In our view, nothing is lost yet, even if you have the minutes of tax audit in your hand: the solution may be in the legal remedies. Referring back to our already cited article, it would be the best to avoid such by acting totally rightful without contextual or even formal mistakes, to have time-to-time health checks to mitigate chances for negative tax audit outcome situations, or finally to involve a tax expert into the process from the very beginning who can represent your interests effectively by knowing the rules of the game. Nevertheless, if sand gets into the machine somehow, there is not all lost by the takeover of the minutes. In this article we show the steps of remedy in details.
The taxpayer has the right to comment the protocol in 15 days after receiving it, to submit his/her opinion of proof, and so the Hungarian Tax Authority will have to justify it verbally or in writing. The observation is not subject to any procedural fees; therefore, it is suggested to apply and take time by the forelock. To further investigate the evidences and comments of the taxable person made during the observation, the tax authority may start an additional audit that lasts up to 15 days.
In case you haven’t had an expert supporting during the tax audit, then by receiving the protocol you should not delay it anymore, because it is only 15 days remained for the professional to take over the procedure, review the documentation and to make any notice.
Finally the controlling tax authority makes its decision about the audit and issues its first instance resolution – we receive it after the processing our taxpayer observations, or even if we ran out of the commenting deadline. In case of negative outcome, tax authority challenges or disadvantageous procedural mistakes, the controlled taxable person may present an appeal against this first instance resolution. The appeal deadline is 15 days in a general procedure or 30 days in a posterior procedure to be calculated from the time of the receipt of the appeal. The submission of the appeal is already subject to a procedural fee (that is why it worth first observing the protocol), which counts HUF 400 after every HUF 10 000 of the disputed amount but at least HUF 5,000 and at most HUF 500,000. In case the material value of the appeal cannot be established, then its fee amounts to HUF 5,000.
If we ran out of the appealing deadline, the only remedy process remains is the call for supervisory action.
Appeals against the first instance tax authority decisions are handled and decided centrally at a higher level authority proceeding and the outcome of the appeal is issued in the second instance resolution. Against this second instance resolution we may seek justice only by administrative litigation i.e. lawsuit, but solely with reference to infringement of law. This process is also subject to a fee; moreover, potentially even a lawyer advocacy may be needed.
On the top of the above, while the trial runs the fiscal deficit i.e. the tax shortage assessed by the tax authority and the fines and interests imposed must be fulfilled and paid, as the second instance resolution is final and legally binding. Even in case the Court gives us justice at the end of the process, the controlled taxpayer has to finance these through the whole procedure. The only opportunity to postpone the enforcement is to present a request for suspension of the payment obligation.
At last but not least by reference of infringement a supervisory measurement may start officially or upon request of the taxable person, which cannot make any disadvantageous decisions against the taxpayer (aside from 1-2 exceptions). In this process the involvement of a representing expert is enforced, the representative may be a tax advisor, lawyer or a certificated tax expert.
This measurement is also subject to a procedural fee, with similar calculation method such as for appeals’. The fee amounts to HUF 400 after every HUF 10 000 of the disputed amount but at least HUF 5,000 and at most HUF 500,000. However, if the material value of the supervisory management cannot be established, then its fee amounts to HUF 50,000.
Involvement of a legal representative, tax expert
We cannot emphasize enough how important is to involve a legal representative or tax expert from the very beginning of the tax audit process in order to facilitate a positive outcome. The professional is not concerned, not affected by fear, so the professional can stay objective. An expert knows and balances the rights of the controlled taxpayer and also the duties of the tax authorities; recognizes the “traps”, assesses the risk connected to the papers to submit, prevent the procedural mistakes and collect supporting arguments – thus the participation of a tax expert provides many advantages.
The frequent faults of controls, protocols and resolutions
So the expert may help in the observation of the objectivity and technicality of the tax authority audit process. Our experiences about the most common faults of the inspections are as follows:
- Procedures may not keep and fulfil the investigation deadlines
- Missing notification of the taxpayer about the hearings of witnesses or experts
- Not presenting the results from connected inspections of domestic or international inquiries and the proofs from other sources – not making these part of the audit documentation
- Delivery is irregular
- No conformity, cause and casual relationship between the statements and their justification
- Numerical contradictions are in the documents, the analysis is missing
- The text is incomprehensible, just citing legislative references
- The condition for estimates are not proved
- Facts for the benefit of the taxpayer are out of sight
- The proofs are not properly balanced.
LeitnerLeitner offers the following assistance for tax authority audits:
- Health check: due diligence before a tax audit, preparation of necessary corrections
- Representation before fiscal authorities and comprehensive tax advisory services
- Participation in observation and appeal procedures
- Tax expert support in even in court proceedings, litigation.