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Affecting both domestic and foreign businesses, a number of actions triggers the obligation to register for VAT in Hungary. To provide a basic overview, our Hungarian experts prepared a comprehensive eBook on value-added tax. Find out more about VAT rates, registration of taxable persons, communication with local tax authorities, compliance and VAT return filing, VAT refund to EU member states or third countries and penalties.
The basic VAT rate in Hungary is 27% in accordance with the EU VAT directive. A reduced rate of 5% applies to some type of milk, poultry meat, fresh eggs, medicine, books, magazines, specific large live animals, district heating services, instrumental live music performed by artists at private events, restaurants, commercial accommodation services and internet. The 18% rate can be applied to dairy products, products made from milk, corn, starch and service providers of open-air events.
The supply of goods to other EU member states is free from VAT, if delivered to a VAT payer registered in the member state and the products are transported to any other member state. The export of goods is free from VAT, but subject to a confirmation by the customs authorities.
The taxable amount equals everything that is deemed to be received or shall be received for the delivery of goods or services. In case of the import of goods from third countries, the taxable amount is based on the value of customs.
In Hungary, all domestic taxable persons are VAT payers by law. Before starting any business activity, taxable persons must be registered at least for a VAT number. Retrospective VAT registration is also possible, but it means a delay penalty risk. There is no threshold that makes the obligation applicable or non-applicable.
Group registration for VAT is possible in Hungary.
Several taxable persons who have their seat, place of business or fixed establishment within the territory of Hungary and are considered as affiliated companies, may participate in group VAT registration and therefore be considered as a single taxable person for VAT purposes.
Taxable persons must register to obtain an EU VAT number as well if they will be performing EU transactions, such as service delivery to other EU member states or acquiring goods or services from other EU member states. This registration must be done in advance because retrospective registration is not possible.
Besides that, even natural persons may become VAT payers by law without previous registration, e.g. in case of supplying new means of transport, buildings or unbuilt lands in a series of transactions.
Foreign taxable person are entities who have no seat, place of business or fixed establishment in Hungary, but who are pursuing business activities with a place of performance is in Hungary.
Foreign taxable persons in Hungary are obliged to register for VAT before doing any activities subject to VAT, and whose place of performance is in Hungary – except, for example, distance sale.
The rules of distance sale have significantly changed from 1st of July 2021. due to the introduction of the One-Stop-Shop (‘OSS’) single VAT return. From July B2C sellers dispatching their goods from a single country will no longer be required to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they may opt to simply complete and file a new OSS filing. One of the main changes is the creation of a common threshold of EUR 10,000 up to which B2C EU cross-border supplies remain subject to the VAT rules of the Member State of dispatch, and above which supplies become subject to the VAT rules of the Member State of destination.
In Hungary, local representation by a tax advisor is not obligatory.
However, foreign persons may need local representation in specific situations.
Only Hungarian language may be used for communication with the tax authorities.
A taxable person can communicate with the tax authorities in electronic format, via the company gate or client gate portal of the tax authorities.
A qualified electronic signature is required for the electronic communication.
In Hungary, the calendar month is considered as a tax period at the beginning of the business activity. Later on, and based on financial indicators, it can be changed to a calendar quarter or calendar year.
VAT returns are required to be submitted either monthly, quarterly or yearly. The deadline is the 20th day of the month following the given period. The yearly VAT return must be submitted by February 25 following the given tax year.
The EC sales list shall be filed till the 20th day following the respective period, which is in general the calendar month. The EC sales list may be filed for a period of a calendar quarter in case the taxable person submits the VAT returns at a quarterly basis and the value of delivered goods to other EU member states does not exceed the threshold of EUR 50 000 within the given calendar quarter.
Besides the VAT return, the control statement listing information from received invoices must be filed too, in case the amount of input VAT is deducted.
VAT refund for a foreign taxable person is possible, upon the fulfilment of specific conditions.
In the case of taxable persons established in another Member State of the Community, the right of refund of VAT may be exercised on condition that the VAT refund application is submitted via the tax authority of the Member State concerned. The Hungarian state tax authority shall adopt a decision on the VAT refund application submitted in another Member State of the Community for the given calendar year, if the taxable person established in another Member State of the Community has justifiably submitted the application at the latest on 30 September of the calendar year following the refund period. No application for continuation shall be accepted upon failure to meet the above deadline.
The minimum amount of VAT requested must be at least EUR 50 for the respective calendar year.
The VAT refund may be requested also for a shorter period. However, it shall not be shorter than 3 calendar months and the value of VAT must be at least € 400.
VAT refund to third countries is possible for Liechtenstein, Switzerland, Norway, Serbia and Turkey, although with restrictions.
The taxable person established in a recognized third State shall submit his VAT refund application directly to the state tax authority in Hungary.
The taxable person established in a recognized third State shall submit his VAT refund application at the latest on 30 September of the calendar year following the refund period, where the application shall be received by the state tax authority by that time. No application for continuation shall be accepted upon failure to meet the above deadline.
The deadline for VAT return is between 4 to 8 months after filing the refund request.
The value of requested VAT must be at least EUR 50 for the respective calendar year.
The VAT refund may be requested also for half calendar year. However, this case the value of the requested VAT has to exceed EUR 400.
Depending on the nature of the breach of the law, penalty for non-compliance can be imposed in form of fine, based on situation and severity, up to HUF 1,000,000 per infringement. Delay interest for late payment is the central bank base rate plus 13 % points.