In a surprising turn of events, a Hungarian boutique owner's attempt at tax evasion was uncovered by the National Tax and Customs Administration of Hungary (NAV) through their own promotional video posted on Facebook.
The video inadvertently provided evidence against the owner’s claims regarding boutiques' refurbishment during the period when VAT deductions were sought.
The investigation began when NAV became suspicious of invoices related to the boutique's alleged renovations, which totaled ten million forints and included three million forints in VAT. The invoices were all issued by a single company, raising doubts because the diversity of work claimed such as construction, interior design, and product-related services would typically require the expertise of multiple companies, not just one.
During the tax inspection, the entrepreneur was unable to produce any documents related to the invoices for the multimillion-forint refurbishment and material procurement. However, the allegedly responsible contractor had issued a significant number of invoices without presenting convincing references.
Further investigation revealed that the company issuing the invoices lacked the necessary personnel and resources to perform the work detailed on the invoices. Additionally, they failed to include these invoices in their VAT declarations, did not pay the transferred tax, and were unreachable. The supposed cash settlement for these invoices left no trace.
Despite the boutique representative’s statement that the renovations took place in the period corresponding to the issuing of the invoices, NAV auditors found a promotional video on the boutique's
Facebook page that was uploaded months prior to the date of the invoices. The video showcased the renovated boutique, fully furnished and stocked with goods. Moreover, continuous sales data was being transmitted from the boutique's cash register during this time, indicating that the store was open for business, and therefore, no refurbishment could have been taking place.
The entrepreneur’s statements changed multiple times under scrutiny, and witnesses provided contradictory answers to even the simplest inquiries (such as when the renovation occurred, what work was done, and who participated).
NAV concluded that the invoices in question were untrustworthy and existed without any underlying economic transaction to justify them. Thus, their VAT content was not deductible. Despite the entrepreneur’s appeals and subsequent requests for supervisory measures, the decisions remained substantiated and in accordance with the law. The business later paid the determined tax difference of 9.3 million forints, including tax fines and late payment fees.