The Hungarian tax authority’s audit plan for 2023

As usual, this spring the National Tax and Customs Administration (“NTCA”) published its audit plan for the current year. In our below newsletter, we summarize the main audit priorities set out in the plan. VGD Hungary has considerable expertise and experience in the field of tax procedure and provides competent support to its clients in representing their interests before the tax authorities. Our tax experts can also help you prepare for tax audits.

The tax authorities select taxpayers for audits and determine the type of audit procedure (compliance audit, tax audit, support procedure) on the basis of increasingly sophisticated analyses of their risk management systems, which are constantly improved through IT developments.

In 2023, NAV's audit activity will focus on four main areas:

1. Control of activities with significant budgetary risk;

2. Audits based on targeted risk analysis;

3. Control of the biggest taxpayers;

4. Support of voluntary compliance.

Below we detail the main types of activities covered by the audit focus, based on the above audit areas.

1. Control of activities with significant budgetary risk

These audits will include the following main sectors in 2023:

• sellers on websites (online shops) and web portals;
• taxable persons distributing or purchasing goods and products related to the food and agricultural industries (foodstuffs subject to price ceilings, sugar, edible oil, cheese, coffee, chocolate, flour, mineral water, soft drinks, poppy seeds, nut kernels, rice, soya, fertilisers) and those manufacturing food products;
• taxpayers engaged in the building industry and in the sale of building materials;
• (second-hand) motor vehicle and motor vehicle spare part dealers and repairers;
• tourism, catering and accommodation service activities;
• fuel sellers, sellers of heating equipment and parts thereof;
• IT, administrative and consultancy service providers.

2. Audits based on targeted risk analysis

In this area, the NTCA selects taxpayers considered to be at risk for audit primarily on the basis of an analysis of data received through the following channels:

• the Online Invoice system and Online Cash Register data;
• the Electronic Public Road Trade Control system (“EKÁER”) data;
• data received in the framework of international automatic information exchange (including mainly the control of the digital platform economy);
• identification of taxpayers linked to non-cooperative countries under the EU and OECD guidelines on tax avoidance.

Based on the analysis of the above data, the focus in 2023 will be on businesses that minimise tax and those that reclaim taxes, but do not generate revenue on a sustained basis.

Undervaluation of imports and VAT evasion in the EU and domestic sales will remain a major challenge for tax and customs authorities. In this respect, controls are aimed at preventing the release for free circulation of goods without payment of the related public charges.

3. Control of the biggest taxpayers

Due to their importance to the national economy, the taxpayers with the highest tax performance remain a particular focus of audits. In this respect, the main areas to be audited in 2023 are tax incentives for capital investments, energy efficiency investments and renovations, as well as the transfer pricing issues. A significant proportion of the priority taxpayers have related companies, and therefore the examination of the prices applied between related companies is a high priority.

Organisations operating Employee Share Ownership Plans and group personal risk insurance (life, accident and sickness insurance) provided by employers to their employees as a certain defined benefit are also targets for tax audits.

4. Support of voluntary compliance

With regard to support procedures, the NTCA considers it a priority in 2023 to help taxpayers who have opted out of KATA taxation in 2023 to switch to the new tax treatment.

The scope of compliance investigations will continue to cover newly-established businesses, businesses affected by changes in managing personnel, taxpayers with a large turnover having no or just a few employees, taxpayers with a discrepancy between their VAT returns and Online Invoice data, and taxpayers who do not submit VAT returns.

Thematic audits:

• audits related to the environmental product tax (“green tax”) obligation;
• taxpayers who have not declared income earned from real estate sales (property or land);
• compulsory audits on the utilisation of corporate income tax reliefs (audits on the utilisation of tax incentives for capital investments, energy efficiency investments and renovation);
• manufacturers of the foodstuffs in the scope of the public health product tax;
• audits of KIVA (Small Business Tax Scheme) taxpayers;
• audits based on Country-by-Country (CbC) reports and transactions identified as risky on the basis of cross-border arrangements reporting.

Among the audits of priority activities and sectors, we highlight the audits with focus on transfer pricing:

• Transfer pricing audits in the automotive sector;
• Transfer pricing audits of taxpayers engaged in manufacturing activities within a group of companies, with losses or very low profits;
• Transfer pricing audits of loan or other financial transactions between related parties,
• Audit of persistent loss-making taxpayers (both related to transfer pricing and other tax aspects);
• Audit of compliance with the conditions set out in Advanced Pricing Agreements (“APAs”).

Employment:

• Compliance audits of the taxpayers with discrepancies between the employment notifications (Form yearT1041) and the personal income tax and social security contribution declarations (Form year08) based on the data for 2022, and verification of the obligation to notify the termination of employment for employees who are included in the employment notifications but not in the personal income tax and social security contribution declarations;
• Review of taxpayers who opted for KATA taxation.

The tax experts of VGD Hungary have considerable experience in supporting tax audits, preparing for tax audits and representing clients before the tax authorities, and are ready to assist their clients in this respect.

08. march, 2023

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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice.