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Each year, more and more people are interested in the rules and regulations affecting company cars in Hungary, so we felt that we should present a comprehensive synopsis about this topic. In our current article, we are going to cover every important detail about company cars, to answer every question that might arise.
The current Motor Vehicle Tax Act and Act on PIT provide the outline of the passenger cars that are subjected to company car tax, as well as the ones that are not subjected to car tax.
From the perspective of company car tax a passenger car is a passenger car based on Act on PIT, excluding the environmentally friendly cars. The environmentally friendly car is the electric car and cars with zero emission. A zero emission car is a car which does not emit air pollutants during its intended use (environmental classification code: 5Z)
The outline defines each of those as follows:
Subjected to company car tax: those passenger cars that are not owned by private individuals or those passenger cars whose costs and expenses have been accounted according to the Accounting Act, or their expenses and depreciation allowances have been written off with the method of itemized expense accounting in accordance with the Personal Income Tax Act.
Not subject to company car tax: Those passenger cars that are owned by private individuals and in connection with the usage, the owners receiving reimbursements, but the itemized costs have not been accounted for.
The registered owner of the passenger car. In the case of several owners (co-owners), they are subjected to company car tax in proportion to their ownership.
In the case of finance leasing, the lessee is subject to the tax.
In the case of a passenger car owned by the Hungarian State, that person or organization holds the passenger car’s trustee rights. If besides the rights of the trustee, there are rights of use that exist too, then the person or organization holds the rights of use.
In case of a passenger car not included in the official register, the person or organization that accounted for expenses for the use of the passenger car.
In the case of passenger cars not owned by private individuals, company car tax liability arises on the first day of the following month of acquisition of ownership, while in the case of passenger cars owned by private individuals, company car tax liability arises on the first day of the month in the preceding month of which the owner claimed any expense for the passenger car.
In the case of private individual owners, on the last day of the month, the owners claim any itemized expense for the passenger car. In the case of non-private individual owners, on the last day of the month, the owners alienate their passenger car. Furthermore, the tax liability terminates on the last day of the month, in which the passenger car is unlawfully alienated or has been destroyed.
The company car tax needs to be self-assessed quarterly (which involves an obligation to assess, declare, and pay the tax) for each month of the calendar year, and its monthly rate depends on the car’s capacity expressed in kW and its environmental category, as follows:
| Engine capacity | Environmental category | ||
| 0, 1, 2, 3, 4 category | 6, 7, 8, 9, 10 category | 5, 14, 15 category | |
| 0-50 kW | HUF 30,500 | HUF 16,000 | HUF 14,000 |
| 51-90 kW | HUF 41,000 | HUF 20,000 | HUF 16,000 |
| 91-120 kW | HUF 61,000 | HUF 41,000 | HUF 20,000 |
| Over 120 kW | HUF 81,000 | HUF 61,000 | HUF 41,000 |
To prevent double taxation, motor vehicle tax can be deducted from the company car tax. If the taxable person persons paid their motor vehicle tax within the applicable deadline, they can deduct their tax for those months of the quarter, in which they were liable for both taxes.
Company car tax needs to be self-assessed. The tax assessment, declaration, and payment need to be submitted quarterly for each month of the calendar year in which the tax liability prevailed by the 20th day of the subsequent month by using the tax authority’s relevant declaration document.
Those passenger cars are exempt from tax and are operated for regular transport of health prevention or curative purposes, social purposes by foundations, public foundations, organizations, and public bodies founded for helping health impaired and disadvantaged people.
The purchase price of the vehicle can be considered as eligible cost by the general rules of the fixed assets, which implies the main rule on accounting and corporate tax base determination that the cost of these assets has to be considered by depreciation method.
The purchase-, upkeep-, maintenance-, repair- and fuel costs can only be enforceable by properly issued invoices.
The private use of company cars provided by the employer, road-use vignettes and tickets in connection with them, according to the Act on Personal Income Tax, are considered as tax free fringe benefits.
Certainly the rules of company cars, affecting the personal income tax, value added tax and corporate tax, are much more complex, thus if you have any additional questions or need further information, please feel free to contact us, our experienced tax advisors would be pleased to help you.
As another element of the co-operation in the field of taxation within the European Union, DAC6 reporting in Hungary (the so-called reporting obligation of aggressive tax structures) entered into force on 25th June 2018. Directive was implemented by the Hungarian legislation in June 2019.
The Directive shall be applied to cross-border arrangements, which means that domestic arrangements will not be subject to the reporting obligation. Cross-border arrangement is defined by the Directive.
In addition, the directive defines hallmarks that capture certain typical features and elements of aggressive tax structures, through which tax evasion and abuse can take place.
The existence of certain hallmarks itself results in a reporting obligation, while other hallmarks generate reporting obligation only if – above the existence of hallmark – achievement of a tax advantage was the main advantage or one of the main advantages of the particular arrangement.The hallmarks are the following:
The directive established the main benefit test. The test has two steps: the first step is to perform a test to examine the main benefit. If the arrangement does not pass the test, that arrangement must be reported to the tax authority.
If the arrangement meets the criteria of the test, the hallmarks used in the main test can no longer be used. In the second phase only the “remaining” hallmarks can be examined.
The directive imposes a reporting obligation on those who are involved in tax planning. As a consequence, the obligation to provide information will primarily fall on tax advisers, but under the Directive, either the financial institution involved in the scheme or the taxpayer itself may be required to provide information – in the latter two cases.
The Directive specifies exactly what information must be provided to the tax authority. The information required by the Directive should, as a general rule, be sent to the competent tax authority within 30 days of the occurrence of the events specified in the Directive.
The deadlines are the following:
1. The shops, with the exception of pharmacies and petrol stations, can stay open until 7 pm and then open when the curfew expires, meaning at 5 am at the earliest. Service providers and services not covered by the decree (such as hairdressers, masseurs, personal trainers) may operate normally in accordance with the rules of the curfew.
Everyone is obliged to wear a mask that constantly covers their nose and mouth during working and shopping as a guest in the shop.
2. The operator must ensure that people staying in the business premises wear the mask properly.
A person who does not wear the mask as prescribed above shall leave the premises. The operator shall make sure that such person leaves the business area.3. Everyone is obliged to be at their place of residence, habitual abode or accommodation between 8 pm and 5 am, except (certified by written evidence) in case of
4. Shop must be closed between 7 pm and 5 am. Presence is forbidden between 7 pm and 5 am, except for the employees.
5. The shop, the operator and the shopkeeper must ensure the effective enforcement of the protection measures.
6. Commercial activity (out of premises) with the purpose of supplying the population can be carried out without notification, under the agreement concluded with catering company or with FMCG trader. This activity can be carried out by the catering company or FMCG trader itself.
7. If the controlling authority becomes aware of a breach of the abovementioned obligations, it may impose a fine of HUF 100,000 to HUF 1,000,000, and may temporarily close the business premise, area, institution or site for a period of at least one day and a maximum of one year – it may use both means.
The fine may be applied in multiple times on the same day.
The abovementioned legal consequences do not apply, if the operator or the operator’s employee has taken the necessary measures in order to make the illegal situation end, in particular
8. Distance work: During the period of the emergency, Labour safety rules pertaining to distance work shall not apply.
In case of distance work, the employer informs the employee about the rules of necessary working conditions that save health and safety, and the employee is entitled to choose the place of work in accordance with these working conditions.
During the period of emergency,
shall be considered as cost deductible, if the individual does not claim any other costs (stipulated in Act on PIT) regarding the distance work.
The payer performing a supported main activity shall be exempted from social contribution tax for the month of November with regard to natural person employees.
The payer performing a supported main activity shall be exempted from vocational training contribution for the month of November.
The payer performing a supported main activity shall be exempted from rehabilitation contribution and any other advances in 2020.
Staff costs occurred in November does not constitute tax base
Supported main activity shall be the activity which forms the major part of the incomes of the payer or the small business taxpayer in the six months preceding date of entry of the government decree, but at least 30% of his/her income.
Beneficiary activities: Restaurant, mobile hospitality; Event catering; Beverage services; Film screening; Arranging of conferences, trade shows; Sports and leisure training; Performing arts and ancillary activities; Operation of art facilities; Museum activities; Plant and zoo operation; Operation of a sports facility; Sports association activities; Exercise services; Other sporting activities; Amusement park activities; Physical wellness services; Other entertainment, leisure activities.
The condition of claiming the benefits is that the payer fulfils the obligation to pay wages under an employment contract already in force at the time when the Decree entered into force and does not terminate employment contracts by dismissal in November 2020 pursuant to the Labour Code.
The precondition of the benefit is that:
Eligibility: same as the supported activities indicated in the tax reliefs
Employer may be eligible for an allowance equal to 50% of the gross wage of the employee, if
The allowance can be granted only for the month of November 2020. The allowance or the pro rata allowance will be paid to the employer in arrears.
A retail tax in Hungary will be introduced as of May 1,2020, as one of the sources funding the current epidemic. The exact rules of the retail tax are set out in the Government Decree of 109/2020 (IV. 14) (hereinafter Decree). The retail tax will affect a number of non-resident and resident taxpayers engaged in activities in the commercial sectors. Please find a list of these sectors covered by the Decree:
The tax is based on taxpayers’ net sales from retail activities, increased additional revenues specific to this sector from services provided to suppliers, which are not listed item by item in the Decree, but as an example they could be various bonuses, and revenues associated to marketing and logistics services. The tax base should also take into account the discounts granted by their suppliers to the retail partners.
Due to the exclusion of the possibility of tax evasion, the net sales of related companies (determined in CIT law) must be added together to determine the amount of the tax base.
The progressive rate of the retail tax is as follows:
Tax payable is equal with the tax base multiplied with the rate and then proportionated with the days of emergency elapsed from 1st May compared to the sum number of days of calendar year.
Taxpayers are required to file the first tax return of monthly tax advance by 31 May 2020, the amount of which is as a general rule 1/12th of the net sales revenue from the last tax year closed before 1 May 2020, multiplied with the above-mentioned rate. Monthly tax advance must be paid by the last day of the calendar months in which the emergency lasts for at least one day.
An advance reduction may also be requested if the taxpayer’s net sales in the month preceding the due date of the monthly tax advance did not reach 60% of the net sales of the same month of the previous year, because in this case, the state tax authority proportionally reduces the advance.
The emergence of COVID-19 pandemic crisis raises a number of new challenges for companies, as more and more sectors suffer from the economic effects of the virus. The pandemic clearly affects the supply chains of multinational enterprises (MNEs) and their intercompany transactions, consequently, transfer prices. Not only supply chain disruptions or challenges of cross-border mobility of their employees are the challenges which MNEs have to face with, but also significant erosion on their profit margins and consequently on their tax base, which may predict certain government actions.
As a result of the governmental measures taken to curb the epidemic, companies are striving to adapt their business processes in a way to cause the least possible interruption on the continuity of their operations. Consequently, our Clients may face with a number of factors that could have significant transfer pricing implications for an international group, e.g. from the issue of loss-making operation to the reorganization of business models or complete group structures.
The OECD Transfer Pricing Guidelines deals in detail with the consideration of outstanding economic situations. Although losses caused particularly by force majeure is neither discussed by the international OECD Transfer Pricing Guidelines nor local Hungarian regulations, so in this regard we cannot rely on clear guidance, certain useful conclusions can be drawn from these regulations. The elaboration of the new business processes and pricing constructions can be a serious matter from the perspective of the arm’s length principle and administrative tasks, as potential breaches of corporate tax base – implying significant shortage of national tax revenues – come under focus. As a result, transfer pricing planning and supporting unfavourable business conditions with appropriate documentations have become more important than ever.
It is already clear that the administrative burden on MNEs will increase radically in 2020. Additionally, we need to be prepared for that the significant governmental efforts made for finance the pandemic measures and stimulate the economy will inevitably result in future pressure on tax authorities to boost tax revenues through audits. We believe that in the current economic climate, this must not be a governmental priority until the outbreak of the pandemic, but after the affected years, MNEs are likely to see increased scrutiny by tax authorities. Accordingly, high proactivity might be required from taxpayers in respect of transfer pricing planning, focusing on the relationships between adverse economic factors attributable to the epidemic and the performance of the affected tax years.
In the framework of the control due to the coronavirus pandemic, the Hungarian government, which is taking advantage of the given extraordinary legislative opportunity, has established several detailed regulations that combined the aim to contribute in ensuring the competitiveness of the Hungarian economy and to preserve jobs. Please find detailed information below;
Contrary to the current provisions of the Labour Code, the typically four- and six- month working limits were uniformly raised to twenty-four months by the relevant legislation. The new provision provides more flexibility for the employees and also for the employers.
The government wants to help businesses by setting up rules for employment of employees with reduced working hours. Reduced working hours require an amendment to the employment contract: employee can now be employed 50-70% of the time compared to the previous working hours, for at least four hours a day. The related state support can be applied by both the employee and the employer in a form of a joint application, for a period of maximum three months. Relevant documents must be submitted to government offices, while the employer must have been in operation for at least six months, and the employee cannot be under termination.
We definitely recommend the involvement of an expert, because this support is not automatic: the changed circumstances and the reasons for the support must be justified – for as long as possible. The procedure is conducted electronically, with the government office deciding within eight days of submission. There is no remedy. In the case of a rejected application, it can be resubmitted once (obviously it is advisable to reconsider the new application and supplement it by additions).
There is no public charge for the grant. Temporary employment is not covered by the support and cannot be claimed by companies that are subject to bankruptcy, liquidation or winding-up proceedings.
On March 27 2020, the Hungarian government issued further regulations and tightened the conditions for who can leave their place of living. The main purpose of these restrictions on movement in Hungary, which are in force since 28nd March, is to allow citizen to leave their homes only in cases when it is absolutely necessary.
Many of the activities covered by the regulation are exempt from the conditions, one of them for example is leaving home for work purposes.
The two downloadable forms are great help for employees and those working based on an engagement letter to prove to the authorities with an official certification that they have left their home for work purposes.
In the case of the engagement letter, either the appropriate title (megbízott/vállalkozó or megbízó/megrendelő) in the document should be underlined, or the irrelevant deleted.
The form can be expanded as desired and can also be customized for the regional representative. For such and similar job positions, it is advised to prove where exactly the employees go to. It may be worthwhile to include exact destinations or counties into the forms.
In addition to the form, it is worthwhile for employees to keep the employment contract and/or job description on them.
However, we would like to draw your attention to the fact that we cannot foresee the practice of law enforcement related to the new government decree, therefore we cannot guarantee that the documents will always be sufficient, but currently there are no restrictions or regulations in the decree.
The decrees, published Monday night in the Hungarian Gazette, provide the following facilitation for companies, private debtors, children educators and credit card users in Hungary.
During the time of the emergency, the following provisions of Act LIII of 1994 on judicial enforcement shall apply with the following differences effect from 24 March 2020:
At the request of the debtor, the enforcement court may suspend the enforcement if the debtor is placed in a life situation which is an equitable circumstance in connection with the epidemiological measures.
Provisions specifically relating to proceedings pending in front of the tax authority:
In cases of suspension, the tax authority shall:
According to the Government decree, from April 15, 2020 at the latest, it will be realized that in touch-based payment the limit will be no longer HUF 5,000, only in case of the payment above HUF 15,000 the PIN code of the card will be necessary.
who performs the following activity identified by TEAOR and TESZOR as the actual principal activity, means that, in the six months prior to March 24, 2020, the taxpayer generated most of the revenue, or at least 30% of the revenue from the following activities:
For those taxpayers listed above who are required to pay the rehabilitation contribution, the rate of the rehabilitation contribution is two-thirds of the contribution pursuant to point 5, article 23 of Act on rehabilitation contribution and benefits for disabled persons. In addition, they are not required to pay any advance on the rehabilitation contribution.
The individual Small Business Tax (KIVA) taxpayer who carries out one of the above activities as an actual principal activity does not consider the amount of personal expenses as a small business tax base in determining the small business tax liability for the months of March, April, May and June 2020.
The Itemized tax to small businesses (KATA) taxpayer who is engaged in any of the following activities (hereinafter “exempted activities”) shall be exempt from itemized tax to small businesses with respect of March, April, May and June 2020.
Exemption from the obligation to pay taxes does not affect the entitlement of social security benefits and the amount of those benefits.
The KATA taxpayer can pay its tax debt which was due before 1 March 2020 in instalments at no extra cost.
The Hungarian Government has adopted a new decree no. 47/2020. (III. 18.) Korm. r. (hereinafter the “Decree”) in order to alleviate the effects of coronavirus pandemics on the economy. The Decree sets forth the following relaxing measures in favour of the companies operating in Hungary and private debtors.
A general suspension of payments is introduced for all credits, loans and financial leases disbursed until midnight 18th March 2020. Both corporate and private debtors benefit from this moratorium, which concerns all payment obligations of capital, interest and banking fees. The suspension of payments is ordered until 31th December 2020.
The modification of payment deadlines operated by the Decree extends to securities securing loans like sureties, liens and mortgages. In our opinion, these securities are preserved during the extended term of the loan.
The moratorium applies to contracts expiring during the emergency situation. It means that these credits, loans and leases are automatically extended by the force of the Decree.
It should be highlighted that debtors are entitled to payback according to the original terms and conditions of the contract. This rule can be useful if the company or private person concerned wishes to decrease his debts.
Annual percentage rate of charge (APR) of consumer credits contracted after the entry into force of the Decree is limited to the prime lending rate plus 5 %.
We expect the adoption of further measures incentivizing banks to lend, possibly from the toolkit of the central bank.
Taxation and employment rules have been announced by the Decree in order to save workplaces in the sectors most hardly hit by the crisis. The aim of the Government is to temporarily decrease the tax burden of the employment in sectors of tourism, restaurant and catering, gambling, film industry, performing arts, event organisation and sports (hereinafter the “supported sectors”).
Pursuant to Article 3 of the Decree, the rental agreements for offices and shops in the supported sectors cannot be terminated by notice before 30th July 2020. No distinction is made by the Decree between contractual termination and immediate termination. In our opinion the interdiction should be interpreted broadly. In fact, a restrictive interpretation would mean that many rental agreements would be terminated for late payment or non-payment of rents. This is the contrary of what the Decree wants to achieve in the supported sectors. Therefore we think that no termination can take effect until the 30th July, for whatever reason. During the same period, the rents cannot be increased either.
Business units acting in touristic, catering, entertainment, gambling, film, performer, event-organiser or sports sectors shall not pay the 17,5% social tax and 1,5% vocational training fee. Employees working in these industries shall pay the 4% health care contribution only – thus they are exempt from 10% pension fund contribution, 3% health care contribution and 1,5% labour market contribution. What’s more, the 4% health care contribution is capped at HUF 7 710, so the volume of contribution does not increase above a gross salary of HUF 192 750.
Restaurants and other catering service providers and accommodation service providers shall not pay the 4% touristic contribution from March till end of June.
Taxi drivers and other passenger transporters subject to Simplified Entrepreneurial tax are exempt from the monthly tax burden for the months of March, April, May and June.
The practical rules – such as transitional rules, proportionating rules, etc. – will be ruled through Governmental Decrees in the near future.
Many questions have arose since the declaration of the emergency situation on 11th March 2020 concerning the legality of measures taken by employers to contain infection and reorganise work. Article 6 of the Decree sets forth the following rules with the view of enabling flexible employment solutions:
According to original rules of the Labour Code, employers could alter the communicated work schedule at least ninety-six hours in advance before the start of the scheduled daily working time. Moreover, work schedule could only be altered if it was justified by unforeseen circumstances in the business or financial affairs of the employer. The Decree exempts employers from these limitations. It means that now employers can alter work schedule at any time, on a discretionary basis.
With some restrictions, employers have already been entitled to instruct employees to work from home. However, only a maximum period of 44 working days per calendar year could be covered by unilateral instructions and the consent of employees was required for longer terms. Now the Decree has suspended this limitation.
The Decree empowers employers to take all necessary and proportionate measures to check the health status of employees. In our opinion, this provision overrides rules of the Labour Code concerning data procession. The employers are now entitled to require statements from the employees concerning their health conditions and to submit them to medical checks not prescribed by law. Thus it becomes possible for companies employing several employees at the same workplace to screen employees possibly infected by the coronavirus.
There are two options to relief the tax burden of taxpayers in all business sectors.
The Hungarian Government announced yesterday that the tax authority shall treat the requests of payment reliefs fairly.
Besides payment relief, the another possibility is the moderating (decreasing) of the CIT advance.
A taxpayer may request the tax authority to revise the amount of tax advance if the advance is paid on the basis of the previous period and the amount of tax, according to the taxpayer’s calculations, will be less than the amount of tax advances payable on the basis of the previous period.
If you decide to use this procedure, please let us know and we are at your service to prepare and submit the application.
The VAT exchange rate may be different in the matter of taxation and accounting. The reason is that it is not necessary to synchronize the applied exchange rates, but the legal requirements must be followed; the exchange rate of the Tax Law must be used in taxation, while the exchange rate of the Accounting Act must be used in accounting matters. However, these two can be the exact same, facilitating the work of businesses and accountants.
Using cloud-based enterprise management systems, nowadays, invoices, and even foreign exchange transactions, can be issued at the touch of a button from anywhere in the world, ensuring speed and efficiency.
However, will invoices issued in such an efficient way comply with the Act CXXVII of 2007 on VAT (hereinafter referred as VAT Act)? The answer to the question lies in the article below.
Suppose that based on contract, the consideration to be paid in HUF is determined at the current exchange rate of a foreign currency or at a fixed exchange rate. In this case, the tax base will be expressed in HUF on the invoice issued for the transaction. It is a lucky situation: the exchange rate does not have to be tested.
Care should be taken, when parties agree on the consideration of the transaction in a foreign currency other than HUF, and then VAT exchange rate difference may occur. In such cases, when transaction falls within the VAT Act, the tax base determined in foreign currency must be ’converted into HUF’.
The reason for the imperfection of the automated billing and enterprise management systems lies in the dual exchange rate technique. Depending on the accounting policy of the company, the accounting exchange rates of the outgoing and incoming invoices in foreign currency may differ from the VAT exchange rate according to the VAT Act.
The value of an invoice issued in a foreign currency must be converted into HUF and set into the accounting according to the exchange rate of the day of fulfilment or – if there is contract made – to the date of fulfilment marked in the contract. This can be the average of the daily selling and buying rate of the selected credit institution, or the official exchange rate of the MNB (Hungarian National Bank), or ECB (European Central Bank). However, if the valuation of these exchange rates causes significant distortion in the values of assets and liabilities or in the result, then for the sake of a true and reliable outcome, there is an option for businesses to use only the selling or buying rate, when converting the value of an invoice issued in foreign currency.
Therefore, to avoid the dual exchange rate technology, it is advised to set an exchange rate that can be matched to the VAT exchange rate according to the VAT Act. If a company does so, the same exchange rate can be applied in the general ledger as in the VAT analysis, so the accounting system does not have to operate at double rate.
If, however, the company decides to use dual exchange technology, the items recorded in the general ledger based on the accounting policy may differ from the exchange rate of the VAT analysis for each reporting period, which may arise in exchange rate differences. The principle is that accounting should match with the VAT return, so at the end of the recording periods, the ledger must be adjusted to the return in HUF, i.e. the differences on the accounts of 466-467 are to be adjusted against exchange rate gains or losses.
It has already been mentioned that the tax base must always be determined in HUF. When determining the tax base for foreign exchange transactions, the taxpayer liable for tax payment must apply the provisions of Section 80 (2) of the VAT act, and either of the exchange rates discussed in 80/A §.
Important, that only the tax charged on this given tax base in HUF can be deducted, so we recommend to each invoice receiver, to check whether the supplier partner has calculated with the correct tax base.
For the purpose of determining the expressed tax base of a foreign currency in HUF, the applicable rate on the day of fulfilment must be taken into consideration. Except, if the special circumstances of the transaction triggers extraordinary method.
It implies the factual realization of the transaction, when all elements of the transaction have occurred; when all conditions laid down by the parties in the contract, and all requirements imposed by the law meet. Handling of some types of transactions are indicated explicitly in the VAT Act itself. Such are the normal product sales, payment in instalments, commissioning, and free of charge transactions. If the subject of the transaction is divisible in nature, and there is no further obstacle for partial fulfilment, than each partial fulfilment can also be considered as date of fulfilment.
Thus, based on the general rule, the conversion to HUF shall be done at the exchange rate of the day of fulfilment.
In case of product acquisition within the Community, transactions subject to the domestic reverse charge (R/C) taxation, and in case of importation of product, conversion into HUF shall be done on the exchange rate applicable at the time of upraise of tax liability.
To determine the tax base in HUF in the case of EU acquisition of product, the exchange rate date must be the day of the issue of the invoice, but no later than the 15th day of the month following the fulfilment.
In transactions, between two Hungarian taxable persons, which are subject to domestic R/C as referred in Section 142 of the VAT Act (such as labour hiring, sales of scrap metal), the following three events must be identified to determine the tax base in HUF: – arrival of invoice / – crediting of the counter-value / – 15th day of the month following the fulfilment. Of these events, the exchange rate of the earliest occasion shall be used.
In case of product import, the same exchange rate shall be applied for the conversion of the tax base into HUF, which is used for the determination of the customs value. The customs value of the product shall be converted into HUF based on the foreign currency exchange rate issued by the Hungarian National Bank (MNB) on each penultimate Wednesday of the month preceding the date of customs clearance.
In case of advance payment, the determination of the tax base in HUF must be done by applying the exchange rate valid on the date of crediting of advance payment At the same time, in connection with „import services”– according to some interpretations – the practice is not objectionable that the domestic taxpayer, who pays the advance payment, applies the exchange rate of the date when the advance payment has been debited from the account, (since the date of credit is not known by him).
In case of a transaction effected by advance payment, at the time of fulfilment – since the advance payment and the remaining amount constitute separate tax bases at different dates – the tax base must be split up, having regard to the fact, when converting the tax base into HUF, the advance payment and the remaining amount apply different exchange rates.
Thus, the amount of the VAT already paid on the advance is not influenced by the change of exchange rate occurred between the date of advance payment, and date of final fulfilment.
In case of transactions with periodic settlements (Article 58 of the VAT Act), the determination of the tax base in HUF is simpler than main rule, the exchange rate valid at the time of issuing the invoice must be applied.
To convert the tax base of intra-community sales to HUF, under the conditions specified in Section 89 of the VAT Act, the following two dates should be identified as the first steps: – the date of issuing the invoice/ -the 15th day of the month following the date of fulfilment. Of these, the exchange rate applicable at the earlier date shall be applied.
After selecting the daily exchange rate to be applied as discussed above, there is only one more issue to decide on:
This exchange rate may be the official currency sell-exchange rate of the selected credit institution or the official exchange rate of the Hungarian National Bank (MNB) or the European Central Bank (ECB).
The one that issues an invoice and chooses the official exchange rate of the Hungarian National Bank (MNB) or European Central Bank (ECB), must formally notify the National Tax and Customs Administration of Hungary (NAV) using the form no. 18T201T, and may not depart from the chosen method of exchange by the end of the following calendar year.
If the one that issues an invoice did not exercise the right of choice, must use any exchange rate quoted as the selling price of foreign currency offered by any credit institution that possesses the permit of currency exchange in Hungary. Taxpayers are free to choose between credit institutions that have a permission of currency exchange.
Because according to the Section 172 of the VAT Act, the VAT charged in foreign currency must be indicated on the invoice in HUF as well, using the exchange rate described above, and the recipient of the invoice may only deduct the tax expressed in HUF, if entitled for deduction.
Talking of intra-community acquisitions, in case of service import or related advance payment, where R/C is applicable, the receiver of the invoice must be aware of the above-mentioned since the invoice received must not include HUF value and applied exchange rate. In this case, the receiver of the invoice, when assess the tax to be paid, does not apply the exchange rate applied by the supplier, but the exchange rate chosen by him/her. The same rate that is used in case of normal sales.
If the used invoicing software can handle all of these, then the invoices issued in foreign currency will in compliance with all the requirements of VAT Act and will be no need for invoice corrections or adjustment of VAT analysis / general ledger registers.
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Accace operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience and erase the borders of service delivery. Covering over 60 jurisdictions with more than 7,000 professionals, we support over 80,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 800,000 pay slips globally.
