Tax audit plans in Hungary for 2023 | News Flash

The National Tax and Customs Administration (NTCA) has published its audit plan for 2023. The document includes the main objectives and the areas, the taxpayers and activities to be audited along with other useful information.

Based on the published information, the NAV will target its 2023 audit activities, focusing on taxpayer behaviour and adapting its actions to taxpayers’ tax morale. In summary, this means that taxpayers who are cooperative and law-abiding will receive ongoing support to correct errors and deficiencies, while fraudulent taxpayers and networks will be dealt with vigorously, closer and closer to the time of the infringements.One of the most important elements of the control activity is the considerable amount of data available to the tax authority, which is used by the NTCA for targeted risk analysis and risk management purposes and on the basis of which it initiates its procedures.

One of the most important elements of the control activity is the considerable amount of data available to the tax authority, which is used by the NTCA for targeted risk analysis and risk management purposes and on the basis of which it initiates its procedures.

The four main areas of audit activities in 2023 are the following:

• Audits of activities with significant budgetary risk
• Audits of taxpayers with a fiscal revenue risk, based on a targeted risk analysis
• Audits of large taxpayers
• Support for voluntary compliance

Activities with significant risk

Compared to the activities identified as risky in previous years, the list has been extended to include new activities in addition to those already included (which were e.g., sales on websites, grocery acquisition and distribution, construction, motor vehicle dealership and repairer activities, tourism and catering, passenger transport, seasonal goods sales).

The new elements to the list are the following:

• the sale of dietary supplements, registered therapeutic substances and preparations which are not classified as medicinal products, in particular various immune-boosting and “protective” products,
• the sale of fuel (such as firewood), heating equipment and parts thereof,
• activities of security and protection of persons and property, building management, cleaning, temporary employment,
• sale and installation of air conditioning equipment
• advertising, marketing, media services and film production activities,
• IT services, consultancy and related activities

Based on the tax authority’s experience and risk analysis so far, these are the areas to focus on in 2023.

Audits of risky taxpayers based on targeted risk analysis

We can see that the NTCA operates in a data-driven way, using the data available to it for risk analysis purposes to try to filter out which taxpayers are suspected of abuse and may need to be audited. One of the key elements of the analysis is the data from online cash registers and online invoicing systems under the online reporting obligations. In addition, data from EKAER (Electronic Public Road Trade Control System), vending machines, construction and tourism systems should also be mentioned. These data are also cross-checked by the IT systems with other sources, such as declarations, and data from other parties to the transactions are also compared, which can reveal discrepancies.

The aim is to check those involved in deliberate tax avoidance or invoicing chains, with particular attention being paid to those registered to a seat-service provider or those engaged in activities requiring a large amount of live labour (construction, film), as subcontracting or subcontracting chains are common in these sectors.

As in previous years, the focus this year will be on taxpayers who are linked to or make profits from non-cooperative (from a tax aspect) countries (other taxpayers in those countries). They may be selected by the NTCA for audits based on risk analysis. In addition, certain data from international data exchanges will also be a priority this year.

According to the audit plan, those who, on the basis of the available data, engage in tax-minimising behaviour and those who do not realise any revenue on a sustained basis but claim tax refunds can expect to be audited by the tax authority during the year. Taxpayers who commit employment-related abuses are also included in this category.

With the restructuring of the ‘KATA’ tax scheme system, the NTCA has set itself the target of auditing both those who opt for ‘KATA’ taxation (whether they are genuinely eligible) and flat-rate taxpayers (application of appropriate cost ratios and income thresholds). In addition, it was pointed out that taxpayers who have not opted for any of the tax scheme options and are therefore likely to continue their activities without authorisation can expect to be subject to on-the-spot audits.

This year’s risk-based tax audits will also focus on the registration tax payable on vehicles imported from abroad and on vehicles leased by fleet operators.

In addition to the above, there will be a focus on the investigation of undervaluation in import procedures and VAT evasion linked to customs procedures, with the tax authorities planning to take immediate action to tackle the practices of disappearing importers acting through an indirect customs representative. At this point, while the goods are still under customs supervision, the transaction documentation and the client are available, allowing effective risk analysis and immediate action by the authorities.

Audit of large taxpayers

In addition to the large taxpayers, the NTCA will also include the companies and taxpayers with the highest tax performance in its audits, as they will receive special attention in the audit plan due to their importance for the national economy.

In addition to the general aspects, the authority has listed a few priority aspects.

The use and application of tax incentives for investments in development and energy efficiency and renovation, as well as transfer pricing obligations, will also be audited. In relation to the latter, the authority also points out that, in general, a significant number of these companies have a related company, so the examination of the prices applied between them will be a high priority task in 2023. This will also include certain related obligations such as reporting and record-keeping.

Also new for this year, taxpayers with a large number of employees will be subject to an audit focus on those operating an Employee Stock Ownership Plan (ESOP), where the authority will examine the entitlement to payments, compliance with remuneration policies and legal requirements, and other tax issues, in particular insurances as specific defined benefits for employees.

Support for voluntary compliance

In principle, the NTCA’s approach is to support taxpayers and, in cases where tax compliance is inadequate or incorrect, the tax authority draws attention to this to encourage compliance. These support procedures will be maintained in 2023 with the help of certain control data.

A new task this year, given the number of people leaving the KATA tax scheme, will be to help taxpayers who were previously KATA taxpayers to switch to new tax arrangements.

In addition to the above, the NTCA also includes the continuous monitoring of basic deviations, by which it continuously examines certain types of data, taxpayers and their behaviour and if necessary, launches an audit after carrying out a risk analysis.

Thematic tasks

Following the textual description, the tax authority groups the audit points and tasks for the year in question as a kind of summary.

Audits are expected for group corporate taxpayers and small enterprise taxpayers (‘KIVA’).

Beneficiaries receiving the largest allocations from the personal income tax donations and real estate agents can also expect audits.

Among the thematic tasks, the authority is planning transfer pricing audits in the automotive sector.

In general, audits are expected in the area of green tax, and lawyers, legal practitioners, independent bailiffs and taxpayers engaged in metalworking activities can also expect audits.

Ildikó Hajnal-Balázs

Senior Tax Consultant | Accace Hungary

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