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Restrictions on Taxpayer Examinations in 2024

Restrictions on Taxpayer Examinations in 2024

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The National Tax and Customs Authority (NAV) published its 2024 audit plan on 26 March 2024, which shows that it plans to carry out more rigorous audits this year than in recent years.

In the past years, the NAV has followed a supportive approach, allowing taxpayers to correct minor errors and shortcomings without sanctions, thus promoting voluntary compliance. However, the tax authority has recognized that there is a group of taxpayers who regularly comply with their obligations only on request. In the future, the support procedures will help taxpayers who do not intentionally make mistakes and who are compliant in general. On the other hand, it means even tougher, immediate action against those who seek to gain an undue advantage by circumventing tax legislation and damaging the budget. In such cases, the tax authority will not be satisfied with simply launching a tax audit, but will also initiate criminal proceedings.

There are also notable changes in the list of taxpayer-specific controls. The most prominent and largest taxpayers have always been in the focus of audits and are subject to recurrent audits by NAV every few years. The main sources of errors identified by NAV for these companies are the use of tax incentives (e.g. energy efficiency investment tax credits, social contribution tax credits), tax-exempt payments to individuals, rehabilitation contributions and the corporate tax base.

In addition, as in previous years, NAV will continue to monitor the transfer pricing obligations of these taxpayers as a matter of priority. Transfer pricing obligations are designed to prevent taxpayers belonging to the same group from freely moving their profits between each other, thereby optimizing their tax liabilities. In particular, automotive companies can expect such investigations. Operators of Employee Stock Ownership Plans can also expect particular interest in the favourable tax treatment of ESOPs.

In addition, this year NAV has again identified sectors that are likely to attract increased regulatory attention. Besides long-established operators (such as guarding, cleaning, building management and construction companies), the authorities are focusing on traders in computer products and food traders. New to the list are internet content providers and event organizers. Pharmaceutical manufacturers and traders operating as part of a group are also likely to be scrutinized, in particular for questions on prices and special taxes between themselves.

The energy sector is also in the focus of NAV, with both gas trading and solar panel sales and installation companies facing inspections. In addition, the beauty industry, such as hairdressers, beauticians and nail technicians, as well as gyms and personal trainers, may also be subject to NAV investigations. As a novelty, NAV will also focus on the tax liabilities of those who earn income from stock exchange trading and cryptocurrency.

By Krisztian Kiralyvolgyi, Attorney at Law, KCG Partners Law Firm