Wednesday, 28 August 2019

Attention! From 2019 the penalty rates are changing!

From 1 January 2019 a significant increase in penalties in tax audit procedures can be expected. You can find the main changes below.

Penalty for late payment

The penalty for late payment shall be calculated at a rate of 1/365 of the Hungarian prime rate plus 5 percentage points with proportionate interest calculation instead of the double it. Furthermore, the actual rate also changes regarding the unreliable taxpayer: previously, this was five times the Hungarian prime rate, but in the future, it will be one and a half times the default penalty calculated according to the general rules. Considering the actual low level of the national prime rate (0.9%), the actual changes result in significant penalty interest increases.

The change in the rate of the penalty is illustrated by the following formulas:

Calculating the current Hungarian prime rate (0.9%), the rate of the annual penalty for late payment changes as follows:

The new penalty rates are applicable after their entry into force; thus, to the liabilities due after 1 January 2019.

Late payment interest

՝Blessing in disguise’ - if we may put it that way, the change in the rate of penalty for late payment also means that the same higher rate should be taken into account theoretically even in the case of late payment interest by the tax authority.

In addition, the regulation of the late payment interest has been extended by a new turn; thus, it is also required to pay the actual interest to the tax authority when a taxpayer's refund claim has been arisen by the authority's unlawful decision. This new clause is already applicable to appeal procedures initiated after 1 January 2018.

Self-revision surcharge

As a result of the amendment, the self-revision surcharge is separated from the penalty for late payment: it is remained to be based on the Hungarian prime rate, and one and a half times the prime rate in case of repeated self-revision.

Therefore, now it is even more worth the failure by the taxpayer itself voluntarily; nevertheless, the sanctioning nature of the self-revision surcharge is relatively fading.