As we have already discussed before, there are a number of new features in Act CL of 2017 on Rules of Taxation (hereinafter: Act on Rules of Taxation) for the year 2018. One of them is reporting the intention to perform a self-revision, which is a new opportunity for taxpayers. According to the new rule, the Hungarian tax authority (NAV) may not start a tax inspection covering the given tax assessment period and tax type for 15 days after receiving such notification.
Tax inspection and electronic communication from 2018
The NAV has recently devoted a considerable amount of time to making electronic access and administration more modern, and from 2018 Hungarian taxpayers have a number of ways to communicate with the tax authority in Hungary electronically. In some cases, electronic communication is an option, while with certain issues, this is the only way for taxpayers to communicate with the tax authority. At the beginning of 2018, choosing the right option often caused headaches both for taxpayers and the tax authority, just like the question of whether to use the business gateway or the government portal. In general, from 1 January 2018 business organisations and other organisations obliged to use electronic communication means in tax-related issues must communicate and handle their administration with the tax authority electronically, via their authorised representative, agent or legal or organisational representative.
According to the change related to tax inspections introduced from 2018, a tax inspection creating a period that is closed from an inspection perspective, meaning that no self-revision can be carried out, starts on the date when the preliminary notification is delivered, or if this is not delivered, then upon the delivery of the engagement letter.
Practice shows that in the case of electronic communication, the representative or the agent only sees that there is an electronic letter among the messages with the subject “official document arrived”. It is enough to click on the letter unsuspectingly, and the notification or the engagement letter about the tax inspection is delivered. Once the letter is delivered, you lose the possibility for a self-revision for the relevant period, and if errors are identified, you may need to pay a tax penalty; with a self-revision you can correct the errors and pay self-revision interest, without facing the threat of a tax penalty.
New option for reporting intention to perform a self-revision
Section 54 of the new Act on Rules of Taxation contains the general rules for self-revisions applied in Hungary and already known for a long time, which are now expanded with reporting the intention to perform a self-revision (Section 55) from 2018. Thanks to this new option, taxpayers can submit a document to the tax authority that enables them to exclude themselves from the tax authority’s right to perform a tax inspection for the period of the self-revision – i.e. for 15 days following the notification. Submitting the self-revision is not subject to giving this notification and making the declaration does not create an obligation to perform a self-revision either. There is one condition, however, that this can only happen once per tax assessment period and tax type.
Documents required for self-revision
A separate document needs to be used to report the intention to perform a self-revision to the tax authority. This can be submitted using the 18ONELLB document, while the self-revision itself – in the case of tax returns – must be submitted using the tax return form for the relevant period, indicating self-revision as the “type of return”.
There are conditions and restrictions connected to selecting a self-revision, similarly to the process of reporting the intention to perform a self-revision. All the conditions must be fulfilled for a taxpayer to take this opportunity. Self-revision interest must be paid if the self-revision reveals that the recalculated liability exceeds the amount indicated in the original tax return. The amount on the first occasion is 50% of the late payment interest, increasing to 75% in the case of a repeated self-revision. It is worth considering the number of times you modify a period before the start of the tax inspection because of the increase in self-revision interest for a repeated self-revision.
WTS Klient Hungary has been representing its clients at the authorities for nearly twenty years. With the authorisation given to our tax advisers you can engage us also to report your intention to perform a self-revision. Feel free to contact us.