Approaching deadline of disclosing financial statements

The first thing that comes to the mind of an accountant when thinking of May is the obligation of disclosing financial statements but we must remember that the timely disclosure of financial statements is in fact a matter of high importance for enterprises and not for accountants. In this issue of our newsletter we present to you the consequences of not disclosing financial statements by the prescribed deadline for companies.

Deadline for the disclosure of financial statements

Annual reports and simplified annual reports are to be disclosed within 150 days while consolidated annual reports within 180 days of the balance sheet date of the business year. Accordingly, the deadline for the disclosure of annual reports and simplified annual reports for the 2010 business year, if such business year is identical with the calendar year, is May 30, 2011 and the deadline for the disclosure of consolidated annual reports for the same year is June 29, 2011.

Financial statements disclosure procedure

Based on effective legal regulations, enterprises keeping double entry books may only deposit their financial statements electronically with the Company Information Service. The financial statements submitted through the government portal “Ügyfélkapu” are disclosed automatically, which means that enterprises can fulfil two obligations at the same time, those of depositing and disclosing of their financial statements. The financial statements deposited are available to everybody free of charge on the website of the Company Information Service.

In order to meet this obligation, an electronic form has to be submitted to the Company Information Service to which companies must attach the accepted annual report or simplified annual report, the resolution on the use of the profit after tax, certification of the payment of the HUF 3,000 disclosure fee and, in the case of enterprises having audit obligation, the independent auditor’s report also. Financial statements may be filed with the Company Information Service by the legal representative of the company or the person authorized by the company for this purpose. The person submitting the financial statements is liable for the data presented in the financial statements sent to the Company Information Service being identical with the data content of the accepted financial statements. For this reason, a hard copy of the financial statements must be kept for a period of 10 years from the date of acceptance.

The person representing the company receives two confirmations of the submission of the financial statements, one from the government portal “Ügyfélkapu” and one from the Company Information Service. We have to note that if the electronic form or its attachments are not submitted properly from an IT perspective (e.g. they are not submitted in the proper format), the financial statements will not be accepted and disclosed, and this is regarded as if the enterprise has failed to fulfil the obligation of disclosing its financial statements.

Controlling of financial statements disclosure

The Company Information Service forwards the received financial statements and the relating electronic forms to the state tax authority so that the tax authority can send notices within 30 days of the deadline for the submission of financial statements to the enterprises failing to disclose their financial statements or to pay the disclosure fee. A 15-day deadline is set for these enterprises for the fulfilment of these obligations.

Legal consequences of non-compliance with the disclosure obligation

If the relevant obligations are not fulfilled within the deadline set in the notice, the state tax authority must suspend the tax number of the enterprise for a period of 60 days. The resolution on the suspension of the tax number is not mailed to the enterprise; it is disclosed by the state tax authority as an announcement (on its bulletin board and its website). There is no legal remedy against the suspension of the tax number in relation to the enterprise’s obligation of financial statements disclosure. Therefore, the period of suspension may not be shortened even if the obligation forming the basis of the suspension is fulfilled. If the enterprise fulfilled its obligation during the suspension of its tax number, it may exercise its right of tax deduction from the day of expiry of the 60-day period.

If the enterprise still fails to meet its obligation relating to the disclosure of its financial statements during the suspension of its tax number, the state tax authority initiates the termination of the enterprise at the court of registration. From this point, the company has 15 days to meet the relevant obligations. Upon the expiry of this 15-day deadline, the court of registration starts the forced dissolution of the enterprise, which is concluded with the cancellation of the enterprise form the company register.

For the above reasons, companies should proceed with utmost care during the electronic disclosure of their financial statements because if the financial statements are submitted to the Company Information Service by a person who is not authorized for this purpose or if an error occurs during the filing of the required documents, this may lead to the suspension of the tax number of the company, which may render the company insolvent as a result of the inadmissibility of input VAT deduction.

The Newsletter contains general information. Therefore, the content of the Newsletter may not be regarded as professional advice or comprehensive information for decision-making. This information – due to its nature – may not address all details, especially all circumstances of a certain transaction. Although we used every effort for our Newsletter to be comprehensive, we cannot assume liability for the outlining and interpretation of the relevant regulations.