Introduction: What is a Compliance Audit?
Since 2018, one of the significant innovations in Hungarian tax administration is the compliance audit, which provides businesses with a serious opportunity to correct mistakes without sanctions. The regulations on taxation and tax administrative procedures underwent significant changes in 2018. Since then, there are two main types of audits: tax audits and compliance audits.
Differences Between Compliance Audits and Tax Audits
A compliance audit checks the fulfillment of other tax obligations, while a tax audit focuses on examining the tax and budget support bases and amounts for closed periods. The new regulation helps taxpayers detect and correct errors before the declaration period ends.
Advantages of the Compliance Audit for Businesses
One of the biggest advantages of the compliance audit is that it can be conducted before the tax reporting period closes, allowing businesses to recognize and correct their mistakes in time. During compliance audits, the tax authority may gather data from the audited taxpayers that could highlight errors, additional tax payments, or even lead to further procedures, such as tax audits or criminal investigations.
How Does a Compliance Audit Work?
Although it may seem intimidating at first that the compliance audit focuses on correcting mistakes, it actually provides an opportunity for the taxpayer to cooperate with the auditor and avoid severe consequences. During this type of audit, the tax authority (NAV) cannot establish tax differences or make a tax assessment; it only records omissions in a report. The taxpayer can submit a self-correction during or after the procedure.
Introduction of the Data Reconciliation Procedure
Starting from 2025, a new tax administrative procedure, the data reconciliation procedure, will come into effect. The essence of this procedure is that NAV regularly compares the data from the online invoicing system with the information submitted by companies in their VAT declarations. If the tax authority detects a discrepancy between the data provided by the taxpayer and another taxpayer with whom they are connected, it will invite the taxpayer to clarify the discrepancies within the framework of the data reconciliation procedure.
Data Reconciliation Procedure: What Happens if There Is a Discrepancy?
If NAV detects a discrepancy between the data, it may ask the taxpayer to clarify the discrepancies within a 15-day response period. Failure to do so can result in a penalty of 300,000 HUF. The core of the data reconciliation procedure, therefore, is to provide an opportunity for the quick correction of errors and to avoid sanctions.
Summary: How Can Sanctions Be Avoided?
The compliance audit and the data reconciliation procedure offer businesses a valuable opportunity to correct their mistakes and avoid sanctions. Constructive cooperation with the tax authority not only reduces financial consequences but also helps prevent future problems. Taxpayers should therefore respond in a timely and appropriate manner to ensure that the audit concludes in the most favorable way.
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Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
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Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
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