In our below article we would like to give you an overview about the right of taxpayers and their representatives to inspect the documents of procedures going on in front of the tax authority (audit process, enforcement procedure etc.), and the content (scope) of this right. We briefly inform you, in respect of what documents this right may be restricted or refused by the tax authority, and we give you an answer to such typical questions like are we allowed to make a digital photo of the respective documents?

Scope of Taxpayer Rights

It is important to note that the right of inspecting the documents is granted to the taxpayers in every phase of the procedure, and this right may be exercised without limitation, therefore the tax authority must enable the exercising of this right, and may deny it only in respect of those documents which are specified by laws. In this case the tax authority has to list by item those documents which were not handed over, and has to indicate the reason of refuse in its written decision. Besides the above, the tax authority prepares a report regarding the inspection of documents.

The taxpayer is entitled to the knowledge of documents connected to taxation. He may inspect any document and ask for a copy, which is necessary for him to enforce his rights, or to fulfil his obligations. In case of a witness the law is not that permissive, hence the witness may inspect only the testimony, and the holder of an object subject to a review may only inspect the document about the review.

Restrictions on Document Inspection

Other persons may only inspect documents which contain personal data or information protected by laws (hereinafter: protected data), if he verifies, that the knowledge of the data is necessary for him to enforce his rights, or to fulfil his obligations based on applicable laws, administrative or court decisions.

According to the above, the taxpayer is entitled to inspect all documents of the tax audit, tax procedure going on against him, with the following exhaustive exceptions:

According to section 43 of the tax procedure act, the taxpayer may not inspect the following documents:

The above law is in force and effect as of 2018, and has restricted the cases of inspecting documents. The previous regulation also contained, that the taxpayers may not inspect e-mails regarding the decision preparation and proposals of the tax authority of second instance. There is neither a change in respect of the documents containing personal data of private persons, hence this does not mean that we are not entitled to inspect the full document, only the inspection of that part which contains personal data is restricted, practically this means that the tax authority covers such parts before the handover. There is neither a change in respect of the inspection-prohibition of those documents which contain qualified or protected data, hence these are typically those documents which contain state secret, and their occurrence in a tax procedure is typically pretty seldom.

Restrictions on International Information Exchange

It is an important change, that the inspection right may not be exercised in respect of documents qualifying as international information exchange and in respect of requests from other states. These mean the so-called “SCAC” requests, when the tax authority contacts the tax authority of another state which is part of the information exchange agreement, regarding information which is in the possession of that respective tax authority, and the knowledge of this data is required for a reasonable decision (finding). If such a request (query) comes from the tax authority of another state, the inspection right may not be exercised.

Timing and Restrictions on Information Requests

In connection with the above there is a regulation in effect as of 2018, according to which the taxpayer may inspect the information request sent in course of international information exchange only subsequent to the arrival of the answer.

For instance, the Hungarian tax authority is auditing a Hungarian company, which had business relationship with foreign companies. To map the aforementioned, the tax authority will send a so-called SCAC request with specific questions to a foreign tax authority. The representative of the Hungarian company may go to the tax authority and inspect the questions sent to the foreign tax authority, and forward them to his foreign partner. Therefore, the foreign partner will know exactly in advance (before the takeover of the summon from its domestic tax authority) to what questions he has to answer, which transactions are affected by the questions, and what preventive anti steps he may should take. To avoid the above practice, the taxpayers may only live with their inspection right subsequent to the arrival of the foreign tax authority’s answers.

Other Restrictions During Audit Procedures

The inspection right regarding documents qualifying as providing information may also be restricted until the start of the audit, if it is likely, that their knowledge would endanger the success of the future audit. The tax authority shall always issue an order with a reasoning regarding the restriction of the inspection right.

Costs of Document Inspection

It is important to underline, that in course of inspecting the documents there can be for instance in course of a tax audit more thousand pages of documents. If the taxpayer asks for a copy, he has to pay a stamp duty of HUF 100 for each page, but making digital pictures of the documents is free of charge.