In Focus: Hungary – Taxpayers’ Categories

Edit Buliczka
January 13, 2021

Just like in every jurisdiction, settling tax liabilities compliantly is important to avoid penalties and other consequences. But in Hungary there are additional benefits to a taxpayer if tax liabilities are settled as compliantly as possible.

As of 1 January 2016, Hungary introduced the so-called taxpayers’ qualification system. This means the Hungarian Tax Office (HUTA) qualifies its clients into three categories. The system covers all direct and indirect taxes.

The qualification applies to companies with an establishment in Hungary, taxpayers with a VAT registration as well as taxpayers that are members of a VAT group. Individual taxpayers are not subject to this classification. Accordingly, foreign insurance companies declaring insurance premium tax (IPT) liabilities are subject to this qualification.

What are the different categories?

There are three categories – risky, general and reliable taxpayer. The best is ‘reliable taxpayer’ which provides the taxpayer with additional benefits and understandably the worst is ‘risky taxpayer’ and this classification comes with additional, stricter rules. If a taxpayer doesn’t meet the criteria of a reliable or risky taxpayer but behaves compliantly most of the time, then they will be placed in the general category.

How does the taxpayers’ qualification process work?

HUTA reviews a taxpayer’s status every quarter. The qualification process takes a month and taxpayers are notified electronically of any changes to their category via the tax office online portal.

What are the criteria to qualify as a reliable taxpayer?

To qualify as a reliable taxpayer, a company must comply with all the below criteria:

  • The company must have been operating continuously or have been registered taxpayers for at least three years
  • The eventual tax shortfall that has been determined during an audit by HUTA doesn’t reach a certain limit (percentage in the current year and in the previous five years)
  • The company hasn’t been under enforcement procedure within the current and the previous four years
  • The company isn’t under bankruptcy, liquidation, winding-up proceedings within the current and the previous five years
  • The eventual tax debt of the company doesn’t exceed HUF 500,000 (approx. EUR 1,500)
  • The company tax number hasn’t been withdrawn in the current year and the previous five years
  • The amount of the default penalties has not reached a certain limit in the previous two fiscal years
  • The company hasn’t been qualified as a risky taxpayer
  • The company is in tax payment position

As you can see the criteria is robust and extensive, but it is achievable within three years following the tax registration if a company demonstrates consistent compliant behaviour.

What are the criteria to qualify as a risky taxpayer?

Whereas a taxpayer needs to fulfil several conditions simultaneously to qualify as a reliable taxpayer, a risky categorisation can be awarded if any of the below conditions are met:

  • The taxpayer is listed on the substantial outstanding errors taxpayers’ lists
  • The taxpayer is listed on the substantial tax debt taxpayers’ list
  • The taxpayer is employing people without registration
  • The taxpayer’s shop has been forced to shut repeatedly within one year
  • The taxpayer’s tax number was deleted
  • The tax shortfall determined by HUTA during an audit exceeds a certain limit in the current and in the previous five years
  • In the previous two tax years the amount of the default penalties exceeded a certain limit
  • A penalty has been levied due to improper seat registration

Once a taxpayer is placed in the risky category, this qualification will remain for at least a year or in some cases, for the duration of noncompliant behaviour.

What are the benefits of being categorised as a reliable taxpayer?

There are many benefits which include:

  • The amount of the default penalty might be reduced by 50%
  • The amount of the tax penalty might be reduced by 50%
  • Automatic provision of payment moratorium, meaning the potential shortfall should not be paid immediately, but within a year without interest
  • The time frame of the reclaims is reduced
  • The tax audit can last for no longer than 180 days

What additional costs do risky taxpayers need to consider?

For a risky taxpayer the opposite conditions are applicable, meaning:

  • Increased tax and default penalties
  • The time frame of the reclaims will be longer
  • The tax audit can last longer

Ensuring tax compliance is always important but the benefits of a reliable taxpayer qualification in Hungary are clear, and so is avoiding a risky taxpayer qualification.

Take Action

Sovos can help you qualify for reliable taxpayer status. Get in touch to discuss your tax requirements in Hungary.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Edit Buliczka

Edit is a senior regulatory counsel. She joined Sovos in January 2016 and has extensive IPT knowledge and experience. Her role ensures the IPT teams and systems at Sovos are always updated with legislative changes. She is a Hungarian registered tax expert and chartered accountant and has worked for companies in Hungary including Deloitte and KPMG and as an indirect tax manager she worked for AIG in Budapest. She graduated with an economist degree from Budapest Business School, faculty of finance and accountancy and also she has a postgraduate diploma from ELTE Legal University in Budapest.
Share This Post

North America ShipCompliant
September 29, 2022
5 Essential Questions to Ask When Searching for a Compliance Partner

Managing beverage alcohol compliance and tax in a rapidly evolving regulatory environment takes expertise and a relentless attention to detail. Odds are, you didn’t get into the industry to spend countless hours each week pouring over mandate changes, tax laws and regulatory updates. Partnering with a compliance software company is an easy way to mitigate […]

E-Invoicing Compliance EMEA
September 27, 2022
Billing SAF-T in Portugal: A New Obligation for Non-Residents

Portugal’s state budget entered into force on 27 June 2022 after protracted negotiations. The budget contained an interesting provision: the obligation to present invoice details to the tax authorities was extended to all VAT-registered taxpayers including non-resident taxpayers, who had long been exempt from this obligation. VAT-registered non-residents now have three options for communicating invoice […]

September 27, 2022
Understanding Insurance Premium Tax Prepayments in Italy

Continuing our IPT prepayment series, we take a look at Italy’s requirements. In previous articles we have looked at Belgium, Austria, and Hungary. All insurers authorised to write business under the Italian regime have a legal obligation to make an advance annual payment for the following year. What is the prepayment rate in Italy? The […]

EMEA VAT & Fiscal Reporting
September 23, 2022
Virtual Events and the Risk of Double Taxation

When organising a virtual event, it’s important to determine how this supply will be treated for VAT purposes. We have previously discussed VAT rules and place of supply for virtual events, this blog will discuss the potential future changes to the VAT position for EU Member States. Current VAT position for virtual events in Europe […]

Brazil E-Invoicing Compliance EMEA
September 22, 2022
Brazil Introduces National Standard for the Service e-Invoice

Brazil is known for its highly complex continuous transaction controls (CTC) e-invoicing system. As well as keeping up with daily legislative changes in its 26 states and the Federal District, the country has over 5,000 municipalities with different standards for e-invoicing. The tax levied on consumption of services (ISSQN – Imposto Sobre Serviços de Qualquer […]