The obligations of newly established businesses should be reviewed from time to time due to the constantly changing legal environment. Apart from filing the right returns, newly established businesses can face a number of other challenges. In this article, I focus only on the filing, reporting and other challenges related to bookkeeping activities.
Standard returns to be sent to the National Tax and Customs Administration
The first standard return to be filed by newly established businesses in Hungary is the T201T form, which generally includes the registration with the National Tax and Customs Administration (NAV), the chosen MNB or ECB exchange rate, and if applicable, the registered office service and the company’s document archive for the tax authority. The filing deadline is 15 days from the date of the change.
From the moment the company has a valid tax number, it is also obliged to submit VAT returns. Newly established businesses have to file monthly returns in the year of registration and in the following year, so before starting to keep accounts, it is also necessary to check which periods require monthly VAT returns, possibly retrospectively. VAT returns can be submitted on form 65 by the 20th day of the month following the month in which the return is filed.
For contributions, the requisite return is 08, the deadline for which is the 12th day of the month following the given month. In this case, it is also advisable to check whether any return has been missed and needs filing.
Moreover, at the end of the financial year, newly established businesses must submit the 01 return for other contributions, the deadline for which is 25 February after the end of the financial year. Year-end closes in Hungary include the corporate tax return (29) and the local business tax return (HIPAK), the deadline for which is the last day of the fifth month following the end of the financial year.
It is important to note that these returns must be submitted even if they don’t contain any data (nil returns). In all cases, returns must be submitted electronically to the NAV, and if the company decides to submit the returns through a representative, it is also necessary to fill in the so-called EGYKE form.
In addition to what is listed above, all organisations in Hungary that conduct economic activities – businesses, civil society organisations, foundations, churches or religious organisations – are obliged to register on the business gate. Business gate registration allows companies to communicate electronically with the various authorities and institutions, thereby improving the efficiency of their relations with public authorities.
Other reporting obligations of newly established businesses
In addition to the commonly known returns for submission to the NAV, newly established businesses must also register with other institutions. To register with the Central Statistical Office, form 1032 must be sent to the CSO regional directorate with jurisdiction for the location of the company’s head office, within 15 days of the date of establishment. This form collects preliminary information on the company’s activities, sales revenue and other data.
In addition, all companies have to register with the Hungarian Chamber of Commerce and Industry. Entities engaged in agricultural activities have to register with the Hungarian Chamber of Agriculture instead.
The registration for local business tax is done electronically to the local authority with jurisdiction for the location of the company’s registered office or place of business, using the form designated by the local authority.
And you shouldn’t forget that for companies incorporated in Hungary, the head of the company must open at least one domestic bank account within eight days of the company’s establishment. In addition, if the company has a bank account abroad, this must be notified to the Hungarian Tax and Customs Administration. And that’s not all…
Problems encountered when the bookkeeping starts
Bookkeeping currency: As an accountant, I often find that newly established businesses don’t necessarily choose the right bookkeeping currency. Many companies have a significant part of their transactions in a currency other than the forint, such as the euro, and while the parent company’s bookkeeping currency is also the euro, the firm chooses to keep its accounts in HUF in its articles of association. This can cause a number of difficulties with reconciliations and reporting, and the fact that changes in the forint exchange rate can have a significant impact on the operation and performance of companies should not be ignored.
Audit: One might rightly think with newly established businesses that there is no need for a statutory audit, as they have not yet started their activities and have no sales revenue, only registered capital. However, if the company is a consolidated entity, an audit is always mandatory, regardless of the size of its activity.
Different legal environments: Another complication is that companies registered in Hungary must be accounted for in accordance with the Hungarian Accounting Act, and of course, Hungarian law applies to all other legislation. This means that a number of reconciliations are needed at the outset with the foreign parent company to deal with accounting and taxation issues.
Financial year: The financial years of companies incorporated in Hungary often don’t align with the financial year of the foreign parent company, which makes information reporting, accounting, the preparation of reports and consolidation processes much trickier. When established in Hungary, companies can determine the end of their financial year, so choosing a different financial year from the conventional one can avoid difficulties that may arise later.
As our article shows, newly established businesses face a number of reporting and filing obligations, whether they have actually started trading or not. Yet in addition to a thorough analysis of these, before starting the accounts it is also very important to deliberate on other issues, such as the choice of financial year or bookkeeping currency, in order to avoid the difficulties associated with making corrections afterwards. The staff at the accounting division of WTS Klient Hungary have over 25 years of experience in helping clients make these decisions.
