According to the bill on the new tax procedural rules entering into force on 1 January 2018, a tax number cannot be suspended by the tax authority any longer. The bill is now before the Hungarian Parliament under discussion.
According to the current provisions, the suspension of a tax number functions as a sanction, for example in case the official documents cannot be delivered to the taxpayer or if it is not available on its registered seat. Taxpayers with suspended tax numbers have limited rights (e.g. in case tax refund or when exercising the right of tax reduction, etc.), however, they may pursue business activities, and they must fulfil their tax obligations. With regard to the fact that in practice it is difficult to interpret this sanction by the taxpayers, and the duration of the suspension is usually short, which is not in compliance with the periods for tax assessment and tax returns, this sanction is planned to be ceased by the bill. Bad news is that in cases where tax suspension would be applicable under the current rules, the bill orders the sanction of the deletion of the tax number.
It is likely that the Hungarian VAT Act will also be modified in connection with tax suspension. However, it is also likely that the sanction of the VAT Act, according to which the right of tax deduction expires in case the tax number is deleted by a final decision, will remain in force.
By Eszter Kamocsay-Berta, Partner, KCG Partners Law Firm