To be or not to be a reliable taxpayer?

Have you ever heard about the taxpayer classification? The purpose of taxpayer classification is to provide taxpayers settling their tax liabilities voluntarily and in time should enjoy certain advantages as reliable taxpayers; specified by law; relative to non-compliant taxpayers who are thus subject to certain stricter rules.

The Tax Authority reviews once a quarter whether taxpayers

in the trader register, VAT registered taxpayers and taxpayer groups

meet the reliable taxpayer or the risky taxpayer criteria.

A taxpayer is categorised as a reliable or a risky taxpayer as a result of the assessment.

The Tax Authority categorises a taxpayer as reliable if it meets each of the following criteria:

1. it has been operating continuously; or has been a VAT-registered taxpayer; for at least three years

2. the amount of the tax difference established by the Tax Authority as a liability of the taxpayer during the year concerned and the preceding five years does not exceed three percent of the taxpayer’s tax performance for the year concerned; providing that the total amount of the tax difference established as a liability of the taxpayer must be reduced by the amount of the total tax difference established by the Tax Authority as an amount to the taxpayer’s credit during the year concerned and the preceding five years.

Our new definition is the “tax difference”. There is an example to be able to understand easily: let us say that we did not submit our VAT return or did not submit with the correct amount. This amount (which we did not declare and is revealed by the Tax Authority during a tax audit) is called the “tax difference”; which can also be the “delinquent taxes”. The most important moral of a fable is to submit our returns is a good thing and, if possible; do not to forget to pay the amount; or do not try to calculate by declaring less than the actual tax to be paid. If a tax audit comes and the Tax Authority reveal the difference; then we have to pay tax penalty due to the tax deficiency.

3. the Tax Authority instituted no enforcement proceedings against the taxpayer during the year concerned and the preceding four years, not including book transfers and the exercise of the right to withhold,

4. the taxpayer is not, and has not been, under bankruptcy, liquidation, or involuntary deregistration proceedings in the year concerned and the preceding five years,

5. the taxpayer owes no net tax debt exceeding five hundred thousand forints;

6. the taxpayer is not and has not been, the subject of tax number cancellation, in the year concerned and the preceding five years;

For example: we cannot be found at our registered office; our registered office is not a real address; the notified legal representative is not a real person.

7. the amount charged by the Tax Authority to the taxpayer in the way of default penalty that fell due during the last two years preceding the year concerned; including excise penalties; did not exceed one percent of the taxpayer’s tax performance established for the year concerned;

8. the taxpayer does not qualify as a risky taxpayer; and

9. the taxpayer’s tax performance for the year concerned is a positive amount

Next time; we are going to check the advantages of being classified as a reliable taxpayer.