Tax penalty amounts doubled in Hungary

Default penalty amounts generally has been doubled in Hungary as of 1 August 2024. According to the Governmental Decree published in the Hungarian Gazette on 8 July 2024, overwriting the Act on the Rules of Taxation, the increase is due to the Ukrainian war and is theoretically effective by the end of the emergency period.

According to the amendments published in the Hungarian Gazette, as of 1 August 2024, the amounts of the default penalty that can be imposed by the Hungarian tax authority (NAV) as a general default penalty is capped:

• for natural persons at HUF 400,000 (instead of HUF 200,000);
• for legal entities (non-natural persons) at HUF 1 million (instead of HUF 500,000).

The specific default penalty cap is also increased from HUF 1 million to HUF 2 million for employing undeclared workers, failing to issue a proper invoice or receipt or in compliance with archiving rules.

The current changes do not introduce any new penalty scenarios in the Act on the Rules of Taxation, ‘only’ the amounts of the penalties are increased. The new penalty amounts will apply to taxpayers who fail to fulfil their tax obligations due after 1 August 2024 and can be already applied during the targeted tax inspections by the tax authority at the popular holiday sites in the remainder of the summer season.

As mentioned, the increase has been introduced via a governmental decree for the state of emergency, period, the Act on the Rules of Taxation has not been formally changed. Based on recent experience and also taking into consideration the inflation in past few years in Hungary as well, it is expected that the increased amounts will stay with us permanently.