A new type of audit appeared from 1st January 2012, the performance of liability audit by tax authority at newly established enterprises and already operating companies connecting to the change in ownership in the frame of tax registration procedure, and as the consequence of risk analysis they got under the supervision of tax authority.

The audit covers the members, shareholders gaining voting right exceeding 50% by the establishing VAT number or following the changes reported regarding to the person of executive employee and/or member.
The tax authority audits the “taxing record” and will be entitled to refuse the issuing of VAT number, and/or to withdraw the taxpayer’s already existing VAT number if the executive employee or member behaves in a way severely violating the law or causing significant injury for the budget enumerated and objectively determined by law in a given period.

If during the audit of taxing record any circumstances are disclosed by the tax authority that imply the behaviour mentioned above will send a notice, so, the company has the opportunity to modify regarding to the given member – replacement or termination from the company – and if it is certified towards the tax authority that the obstacle is ceased, the VAT number will not be withdrawn. It is important to take rapid actions to avoid the difficulties that would be caused through a probable withdraw of VAT number.

After the establishment of VAT number, the tax authority performs a risk analysis procedure, may send a questioner for the taxpayer which covers:

a) detailed introduction of activity:
– factually started activities due to the Hungarian NACE classification,
– the time of factually started activity or if it has not been started yet, the expected date of start-up,
– enumeration of company seat, branch offices,
– detailed scope of customers for whom products, services were sold (private person, enterprise, small/large-scale trader …), and from a geographical point of view (domestic territory, EU, for third country);

b) enumeration of the number of employees, the scope of employment, managing director(s), classification of legal relationship, frequency of activity;

c) the presentation of assets available for continuing the activity;

d) information regarding to the data of the place necessary for the performance of activity, and referring to the pretence of the usage of place:

• in case of rental, the name of lessee, rental fee
• address of real estate, size (m2), lot number;

e) detailed presentation of available financial, financing sources to perform the activity: subscribed capital, member’s loan, enumeration of credit advances, receivables, liabilities.

In practice, the tax authority sends a questioner for the enterprise by post (containing 38 questions) in which the taxpayer need to present the above data itemizedly and in details, fill in and send back within 10 days.
After filling in and sending back of the questioner, it is expectable that in the frame of a risk analysis procedure, the taxpayer will be invited to the office of National Tax Authority for a further personal meeting where the data will be repeatedly supervised whether any changes has occurred in connection with the company since the filling in of the questioner, whether all the data are correspond.

The questions and the documents required in the presentation material:

• whether there is a cash desk, an invoicing programme or invoice pad, if they are there, whether there is a certification on the necessary programme, and the registry of documents subject to obligation of strict accounting,
• if necessary presenting the licence of competent authority,
• employment contracts and certification of the legal relationships of managing directors,
• existence of accounting policy, regulations regarding to money management and inventory.

It is audited in case of every starting enterprise whether the registration forms had been received in time, within 8 days following the establishment, if they were not received by deadline, default penalty will be imposed in every case.

If the State Tax Authority recognises differences between the data reported by taxpayer and the factual state, the taxpayer – at longest for one year – gets under increased tax authority supervision:

a) taxpayer may be forced for the submission of more frequent VAT return and summary statement,
b) taxpayer may be forced for countersigning its returns by a tax consultant, tax expert or a charted tax expert.

Based on the new legal institution of increased tax authority supervision, tax authority has the opportunity to order certain taxpayers who are not excluded from the system of taxation, but from the point of view of taxation they are defined as risky, to operate beside continual tax authority supervision in the first period of their operation, and/or following the personal changes defined and named by law for a definite term.

The increased tax authority supervision is ordered even if the enterprise does not create the financial, material and personal conditions necessary for the registered activity by the time of the audit.

If this kind of supervision is ordered, it means extra administration and expenses for the taxpayer in case of countersigning is prescribed.