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VAT changes 2016

05 October 2016

With the passing of the 2016 amendments to the tax law the tax legislation for the coming year is now finalised. In this special BDO’s newsletter for your convenience we have summarized the main tax legislation changes impacting firms registered for VAT in Hungary.

We are pleased to provide you more detailed information and analysis of the new rules that could have impact on your business.

Please do not hesitate to contact us!

  1. Invoicing software – new requirements

As of 1st January 2016 all invoicing software must have an independent function suitable for making the data available to the tax administration with a single click,

  • for invoices issued during a certain period specified with a starting and ending date (year, month, day), and
  • for invoices within a certain range of invoice serial numbers specified with a starting and ending invoice serial number.

This new function, the so-called "data disclosure for tax administration audit" or data export will enable the tax administration in the course of a potential tax audit to quickly export data on issued invoices in a consolidated structure. The specifications for the schematic structure of the data export are contained in detail within the annexes of the Decree.

The purpose of this new function is to improve the efficacy of tax administration audits. This requires much greater attention from users and a high level of precision from software developers.

The new rule applies for all taxpayers who issue invoices by invoicing software, therefore VAT registered foreign companies who issue invoices under their Hungarian tax number shall  also comply with this obligation.

  1. Classification of reliable taxpayer

As of January 1, 2016, the Act on Taxation introduces rules for reliable and risky taxpayers. Under the new classification scheme taxpayers classified as reliable will be treated more positively, while risky taxpayers will be treated more strictly than under the generic rules.

Who can be a reliable taxpayer?

A taxpayer may be classified as reliable, if it is meets all of the following criteria:

  • It has been active continually for at least 3 years, or it has been a taxpayer registered for VAT for at least 3 years;
  • In the year concerned and in the five preceding years:
    • The total of its delinquent taxes assessed by the state tax authority was not in excess of 3% of its tax for the year concerned;
    • It has not been subjected by the tax authority to judicial enforcement, not to include a transfer or the execution of the right of retention;
    • It has not been, and is not subject to on-going bankruptcy, liquidation, or forced de-registration proceedings;
    • It has not been, and is not subject to the suspension of its tax number;
    • It has not been, and is not subject to the deletion of its tax number;
    • It has not been, and is not subject to increased supervision by the tax authority;
  • It does not have a net tax liability in excess of HUF 500,000;
  • The total of the default penalties that have become due in the two years preceding the year concerned wasnot in excess of 1% of its tax assessed for the year concerned;
  • It is not classified as a risky taxpayer.

Why is it worth to be a reliable taxpayer?

Reliable taxpayers will be subject to several positive discriminations.

  • Their audits by the National Tax and Customs Administration may not exceed 180 days.
  • The upper limit of the default penalty and tax penalty that may be imposed on a reliable taxpayer is 50% of the default penalty and tax penalty imposable under the generic rules.
  • Once a year they receive automatically (i.e., without conditions) an instalment payment option spanning a maximum of 12 months and exempt from surcharges for the settlement of their tax liability between HUF 10’000 and 500’000.
  • As of 2017 their requests for VAT remittances will be met by the authority within 45 days; as of 2018 this deadline will be reduced to 30 days.

Who can be a risky taxpayer?

A taxpayer is considered risky, if it is included on the publication roster of taxpayers with considerable tax arrears; it is included on the publication roster of taxpayers employing employees that have not been employees etc.

The taxpayer shall be considered a risky taxpayer for a year from the occurrence of the condition that gives rise to the classification, except if it pays its tax arrears or tax liabilities.

Why isn’t worth it to be a risky taxpayer?

Because…

  • their VAT remittance deadline is a uniform 75 days;
  • their tax audit deadline is extended by 60 days;
  • they are treated more strictly with regard to the assessment of default interest, tax fines and default penalties.

The tax authority will perform the classification for the first time in the first quarter of 2016, relying on data prevailing on March 31, 2016. The outcome of the first classification shall be effective as of April 1, 2016. No one may lean back thereafter however, as the classification will be reviewed every quarter.

  1. Performance date of periodically settled transactions

Pursuant to the rules in effect for 2015, if the parties have agreed on payment in instalments or on settlement by set time periods, then the due date of the payment shall be considered as the performance date for VAT purposes.

As of January 1, 2016 however, the performance date for VAT purposes shall be determined in accordance with the following three rules. The performance date could thus vary on a case-by-case basis depending on the agreement between the parties.

  1. If both the payment due date and the invoice date the last date of the period being settled, then the issue date of the invoice shall be considered as the performance date.
  2. If payment is due following the last day of the period being settled, then the performance date shall be understood as the payment due date
  3. In all other cases the performance date for VAT purposes shall be the same as the last day of the period concerned by the settlement or by the instalment payment. Of the new rules this last one will be the most seldom used, as essentially it can only occur if the payment due date falls exactly on the last day of the period settled.

The new rules shall first be applicable to periodically settled transactions where both the first day of the settled period and the payment due date fall on dates following December 31, 2015.