Thursday, 9 June 2016

Hungary updates tax audit guidelines

Hungary’s Tax and Customs Authority published guidelines on 19 February 2016 that set out the items it will focus on during tax audits in fiscal year 2016. These items are intended to reflect current economic trends and business practices of taxpayers that may result in tax risks in Hungary, and include the following:

  • Taxpayers registered at “seat providers” (i.e. entities that help companies establish and maintain a registered seat in Hungary);
  • Sellers and/or buyers of loss-making companies or companies with significant debt;
  • Taxpayers relocating their registered seat (typically, to Budapest or to Pest county) to receive more beneficial tax treatment, while effectively operating from their original seat;
  • Related individuals and corporate entities, particularly owners of multiple or high-risk companies and/or the representatives of such companies;
  • Transfer pricing policies of related parties;
  • Accurate accounting treatment of tax grants, in particular, incentives relating to R&D (where the volume is significant);
  • Determinations of nonbusiness-related costs, expenses and “unjustified” tax baseadjusting items for income tax purposes;
  • Taxpayers carrying out e-commerce, online services (such as online storage) and shared economy services (such as community accommodation, transportation and catering);
  • International trading of high-risk, licensed products;
  • Taxpayers required to use online cash registers;
  • Taxpayers engaged in the handling of products subject to excise duty (cigarettes, alcohol, fuel);
  • Taxpayers employing unregistered employees;
  • Activities including the following:
  • Real estate planning and development;
  • Public road freight and passenger transport;
  • Loan staffing;
  • Trade in information technology products and communication technology products; and
  • Management consulting.

Regardless of a taxpayer’s status (“reliable” or “unreliable”), the tax authorities intend to frequently audit those taxpayers with the greatest volume of tax liabilities, due to their significant impact on the national economy. The most common type of audit will remain the inspections carried out prior to granting a tax refund.

Source: Deloitte