Each year, taxpayers and tax advisors are eager to learn about the tax authority's audit guidelines, revealing which areas will be in the focus of the tax authority's attention for the year. Here are the key points of the 2024 guidelines.
Differentiated action proportionate to compliance in 2024 again
What does this exactly mean? On the one hand, it means assisting compliant taxpayers in meeting their tax obligations through a supporting procedure and acompliance review. Supporting procedures help unintentionally erring taxpayers, who are basically compliant but make mistakes, to correct their errors. They also support taxpayers in complying with tax obligations in a constantly and rapidly changing legal environment.
On the other hand, it means even stricter, immediate action against those who seek to gain an undue advantage by evading tax laws and damaging the central budget.
In such cases, the tax authority will not be satisfied just launching a tax audit, but will also initiate criminal proceedings.
Business partner verification – more important than ever!
The tax authority performs a sophisticated risk analysis using existing algorithms and artificial intelligence in order to detect taxpayers who play for an illegal tax advantage. In doing so, it relies on available data, in particular by processing data from online invoice data reporting services.
For this reason, a strong emphasis is placed on reminding taxpayers to correct discrepancies in data reporting.
This highlights the importance of the prior business verification of partners to avoid entering into a business relationship with a high risk entity.
Download our publication – a summary of public databases to help you verify your business partners and prepare for a potential tax audit.
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Key tax audit areas in 2024
The range of activities identified as high risk has been extended
Activities identified as high risk in recent years to reduce risks to the central budget (motor vehicle parts trade, motor vehicle repair, personal and property protection, temporary staffing, distribution of IT products, retail and wholesale of textiles, website sales, fruit and vegetable wholesalers, groceries and agricultural goods procurement and distribution, construction and building materials trading, tourism, catering and accommodation service providers, taxi drivers, sale of Far East goods, Internet content providers) have been extended to include new areas. The tax authority has extended the list to include taxpayers with income from controlled capital market transactions and cryptocurrency, event organisers, advertising, marketing and media service providers, as well as those providing beauty and physical training services – personal trainers and masseurs, who may face increased audit.
Affiliated parties, transfer pricing, ESOP
Within the audit of large taxpayers, particular emphasis will be placed in 2024 on the audit of affiliated companies and intra-group transactions, as well as on the audit of organisations operating Employee Share Option Plans (ESOP).
Please contact our tax experts for advice.
High risk taxpayers
The audit of taxpayers representing a high risk to the central budget, is based on a targeted risk analysis, including the use of all digital data available to the tax authority.
Here, the focus is on taxpayers who start up and suddenly have a high turnover without employees, those who operate through an office service provider, or those who have been operating for several years on a members’ loan and at the same time fail to submit their tax returns and report data.
The tax authority will continue to give priority to the review of lawful employment. Taxpayers with a large number of employees who do not issue invoices according to the online invoice data reporting and where no control data are available for the invoices they receive, can surely expect a tax audit.
Individuals who hold accounts with foreign banks can also expect special attention from the tax authority in 2024, as the audit plan also provides for the monitoring of data received in connection with financial accounts in the framework of international information exchange.
Tax type specific audits: CIT allowances, affiliated parties, transfer pricing
Regarding tax types,in 2024 the focus will be on the mandatory audit of the use of corporate income tax allowances, the review of the allocation and release of the development reserve, country-by-country reports and transactions identified as high risk based on cross-border arrangements.
In the case of affiliated companies, special focus is on transactions involving intangible assets, controlled transactions classified as high risk based on the data of the transfer pricing data reporting, the transfer pricing review of taxpayers with loss-making or very low profit manufacturing activities within the group, as well as loan or other financial transactions between affiliated companies.
Taxpayer specific audits
In terms of taxpayer-specific topics, the focus is on affiliated companies operating in the pharmaceutical industry, the audit of social contribution tax allowances, the audit of taxpayers engaged in the sale and installation of solar panels, gas traders, taxpayers subject to small business tax, the audit of taxpayers who fail to declare income from the sale of real estate or land, the audit of entities of the highest amount of refund in respect of CIT allocation, the audit of affiliated automotive companies from the transfer pricing perspective.
Customs audit focus for 2024 also disclosed
Customs controls are designed to ensure compliance with the various prohibitive and restrictive provisions and penalties before and after the release of goods, in line with economic trends.
To manage the growing e-commerce traffic, the centre that has recently been established at Liszt Ferenc International Airport to manage financial and non-financial (e.g. drugs) risk serves not only domestic needs but also customers from neighbouring countries. Post-release checks focus on anti-dumping, the release for free circulation of products subject to countervailing measures, the use of the preferential originating status of goods for allowances, the correct classification of goods and the declared customs value.
The focus remains on checking the payment of registration tax and VAT on new vehicles imported from the EU and third countries and placed into circulation in Hungary;
In the subsequent review of the European Agricultural Guarantee Fund (EAGF) financed entitlements, the tax authority pays particular attention to unauthorised claims, beneficiaries not operating legally, the implementation of financed projects and the identification of fictitious economic events.
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Areas of audit in the field of law enforcement
This year, the tax authority’s focus is on detecting and preventing metal theft and eradicating illegal trade. To this end, the tax authority will carry out joint inspections in cooperation with the waste management authority using the new waste management (concession) model.
Another priority is the detection of infringements of intellectual property and related rights and illegal medicines.
In the areas of road transport of goods and passengers, road safety and international road transport of goods, the tax authority plans to take more effective action against unauthorised transport.
Excise checks at fuel stations are meant to prevent the distribution of fuel illegally released into free circulation, based on mobile laboratories, random inventory checks and sampling.
By checking retail excise traders, the tax inspectors will continue to detect the illegal production and trading of excise goods in 2024.
Should you have any question please contact our tax experts for advice.
