As of 1 January 2016 the tax authority introduces new categories for taxpayers entered in the commercial register and taxpayers registered for VAT purposes.
Overview – reliable and risky taxpayer categories
As of 1 January 2016 the tax authority introduces new categories for taxpayers entered in the commercial register and taxpayers registered for VAT purposes.
Accordingly, this group of taxpayers may fall into one of three categories for the purposes of the tax authority:
- the currently existing “general” taxpayer, subject to the general rules;t
- the “reliable taxpayer”, subject to rules that are more lenient/positive than the general rules;
- the “risky taxpayer”, subject to rules that are more stringent/negative than the general rules.
To qualify as a reliable taxpayer, the business must have good taxpaying history (no major penalties), good tax compliance record and no liquidation, bankruptcy, forced liquidation procedures in place. Reliable taxpayers will receive priority treatment from the tax authority, lower penalty rates, faster tax refund procedures and shorted tax audit terms.
On the other end of the spectrum, entities with bad tax history, poor tax compliance record, unpaid tax balance, illegal employment and other irregularities will be qualified as risky taxpayer. Risky taxpayers should expect scrutiny from the tax authority, longer tax audits and tax refunds and higher penalties.
What this means for your business?
Classification will be automatic, i.e. it does not occur at the taxpayer’s request. This system should not be confused with the “database of the taxpayers free of tax debt obligations” which is a different database and must be requested separately.
The new legislation may have an impact on the “knew or should have known” processes aimed at identifying business parties potentially involved in the carousel VAT fraud, i.e. This means that in additional to the check of validity of the VAT number, businesses are advised to check the tax qualification of their supplier.
On the other hand if a business finds itself in a position where the tax rating has been downgraded to risky, it may have potential business implications as some of the clients may be discouraged from doing business with the downgraded entity.
Entities doing business in Hungary, including VAT registrations of foreign entities are advised to review their tax compliance and tax payment track record to avoid being downgraded to “risky taxpayer” category.
Dániel Sztanko
RSM DTM
