Accounting Intelligence: Accounting duties of newly founded business entities

Based on effective regulations of the Act on Tax Procedure, taxable activities may only be performed by taxpayers having a tax number. The taxpayer wishing to pursue a taxable activity must register with the state tax authority for the issuing of a tax number.

In case of business entities, registration by the court of registration is necessary for the business-like performance of economic activities. In this case, the taxpayer’s request for registration by the court of registration initiates the issuing of the tax number.

However, in addition to the above registration, there are data which have to be reported by the taxpayer in writing directly to the tax authority within 15 days of the registration with the court of registration – i.e. the date of issuing of the tax number.

These data include, among others, the following:

- the place of keeping of documents if it is different from the entity’s seat;
- changes in the persons representing the entity indicating the tax identification number of the representatives;
- changes in the owners of the entity indicating the tax identification number of the owners;
- activities not included in the deed of foundation but actually performed by the entity;
- the statement date if the business year of the entity is different from the calendar year;
- in case of using registered office address services, name and tax number of the attorney or law firm, starting date of the attorney’s/law firm’s mandate and scope of the mandate;
- non-profit nature of the activity and
- the resolution of voluntary dissolution.

Requests for the registration of a company must always be submitted electronically to the court of registration competent on the basis of the seat of the company. However, registration with the tax authority takes place in writing on paper or electronically using in both cases the form of the Hungarian Tax Authority prescribed for this purpose.

The tax authority notifies the taxpayer of registration within 30 days and informs him/her of all of his/her registered data. From this point, the tax authority registers the taxpayer on the tax number issued and any documents submitted to the tax authority must refer to this tax number.

We have to note that taxpayers pursuing entrepreneurial activity must report changes to their previously reported data to the tax authority within 15 days of the change using the data modification form prescribed for this purpose.

In case of late, incorrect or deficient fulfilment of the registration and the change reporting obligation, the tax authority imposes default penalty in an amount of maximum HUF 500,000 for taxpayers who are not private persons.

If the taxpayer originally reported certain data to the court of registration, he/she must also report the change of such data to the court and only changes in the data which are not communication by the court of registration to the tax authority have to be reported directly to the tax authority.

In addition to the above, further changes are the modification of the declaration on value added tax and the filing of requests for the issuing or termination of Community tax numbers. The modification of the declaration on value added tax has to be submitted until the last day of the tax year before the change after which deadline, the right of modification lapses. The issuing of a Community tax number must be requested before the start of the commercial relationship.

The taxpayer must apply for the issuing of a Community tax number at the time of registration. The taxpayers wishing to do business with taxpayers resident in a member state of the European Union must have a Community tax number.

Non-Hungarian citizens acting as representatives of business entities should also apply for the issuing of their tax identification code before the acquisition of income because – unlike previously – the tax authority no longer registers non-Hungarian citizens by their passport numbers.

On the reporting form submitted to the court of registration, the taxpayer must declare for value added tax purposes that

- he/she opts for tax-exemption,
- he/she opts for taxability, i.e. VAT payment obligation instead of tax exemption in respect of the sale or letting of certain real properties,
- he/she only performs tax-exempt activities due to the public-interest and/or other special nature of his activity,
- he/she opts for taxability in respect of an activity exempt from tax due to its special nature, or
- he/she opts for a special method of tax assessment.

Special attention should be paid to the declaration concerning value added tax because the choice of tax method has a major impact on the future operation of the company in the assessment of value added tax liabilities. For instance, if the taxpayer opts for taxability in respect of the sale and/or letting of real properties otherwise exempt from tax, he/she may not vary from this choice until the end of the fifth calendar year form the year of making this choice.

A company having registration obligation is effectively established as of the day of its registration in the company register. However, the company may operate as a pre-company in the period before its registration until the date of establishment of the business entity. The pre-company may perform business-like economic activities and has an accounting obligation and is also obliged to prepare, publish and disclose a pre-company report within 90 days of its registration in the company register. Having regard to the fact that in the future electronic company registration will significantly accelerate court proceedings, the Act on Accounting allows companies not to prepare the pre-company report as a separate report if they have not commenced entrepreneurial activities during the pre-company period.

Newly-founded companies must prepare their accounting policy within 90 days of the date of foundation. The accounting policy lays down in writing the rules, regulations, methods applied by the entity for the definition of matters that are significant, material or insignificant from an accounting perspective and determines which of the options and classification opportunities the entity uses from the ones provided in the Act on Accounting and under what conditions as well as the reasons for a possible change of the practices applied.

The company must prepare as part of the accounting policy:

a) the regulation on the drawing and the counting of inventories of assets and liabilities;
b) the regulation on the evaluation of assets and liabilities;
c) the internal regulation on direct cost calculation;
d) the cash management regulation.

Within 15 days of the registration of the company, basic information on the newly-founded business organization has to be filed with the Central Statistical Office.

Also within 15 days of foundation, the start of local business tax payment obligation has to be reported to the state tax authority on the form prescribed for this purpose indicating the local municipality eligible for the collection of the local business tax. Should the company perform business activity in the territory of another municipality on a temporary basis, it is obliged to report this change to the state tax authority, which obligation must be fulfilled before the commencement of the temporary activity but on the day of commencement of the activity at the latest.

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