Has the National Tax and Customs Administration (NAV) contacted you? Have you received a summons in a tax matter and are unsure what to expect? A frequent question from our clients is what rights and obligations they have when the tax authority calls them for a statement or testimony. How far can NAV go in its questioning? Can I refuse to answer? Do I need a lawyer? Below, we clarify the most important information so you can face the situation prepared.
In a tax procedure (be it a compliance review or a tax audit), your cooperation may be requested verbally or in writing in fundamentally three different capacities. It is crucial to know in which capacity you are being contacted, as your rights and obligations depend on this.
Know Your Role: Three Types of NAV Inquiries
Based on the Act on the Rules of Taxation (Art.), you may encounter NAV inquiries in the following capacities:
1. Statement in One’s Own Case (Art. § 59)
When? If you or the company you represent (as managing director) are the subject of the tax procedure, i.e., you or your company is being audited by NAV.
Most Important Right: In this situation, you are free to decide whether to make a statement or not. Refusing to make a statement is a fundamental right, does not require justification, and does not in itself entail adverse consequences (e.g., a fine).
What to Watch Out For? Although the right to refuse is given, strategically, it is not always the best course of action. If you do not make a statement, NAV will decide based on the available (possibly incomplete or misleading) data. It may often be in your interest to clarify the facts, present your own version, and present favorable circumstances and evidence. Before deciding whether to make or refuse a statement, you should definitely consult with your legal representative!
2. Statement in Another’s Case (Art. § 60)
When? If NAV is auditing another taxpayer (e.g., a business partner, former employer/employee) and believes you possess information related to the audited person or their transactions. Typically, this is how former managing directors, contractual partners, suppliers, and customers are contacted.
Obligation: In this case, NAV may compel you by summons to make a statement about data or facts known to you and recorded in your records.
Right to Refuse: The right to refuse to make a statement here is limited: it can only be refused if you could not be heard as a witness, or if you could refuse to give testimony (see the next point).
Form: It is important that the law here uses the phrase “may compel you by summons,” which primarily refers to written statements. However, NAV’s practice often involves summoning individuals for personal appearance in this case as well (see later under summons).
3. Witness Testimony (Art. § 62)
When? If you are not the subject of the procedure, and are not merely required to provide general data related to another party, but rather must testify about specific facts and events in a given case.
Obligation: A person summoned as a witness is obliged to appear and give testimony. The obligation to tell the truth applies; false testimony is a criminal offense!
Right to Refuse (Exceptions): Witness testimony can only be refused in a narrow range of cases:
- If you are a close relative of the audited taxpayer (under the Civil Code: e.g., spouse, lineal descendant, adopted child, sibling).
- If your testimony would accuse yourself or a close relative of committing a crime.
- If you are a media content provider (journalist) and your testimony would reveal your informant.
- If you enjoy diplomatic immunity.
Who Cannot Be Heard as a Witness?
- Someone from whom no valuable testimony can obviously be expected (e.g., due to mental state).
- Someone who would have to disclose protected data (e.g., business, banking, medical secret) and does not have an exemption from confidentiality.
The Summons and Course of the Hearing: What to Expect?
If NAV deems your personal appearance necessary, it will send a summons.
Content: The summons must specify the case, the capacity in which you are summoned (taxpayer, witness, person making a statement in another’s case), and the place and time of appearance. It must also warn of the consequences of non-attendance.
Deadline: The summons must be delivered at least 5 days before the hearing.
Obligation to Appear: The summons must be complied with. If you are unable to appear (e.g., due to illness), this must be reported and justified in advance with a valid reason.
Consequences of Non-Compliance:
- Procedural fine: If you fail to appear despite a valid summons and do not properly excuse your absence.
- Forcible attendance: If you fail to appear and do not excuse yourself, NAV may have you forcibly brought in by the police.
Place of Hearing: By default, in NAV’s official premises, but in justified cases (e.g., elderly, sick person), it may take place at your place of residence/stay.
Start of the Hearing:
Identity Verification: First, you must identify yourself.
Information: The NAV official will inform you of the capacity in which you are being heard and will advise you of your rights and obligations (e.g., rights of refusal), as well as the consequences of false testimony.
Clarification of Relationship: You will be asked about your relationship with the audited taxpayer and whether there is any bias.
Possibility of Written Statement:
- Although NAV often insists on oral hearings, the law allows a witness to provide testimony in writing instead of or after the hearing, if NAV permits this. It may be advisable to request this if it is more advantageous for you (e.g., you have more time to consider your answers).
- As mentioned, statements in “one’s own case” and “another’s case” (Art. § 59, § 60) should, in principle, be based on a written request.
Presence of the Audited Taxpayer at Witness Hearing:
- An important procedural safeguard is that if you are heard as a witness, NAV must notify the taxpayer whose case is being investigated.
- The audited taxpayer (or their legal representative) may be present at the witness hearing and may also ask you questions.
The Role of Legal Representation: Why is Its Presence Important?
Regardless of the capacity in which a statement or testimony is made, you have the right to have your legal representative (attorney) present! This is not a luxury, but an important safeguard:
Assertion of Rights: The attorney ensures that your procedural rights (e.g., right to refuse, right to ask questions) are fully asserted. They can alert you if you receive a question you are not obliged to answer.
Enforcement of “Rules of the Game”: The attorney can make observations if the NAV official makes a procedural error (e.g., exceeds the scope of the investigation, questions in an inappropriate capacity, attempts to influence the answer).
Objectivity: Experience shows that NAV officials act more objectively and in compliance with rules when the summoned person is accompanied by legal representation.
Preparation: The attorney helps you prepare before the hearing, discussing expected questions and possible answers.
No Substitution: It is important to know that the legal representative cannot make a statement on your behalf, but assists and protects you in all other aspects during the procedure.
Common NAV Practices to Watch Out For
Unfortunately, situations may arise that are worth preparing for:
Overreach: The auditor asks a question that falls outside the official scope of the audit or investigation (e.g., relates to a different period or tax type). A legal representative can help in recognizing this and in lawfully refusing to answer.
Incorrect “Labeling”: It sometimes happens that someone is summoned as a witness when, according to the law, they should be treated as a “person making a statement in another’s case” (e.g., because they were a contractual partner). This can be significant in terms of rights of refusal and the form of the procedure (written vs. oral).
Insistence on Personal Appearance: As mentioned, NAV often insists on a personal hearing even when the law would allow (or even mandate) a written statement.
Summary: Prepared and With Legal Counsel!
If NAV summons you for a statement or testimony, the first and most important step is: do not panic, but take it seriously! Understand your rights and obligations in the given capacity.
Especially important:
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Never go unprepared! Consider what the case might be about and what information you possess.
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Before Submitting Documents: Before handing over any documents to NAV (even if requested at the very beginning of the audit), consult with an attorney specialized in tax matters! It can easily happen that you submit a document that could later be used against you.
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Before the Hearing: Never make a statement or give testimony without the presence of legal representation and prior consultation! Even if you feel you have nothing to hide, a poorly formulated sentence can have serious consequences. Remember: in your own case, you can refuse to make a statement without even providing a reason.
Professional legal assistance ensures that your rights are not violated during the procedure and that the case concludes with the most favorable outcome possible.
This article is for informational purposes only and does not constitute the official legal opinion or legal position of Molnár and Márk Law Association applicable to individual cases, nor does it constitute tax advice. Molnár and Márk Law Association disclaims legal liability for the use of the contents of this article in individual cases.