Budget fraud is committed by anyone who, in connection with a tax, contribution or other payment obligation, or a subsidy, deceives the authorities, makes a false statement or conceals a fact, thereby causing a financial loss to the budget. It also covers unlawfully claimed tax relief and the use of subsidies for purposes other than those approved – for both Hungarian and EU funds.
Typical situations
- fictitious invoicing chains, “invoice factories”, unlawful VAT refund claims;
- concealing income, employing workers “off the books”;
- accounting for Hungarian or EU subsidies with false documents;
- excise goods (fuel, alcohol, tobacco) produced or sold without a licence;
- a company director who is only a nominee (front man) but signed the documents.
What is the penalty?
| Financial loss | Basic case | In a criminal conspiracy or on a commercial basis |
|---|---|---|
| below substantial value | up to 3 years | 1–5 years |
| HUF 5 – 50 million (substantial) | 1–5 years | 2–8 years |
| HUF 50 – 500 million (particularly large) | 2–8 years | 5–10 years |
| over HUF 500 million (particularly substantial) | 5–10 years | 5–10 years |
Breaching the accounting and reporting obligations relating to subsidies is separately punishable by up to 3 years.
The most important point: paying back the loss
If the financial loss is repaid before the indictment, the penalty may be reduced without limit. This does not apply if the offence was committed in a criminal conspiracy, by a criminal organisation or by a special recidivist. The defence lawyer therefore assesses at the very start of the investigation how large the actual loss is and on what schedule it can be repaid.
What does the defence look at?
- The amount of the loss: the calculations of the tax authority and NAV investigators can often be challenged; reviewing the items one by one can lower the category.
- Who knew what? In cases with many defendants, the liability of the accountant, the adviser or the nominee director can differ substantially from that of the person actually in control.
- Consistency between tax and criminal proceedings: statements made during a tax audit may later surface in the criminal case, so it is worth consulting a lawyer already at that stage.
Frequently asked questions
There is a tax audit at my company. Do I already need a criminal lawyer? If a larger discrepancy may come up, yes – an audit can easily turn into criminal proceedings.
I was a front man and knew nothing. Am I liable? Because of the signed documents, the nominee director is often also suspected; the defence proves that they did not know about the fraud and had no reason to know.
Facing criminal proceedings in Hungary? Read more about your defence options and what to do next: Tax and budget fraud – defence lawyer →
The full text of the relevant provisions of the Hungarian Criminal Code is available on the Hungarian version of this page. This article is for general information only and does not constitute legal advice.
About the author: Dr. László-Tamás Benő is a criminal defense lawyer in Budapest. He graduated in law in 2001 (Pázmány Péter Catholic University) and has worked as a defense lawyer since 2002, representing clients in more than 4,000 criminal cases. Contact →