A tax audit is a procedure during which the tax authority assesses whether a taxpayer has fulfilled their tax payment and filing obligations in accordance with legal requirements. This process takes various forms, all aimed at providing the state with an accurate picture of the taxpayer’s activities concerning public revenue collection. During a tax audit, the authority may request documents, conduct on-site inspections, and hear both the taxpayer and individuals with relevant information about the matter.

Under current Hungarian regulations, the tax authority—whether the National Tax and Customs Administration (NTCA) or another body vested with taxation powers—must clarify the facts of the case. This involves obtaining documents related to the transaction and hearing individuals who may hold pertinent information about a specific deal or event. The form of the hearing can vary: it may take place as witness testimony or as a statement. Consequently, it is vital to determine the exact capacity in which an individual is being heard.

Why Might Witness Testimony Be Required in Tax Matters?

📚 Related: About the three capacities in NAV inquiries (own case, another’s case, witness) and the summons process: NAV Hearing – Rights and Obligations →

Witness testimony in tax matters often serves as a key evidentiary tool during a tax audit. For instance, if an individual has no current or past contractual relationship with the audited taxpayer but possesses information that aids in clarifying the facts, the tax authority may compel them to appear and testify. This obligation particularly applies to those who directly observed a contract negotiation, execution, or the manner of performance, even if they were not formally involved in the transaction.

Obligation to Provide a Statement and Section 62 of the Air.

Hungarian tax law, specifically the Act on the Rules of Taxation (Air.), addresses the obligations of testimony and statements in multiple provisions. Section 62 of the Air. states:

“The tax authority may hear as a witness any person who may have knowledge of facts relevant to the subject matter of the procedure to clarify the facts.”

An individual who receives a lawful summons is obliged to appear. However, a witness may be exempt from testifying if statutory grounds for exemption exist, such as professional confidentiality (e.g., attorney-client privilege or medical secrecy) or if testifying would expose the witness or a close relative to criminal prosecution.

Personal Hearing vs. Written Testimony

Witness testimony in tax matters may occur in person or in writing. It is common for the tax authority to issue a summons requiring personal appearance. However, Hungarian regulations, particularly Section 63 of the Air., allow a witness to request to provide testimony in writing. This option is exceptional and subject to the tax authority’s approval. In practice, the authority may deny this request if it determines that only an in-person hearing can ensure the completeness of the information.

Procedure for Witness Testimony Under Section 62 of the Air.

  • Issuance of Summons
    The tax authority sends a formal summons specifying the location and time of appearance.
  • Hearing
    The witness is questioned by the lead auditor or a designated tax official. The witness is obligated to tell the truth but should be aware of statutory exemptions.
  • Recordkeeping
    A record of the hearing is prepared, which the witness may review and sign if they agree with its contents.
  • Option for Written Testimony
    Upon request or in justified cases, the tax authority may permit the witness to submit testimony in writing instead of or in addition to an in-person hearing, though this requires approval.

When Can Witness Testimony Be Refused in Tax Matters?

Tax law distinguishes between cases where a person “cannot be heard as a witness” and where “testimony may be refused”:

  • Cannot Be Heard as a Witness
    For example, individuals bound by professional confidentiality (e.g., attorneys, doctors).
  • Testimony May Be Refused
    If testifying would place the witness or a close relative at risk of criminal liability.

In such cases, consulting a legal representative is critical.

Statements Before the Tax Authority and Provision of Information

Beyond witness testimony, statements also play a role during tax audits. These two processes operate under different frameworks, imposing distinct rights and obligations on the individual being heard.

If an individual has or had a contractual relationship with the audited taxpayer, the tax authority may compel them to provide a statement under Section 60 of the Air.. This obligation typically arises when the person was a business partner, supplier, or service recipient of the audited taxpayer. In such instances, the authority may require the individual to clarify contract details, payment methods, or other relevant facts.

Statements in One’s Own Case

When an individual is the audited taxpayer, they generally have the right to make a statement during the tax audit. This is not only an option but often in their interest, as full and accurate cooperation can expedite and favorably resolve the procedure. However, the tax authority cannot compel the taxpayer to appear in person or provide an oral statement. The taxpayer may choose to submit a written statement or convey information through a legal representative, such as an attorney.

Obligation to Provide Statements in Connection with Other Parties

If the statement pertains to another taxpayer’s case and a contractual relationship with the audited party is demonstrable, the individual may be compelled to provide a statement. Refusal is permissible only if grounds for refusing testimony (e.g., self-incrimination or professional confidentiality) apply. We note that the tax authority often prefers statements to be made in person at its premises, though we believe this can only be requested through a written summons.

Provision of Information for the Tax Authority

The provision of information for the tax authority is a less formal form of evidence collection. Here, the authority seeks clarification on specific issues through more informal means. This does not always require personal appearance, but the authority may request written responses to certain questions within a specified deadline. Failure to comply with this obligation may result in fines or other enforcement actions by the tax authority.

How Molnár & Márk Assist with Statement Obligations and Tax Audits

Tax matters, particularly tax audits, constitute a complex legal field. Potential risks—such as tax fines, sanctions, or criminal liability—can have severe consequences. Therefore, it is critical to engage professional assistance from the outset, whether as the audited taxpayer, a witness, or a person obligated to provide a statement.

The Molnár & Márk Law Association aims to provide comprehensive support to clients throughout all stages of tax authority proceedings. Their services include:

  • Support During Tax Audits
    Assistance in preparing documents, coordinating the audit process, and drafting necessary submissions, appeals, or comments.
  • Legal Representation Before the Tax Authority
    When the tax authority seeks to hear the taxpayer, statement provider, or witness in person, Molnár & Márk’s attorneys provide representation, ensuring procedural rights are upheld and crafting legal arguments.
  • Advice on Statement Obligations
    Preliminary assessment of lawful options for refusing testimony and guidance on the most appropriate responses to avoid self-incrimination.
  • Tax Litigation and Appeals
    Representation in court for tax disputes and related appeals, safeguarding clients’ legal and economic interests.

Expert Support in Tax Audits

Molnár & Márk possess extensive expertise in both preventive and reactive tax advice. Preventive counsel helps clients establish legally compliant contractual structures to minimize legal or tax risks during potential audits. If an audit is already underway, the firm’s attorneys represent clients before the authority, assist in fact-finding, and effectively address the authority’s inquiries.

When a statement obligation arises, Molnár & Márk’s attorneys thoroughly review the client’s documentation and contractual background, preparing them to provide accurate and lawful responses to the authority’s questions. They also advise when refusal is legally permissible. The firm goes beyond drafting submissions, developing proactive strategies to manage potential outcomes of tax authority proceedings.

  • Tax Advice and Planning
    Assistance in designing optimal tax structures, including corporate tax, VAT, local taxes, and more.
  • Representation in Tax Audits and Litigation
    Full representation before authorities and courts, from initial audits to multi-level litigation.
  • Corporate and Labor Law
    As tax issues often intersect with corporate or labor law, the firm offers comprehensive solutions in complex cases.

Through expert support, businesses and individuals can better understand their rights and obligations, reducing the risk of adverse outcomes during or following authority proceedings.

Conclusion

A tax audit is an official process wherein the tax authority comprehensively examines the financial relationships of the audited taxpayer and related parties. To this end, the authority may collect information through witness testimony, statements, or provision of information. The method of hearing (in-person or written) depends on the authority’s discretion, though personal statements cannot be mandated in certain cases.

Legislation strictly regulates who can be compelled to provide a statement and when testimony may be refused. This dual purpose ensures the tax authority obtains accurate, verifiable information while preventing individuals protected by confidentiality or higher legal safeguards from being forced to testify.

During a tax audit or inquiry, it is always advisable to be aware of one’s rights and obligations. Affected individuals—whether as witnesses or statement providers—should understand how best to cooperate with the authority and when to seek expert or legal assistance. Thorough knowledge of regulations and professional representation not only minimize risks but often expedite proceedings and reduce costs.

The Molnár & Márk Law Association offers comprehensive solutions in tax audits, litigation, corporate law, real estate law, and beyond—whether for company formation, VAT advice, or contractual matters. It is highly recommended to consult our experts if summoned as a witness, obligated to provide a statement, or involved in any procedure related to Section 62 of the Air. on witness testimony.