules) which enter into force in 2018.
Data reporting obligations for foreign company bank accounts
One of the most important new elements of the revised Act on Rules of Taxation entering into force recently is that taxpayers who had a valid bank account as of 1 January 2018 at a foreign financial institution have to report all of their existing bank account numbers as well as the name of the foreign banks holding these accounts to the NAV by no later than 31 January 2018. Additionally, taxpayers have to report the changes affecting their foreign bank accounts to the Hungarian tax authority within 15 days.
One important stipulation is that the reporting obligation applies to business organisations whose business activity is subject to the prior submission of a company registration request. According to the original plans, the obligation would also have applied to taxpayers who are not obliged to have their companies registered by the court. Based on our proposal sent to the Ministry for National Economy it was ultimately clarified that the reporting rule does not apply to taxpayers with special legal status who are not subject to registration at the Court of Registration in Hungary, such as VAT-registered taxpayers.
If only because of the sizes of the default penalties it is worth paying attention to the deadlines. Should an otherwise obliged taxpayer fail to comply with either the data reporting obligations or change reporting obligations, the NAV will call upon the taxpayer to fulfil its tax liability within 15 days, also drawing attention to the legal consequences of failing to do so. If the obligations remain unfulfilled even after a warning, the tax authority may first impose a default penalty of HUF 100,000 (approx. EUR 320) on the taxpayer, followed by up to HUF 500,000 (approx. EUR 1,600) if an additional 15 day supplementation deadline passes without any result.
Reporting obligations of related companies
Hungarian taxpayers who have related companies may also face an important reporting obligation in January if they initiate new transactions with their related parties at the beginning of 2018:
- taxpayer concludes a new contract with a related company and a business event of any kind takes place between them;
- the related-party relationship between the taxpayer and its related company ceases as of 1 January 2018;
- services are provided between the taxpayer and its related company in excess of HUF 1 million (approx. EUR 3,200) in cash.
The reporting to the Hungarian tax authority should take place within 15 calendar days of the event (otherwise you can expect a default penalty here as well). This rule is not new, but it is difficult to find the reference in the new Act on Rules of Taxation. According to the form used for reporting, data on the related company has to be reported within 15 days of concluding the first contract, and changes connected to the related company within 15 days of such changes occurring, according to Section 44 and Section 7 (28) of the Act on Rules of Taxation. If the related company is a resident company in Hungary, they have to make these reports as well.
Posted foreign employees
Multinational companies often temporarily post foreign staff working in another country to the Hungarian member of the group for a set period. The Hungarian host company may have data reporting obligations towards the tax authority in the case of these employees (expats) too.
Based on Section 41 (3) of the new Act on Rules of Taxation, the reporting has to include the following data:
- personal identification data, address and citizenship of the foreign-resident natural person;
- start date of employment;
- name, registered office, permanent establishment and address of the foreign organisation or natural person ordering the work.
Companies have 30 days to report posted employees from the start date of their employment. We should not forget that the end date of the employment has to be reported too, and if relevant data is available regarding the employment then also the date when the employee leaves the territory of Hungary.
If you want to make sure you have met all your data reporting obligations, we are here to help.
Click here and send us an email to request a quick examination of your status with our tried and tested checklist. This will only take an hour.
To start the year on a positive note, we are offering the first 3 examinations free of charge for those quickest to apply.
