17.04.2018

What does electronic communication mean from the perspective of local business tax returns?

What does electronic communication mean from the perspective of local business tax returns?

In some previous articles we revealed that business entities will need to communicate electronically with the state in Hungary from 1 January 2018. In terms of tax affairs this electronic communication means electronic administration not just at the NAV but also with local governments.

Electronic communication happens by submitting forms provided by the tax authority, while for applications that do not use standardised wording, taxpayers can use the General Purpose Request Form, i.e. the e-Paper (e-Papír) service. On the Local Government website – the ELÜGY system – taxpayers can use various electronic administration services. Certain functions can be used freely, while other functions are subject to registration.

Electronic returns compulsory from this year

Since companies that close their books at the end of the calendar year are moving ever closer to the deadline for filing their local business tax returns, namely 31 May 2018, it is particularly topical and important to know that local governments in Hungary can now only accept tax returns on 2017 electronically. Electronic returns were introduced earlier at many local governments, but from 1 January 2018 this will be mandatory at every local government.

Until 31 December 2018, individuals (representative/authorised representative) acting on behalf of business entities may also handle their electronic communication through the government portal, but from 1 January 2019, however, only the business gateway can be used for electronic communication. If an authorised representative wants to submit the annual local business tax return, separate authorisation is required that entitles them to this type of electronic administration. The form required for this can be downloaded from the local governments’ website. Many local governments in Hungary send out information to taxpayers on changes via the business gateway.

Even if using the business gateway, it is possible for the local business tax return not to be submitted by the party otherwise authorised to use the gateway, but for another person to be appointed, a case manager. The settings for this can be found in the business gateway, where the given person can be registered as a new case manager.

Electronic communication for Budapest taxpayers

Local business tax returns can also be submitted via the government portal / business gateway using the 17HIPA form prepared by the NAV; the NAV forwards these on to the competent local governments without conducting any checks. According to information from the Budapest City Council, however, experience from last year shows that these forms contain several errors. This is why the Budapest City Council specifically asks taxpayers to use the form-completion programme of the City Council when filing for Budapest. It is important to note here that local government authorisation is still required in this case. This is because the representation right for electronic administration reported on the EGYKE form submitted to the NAV does not cover the representation of entities at the local governments.

Since practices with regard to electronic local business tax returns are not fully developed yet, it is advisable to inquire in advance at the competent local governments about this authorisation, and to see which interface and which form should be used to meet your tax return obligations.

The City Council information on electronic administration can be found here, and on electronic tax returns here. The relevant legislative background is drawn from Act CCXXII of 2005 on the General Rules for Electronic Administration and Trust Services as well as Government Decree 451/2016 (XII.19) on the detailed rules of electronic administration.(The links mentioned are only available in Hungarian.)

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