VAT in Hungary
Hungary became a full member of the European Community on 1 May 2004. To date, it has fully implemented into national legislation the provisions of Directive 2006/112 / EC on value added tax, but taking into account its own provisions of those paragraphs of the directive where the responsibility for their implementation is entrusted to countries within their territories.
Taxable transactions
The following transactions are subject to Hungarian VAT:
- the supply of goods and services by a taxable person to the territory of Hungary;
- acquisition of goods and services within the community (Intra-Community Acquisition) by a taxable person from another EU state;
- receipt of goods and services using the Reverse Charge mechanism;
- import of goods into the territory of Hungary, regardless of the status of the importer.
Registration
According to the legislation of Hungary, legal entities and individuals carrying out business activities in the country are required to register as VAT payers before starting such activities. The registration number of the company will correspond to its VAT number. You do not need to submit any additional forms to obtain a VAT number.
For a new business, a VAT exemption regime is provided if the planned turnover for the year does not exceed 6 million forints, or about 18 thousand euros. An operating business can obtain VAT exemption status if the annual turnover does not exceed HUF 8 million. To obtain this status, you must submit an application to the Hungarian tax authorities.
Companies not registered in Hungary must register for VAT if they carry out operations for the supply of goods and services to its territory. These operations include:
- distance selling above the threshold of 35,000 euros per year;
- purchases and deliveries within the community;
- supplies of goods and services that do not fall under the terms of the Reverse Charge;
- import of goods into Hungary.
The Hungarian legislation provides for group and voluntary registration.
For late registration, fines from 200 to 500 thousand forints are provided.
Rates
The standard VAT rate in Hungary is 27%. It applies to most operations for the supply of goods and services.
The reduced VAT rate of 18% applies to goods and services in the following categories:
- milk and dairy products, except mother's milk and products taxed at a rate of 5%;
- products made using corn, flour, starch or milk;
- commercial placement goods;
- occasional outdoor events;
- Internet services;
- food in restaurants.
A 5% rate applies to the following goods and services:
- medical services;
- medical equipment;
- books in paper form;
- e-books;
- magazines;
- cattle, pigs, sheep and goats;
- bird, bird eggs;
- milk, except mother's milk, as well as milk processed with ultra-high temperature or with an extended shelf life;
- district heating services;
- performance of instrumental live music by artists in enclosed spaces.
Goods and services exempt from taxation without the right to a tax credit:
- financial and insurance services;
- post services;
- sale of securities;
- sale or lease of land;
- folk art and handicrafts.
Tax-exempt transactions with the right to a tax credit:
- export;
- deliveries between EU states.
An important condition for the application of the zero VAT rate in the operations of export and supply of goods to the EU countries is the confirmation of the export of goods outside the territory of Hungary within 90 days from the date of sale. If there is no such confirmation, VAT on this transaction will be charged.
In the case of export, the supporting document may be an export declaration or a single transport document, and for deliveries between EU countries, a transport document confirming the delivery of goods to another EU country.
Reverse charge mechanism
As in other EU countries, the Reverse Charge mechanism works in Hungary. It imposes the obligation to pay VAT on purchases of goods and services not on the supplier, but on the buyer-payer of VAT. At the same time, a non-resident supplier does not have to be registered as a VAT payer in his country, and he also does not have an obligation to register for VAT in Hungary.
An important feature, the Hungarian Reverse Charge mechanism can be applied to such transactions between resident VAT payers:
- services requiring a building permit;
- works related to the expansion, restructuring, demolition of buildings, their maintenance, the implementation of additional related services;
- sale of metal and grain crops;
- sale of collateral;
- provision of personnel for rent.
Reporting
As a general rule, taxpayers are required to file a VAT return quarterly. The following categories of taxpayers are required to file a declaration monthly:
- new companies within 2 years after registration;
- companies whose net VAT payable or refundable exceeds HUF 1,000,000;
- companies with group VAT registration.
Companies whose net VAT payable or refundable for the second year prior to the reporting year is not more than HUF 250,000 can file reports annually.
Companies filing reports on a quarterly and monthly basis are required to file reports and pay VAT by the 20th day of the month following the reporting month or quarter.
Companies submitting annual reports are required to report and pay tax by February 15 of the year following the reporting year.
Companies that carry out transactions between EU countries are required to submit appropriate reports on transactions within the EU or EC-list monthly by the 20th day of the following month.
Payers reporting quarterly VAT can also submit an EC-list quarterly, provided that the volume of transactions between EU countries in the current year and for the last four quarters does not exceed 50,000 euros.
Payers involved in transactions between EU countries cannot file VAT returns in Hungary on an annual basis.
Additional VAT reporting on transactions between payers in Hungary is accepted by the Hungarian tax authorities from July 1, 2018.
These reporting requirements apply:
- to all business entities registered as VAT payers in Hungary, both residents and non-residents;
- to incoming and outgoing invoices in which the amount of VAT exceeds 100,000 forints or about 320 euros.
Export operations, deliveries to EU countries, internal Reverse charge and B2C sales are not taken into account.
VAT reporting in Hungary is generated automatically, online. It replaced the already existing reports on internal operations. Penalties for late deadlines or failure to provide information can be up to 500,000 forints or about 1,600 euros per invoice.
All taxable persons doing business with other EU countries are required to submit an Intrastat statistical report for the previous month by the 15th day of the following month. The threshold values for the purposes of this report are as follows: transactions for the purchase of goods - over 170 million forints, for deliveries - over 100 million forints. Violations are subject to fines of up to 2 million forints.
Reimbursement
The taxpayer is entitled to a VAT refund if the input VAT exceeds the output.
Monthly reporting taxpayers cannot claim VAT refunds if the tax refundable is less than HUF 1,000,000. In any case, the excess amount can be taken into account to reduce the taxable base of VAT in the following periods.
For companies not registered in Hungary, there is a VAT refund procedure based on the principle of reciprocity. In other words, Hungary refunds VAT to companies from countries that do the same for Hungarian companies.
At the moment, an agreement on VAT refunds on the principle of reciprocity is valid between the EU countries, as well as Liechtenstein, Switzerland and Norway.
The VAT refund application must be submitted by September 30 of the following year either to the tax authorities at the place of registration in the EU countries, or to the Hungarian tax office for Liechtenstein, Switzerland, Norway.
The minimum annual VAT refund for a calendar year or the remainder of a calendar year is 50 euros. For refund applications for a period less than a calendar year but more than three months, the intermediate minimum is 400 euros.
Companies registered outside the EU, along with the completed form, provide original invoices confirming their payment in full, and a VAT payer certificate in the country of registration.
As stipulated by the Hungarian legislation, if a decision is made to refund VAT, the amount is transferred to the taxpayer's account within 30 to 75 days from the date of confirmation of the request.
Distance selling и MOSS
From January 1, 2015, electronic sales to individuals or VAT non-payers are subject to VAT at the location of the buyer.
For non-resident companies engaged in distance sales of goods and services, a threshold of 35,000 euros per year is set, after which they are required to register as a VAT payer with the Hungarian tax authorities.
For distance sales in EU countries, a simplified Mini-One-Stop-Shop (MOSS) procedure is used to account for VAT. If the supplier is registered as a VAT payer in one of the EU countries, then he is not obliged to register also the Hungarian VAT number. Until the threshold is reached, a non-resident must report VAT at its home rate, and after it is exceeded, at the Hungarian rate.
When applying the MOSS regime from September 1, 2019, non-EU residents can register in one of the EU countries of their choice, sell to other EU countries and report VAT in the country where the VAT number was obtained.
