Understanding how penalties are imposed by the Hungarian Tax Authority (NAV) is essential for both individuals and companies operating in Hungary. In this article, we look at the main types of tax penalties and the underlying definitions that will later be important when discussing taxpayer classifications such as “reliable” or “risky” taxpayers.
Tax Deficiency and Tax Penalty
A tax deficiency is the tax difference determined to the taxpayer’s detriment; in the case of self-assessment, only if the difference was not paid by the due date, or if a budgetary subsidy was unduly claimed. In the case of a tax deficiency, a tax penalty must be paid. The tax authority also imposes a tax penalty if the taxpayer has unlawfully submitted an application for a subsidy, tax refund, or tax reimbursement, or a return related to such a claim. Unless otherwise provided by law, the amount of the tax penalty is 50% of the tax deficiency or the unjustified claim. The amount of the penalty is 200% of the tax deficiency if it is related to concealed revenue, or to the creation, use, falsification, or destruction of false invoices, books, or records.
Example: The tax difference is HUF 2,000,000 (appr. 5,000 EUR) in the case where HUF 5,000,000 (appr. 12,500 EUR) should have been paid (e.g. corporate tax by May 31), but only HUF 3,000,000 (appr. 7,500 EUR) was paid by the due date. Based on the above, the tax penalty must be paid on HUF 2,000,000 (appr. 5,000 EUR), which is HUF 1,000,000 (appr. 2,500 EUR), and of course, the tax deficiency itself (HUF 2,000,000) must also be paid.
According to the rule on the conditional reduction of the tax penalty, if the taxpayer waives their right to appeal against the first-instance decision establishing the additional tax and pays the assessed tax difference by the due date, they are exempted from paying 50% of the imposed tax penalty.
Default Penalty
For the violation of a legal obligation, the tax authority may impose a default penalty of up to HUF 400,000 (appr. 1,000 EUR) on an individual taxpayer and up to HUF 1,000,000 (appr. 2,500 EUR) on a non-natural person.
A default penalty may be applied in addition to a tax penalty.
Examples of cases where a default penalty may be imposed:
- Conducting taxable activity without a tax number;
- Failing to deposit and publish the already discussed financial statements;
- Violating invoicing or receipt issuance obligations.
If the factual circumstances occur separately, it is possible to impose penalties for multiple facts within a single decision.
In the next part of this article, we will continue with the remaining types of penalties and interests regulated by Hungarian tax law, including late payment interest, self-revision interest, procedural penalties, and the concept of tax performance, which plays an important role in the classification of taxpayers as reliable or risky.
The information provided in this article is for informational purposes only and does not constitute tax or legal advice.
Sources:
- [1.] Act CL of 2017 on the Rules of Taxation
- [2.] Act CLI of 2017 on Tax Administration and the Regulation of Tax Administration