VAT rules in brief
Name of the tax: Value-added tax (VAT)
Local name: Általános forgalmi adó
Trading bloc membership: European Union (EU) Member State
Administered by the National Tax and Customs Authority (www.nav.gov.hu)
- Standard: 27%
- Reduced: 5%, 18%
- Other: Exempt
VAT number format: 12345678-2-34
Scope of the tax
VAT applies to the following transactions:
- The supply of goods or services provided in Hungary by taxable persons
- The intra-Community acquisition of goods from another EU Member State by a taxable person (see the chapter on the EU )
- Reverse-charge services and reverse-charge goods received by a Hungarian taxable person
- The importation of goods into Hungary, regardless of the status of the importer
Special rules apply to intra-Community transactions involving new means of transport and distance sales (see the chapter on the EU ).
Who is liable
A taxable person is any business or individual that makes taxable supplies of goods or services in the course of its business in its own name. Every entity or individual that undertakes a business activity in Hungary must register for VAT before beginning the activity in question. Retroactive VAT registration is possible but may trigger significant penalties. Obtaining Hungarian VAT numbers for intra-EU transaction purposes with retroactive effect is not allowed.
Exemption for small businesses.
If a taxable person’s turnover did not exceed HUF8 million in the preceding VAT year, it may request VAT exemption status. The request for exemption must be filed before the end of the VAT year preceding the year in which the exemption is to take effect. A new business may request exemption from registration if its anticipated turnover is not expected to exceed HUF6 million a year. The request for exemption must be filed at the time of registration.
If exempt status is granted, the business must still register for VAT, although it may not charge VAT on its supplies and it may not recover input VAT on its expenses and purchases. In addition, such businesses are generally not required to file any VAT returns.
VAT group registration is available for all industries. Companies that qualify as related parties and that have a fixed establishment in Hungary from a VAT point of view may opt for VAT grouping when the participating entities are regarded as being a single taxpayer and the group regime applies to all transactions performed by every group member. Practically, this means that the supplies performed between the group members fall out of the scope of VAT whereas any supplies performed outside the group are subject to VAT. In addition, the group members are obliged to file joint VAT returns with the tax authority. Non-established businesses. A “non-established business” is a business that has no fixed establishment in Hungary. A non-established business that makes supplies of goods or services in Hungary must register for VAT if it is liable to account for Hungarian VAT on its supplies or if it makes intra-Community supplies or acquisitions of goods.
The reverse charge applies generally to installation supplies made by non-established businesses to taxable persons that file periodic VAT returns. Under this measure, the taxable person that receives the supply must account for the Hungarian VAT due. If the reverse charge applies, the non-established business is not required to register for Hungarian VAT.
Consequently, non-established businesses must register for Hungarian VAT if they make any of the following supplies:
- Intra-Community supplies
- Intra-Community acquisitions
- Distance sales in excess of the threshold
- Supplies of goods and services that are not subject to the reverse charge (for example, goods or services supplied to private persons)
- • Importation of goods
- • Purchase of services from other countries
Reverse charge for domestic transactions. The concept of a reverse charge also applies to the following transactions between Hungarian taxpayers:
- Transfer of immovable property on the basis of a construction contract
- Certain services relating to immovable property
- The supply of certain scrap materials
- The supply of real property if taxation is opted for
- The supply of goods provided as security in execution of that security
- Trading in greenhouse gas emission rights
- Goods and services provided by taxpayers under liquidation or insolvency proceedings, provided the value exceeds HUF100,000
- The supply of cereal and metal
- Staff leasing services
- Services provided by school cooperatives
Businesses that are established in the EU may register for VAT without appointing a tax representative. However, EU businesses may opt to appoint a tax representative under certain conditions.
In general, businesses that are established outside the EU must appoint a resident tax representative to register for Hungarian VAT. The tax representative is jointly liable for VAT debts and obligations with the business it represents. All non-established businesses must register with the office for foreign taxpayers at the following address:
NAV Kiemelt Ügyek Adó- és Vámigazgatósága
Dob utca 75-81.
Registration procedures. In order to register for VAT purposes in Hungary, two copies of the application form (available only in Hungarian language) should be submitted on paper together with several corporate documents (translated into Hungarian). The registration procedure generally takes at least two weeks from the date of submission.
If a taxable person fails to register for VAT, a default penalty of HUF500,000 applies. In addition, the VAT authorities may notify the taxable person of its obligation to register. The fine is doubled if the taxable person fails to register within the deadline specified by the tax authority.
From 1 January 2015, supplies of telecommunication, broadcasting and electronically supplied services supplied to private customers and nontaxable persons, i.e., B2C transactions are taxable in the Member State where the customer is established, has a permanent address or usually resides.
Mini One-Stop Shop
In case of supplies of telecommunication, broadcasting and electronically supplied services, non-EU based suppliers are entitled to decide in which Member State they register for VAT purposes and file the EU-level consolidated VAT return. Under this scheme, called the Mini One-Stop Shop (MOSS), suppliers do not have to register in Hungary for VAT purposes if they register in one of the other EU Member States under MOSS and report their Hungarian VAT liability in that Member State via the EU-level consolidated VAT return. Alternatively, such suppliers do not have to register in other EU Member States for VAT purposes if they register in Hungary under the MOSS scheme and file their EU-level consolidated VAT return in Hungary.
Foreign entities that cease to perform transactions subject to Hungarian VAT can deregister, canceling their Hungarian VAT number. The necessary steps for deregistration are the following:
- Checking the tax account statement of the company and paying any underpayments or reclaiming any overpayments
- Preparation and submission of the deregistration form within 15 days from the effective date of the deregistration
- Preparation and submission of a closing VAT return covering the period not covered by previous tax returns within 30 days from the effective date of the deregistration (submission together with the deregistration form is advisable)
The tax authority usually performs a tax audit related to the deregistration.
Exemption from registration
The following types of taxable persons may be exempted from registering for VAT in Hungary:
- Any importer who employs an indirect customs representative in connection with the importation of goods and the subsequent intra-Community supply of goods, shall be exempted from the obligation of registration if it is not engaged in any other taxable activities in Hungary.
- Taxable persons are considered non-established according to the Hungarian VAT Act, and the taxable persons to whom the requirement of establishment does not apply, shall be exempted from the obligation of registration if engaged in Hungary solely in the supply of goods under VAT warehousing arrangements as provided for in the Hungarian VAT Act. The condition is that the goods have not ceased to be covered by these arrangements as a direct consequence of such supply, or that the goods are exited by the state tax and customs authority from the territory of the EU.
- Any non-established taxable person who provides telecommunications, broadcasting and electronically supplied services in Hungary to nontaxable persons shall be exempt from the obligation of registration, provided that it is entitled to apply the Mini One-Stop Shop regime.
- Non-established taxable persons (including those where the requirement of establishment does not apply in Hungary), but who are established in another EU Member State) shall be exempt ed from the obligation of registration. This is only where the taxable person wholly makes supplies of exempt goods in Hungary under the VAT warehousing arrangements.
Voluntary VAT registration is applicable to taxable persons supplying goods or services to nontaxable persons (distance selling). Where the taxable person performing such supplies is a resident of another EU Member State, and not Hungary, the taxable person is entitled to opt for registering for Hungarian VAT purposes and pay Hungarian VAT on the supplies concerned. If, however, the total consideration of such sales exceed the threshold of EUR35,000, registration and payment of Hungarian VAT is no longer voluntary, and is required.
The term “taxable supplies” refers to supplies of goods and services that are subject to a rate of VAT. The term “exempt supplies” refers to supplies of goods and services that are not subject to tax and that do not give rise to the right to deduct input tax (see Section F). Some supplies are classified as “exempt with credit,” which means that no VAT is chargeable, although the supplier may recover related input tax. Exempt with credit supplies include, but are not limited to, exports of goods outside the EU and related services (for example, related to transport) and intra-Community supplies of goods.
In Hungary, the following VAT rates apply:
- Standard rate: 27%
- Reduced rates: 5% and 18%
The standard VAT rate applies to all supplies of goods and services, unless a specific rule provides for a reduced rate or exemption.
Examples of goods and services taxable at 5%:
- Human medicines and certain medical products
- Books (on paper)
- Live specimens or slaughtered and chopped (to some extent) meat of certain large animals (pigs, cattle, sheep, goats)
- As of 1 January 2017, the VAT rate on poultry meat and eggs decreased from 27% to 5%. The VAT rate on fresh milk (i.e., milk other than UHT and ESL) decreased from 18% to 5% where as several milk products (including UHT and ESL milk) become subject to an 18% VAT rate.
- From 1 January 2018, the VAT rate applicable to internet services, catered meals and nonalcoholic beverages made on the spot is scheduled to decrease from 18% to 5%.
Examples of goods and services taxable at 18%
- Basic foodstuffs
- Hotel services
- Entrance to certain open-air public music festivals
- The VAT rate on catered meals and nonalcoholic beverages made on the spot
The term “exempt supplies” refers to supplies of goods and services that are not subject to tax and that do not give rise to the right to deduct input tax (see Section F). Some supplies are classified as “exempt with credit,” which means that no VAT is chargeable, although the supplier may recover related input tax. Exempt- with-credit supplies include, but are not limited to, exports of goods outside the EU and related services (for example, related to transport) and intra-Community supplies of goods.
Examples of exempt (without input VAT credit) supplies of goods and services
- Financial services
- Public postal services
- Approved education
- Lease of property
- Sale of securities
- Sale or lease of land
- Human medical care
- Folk arts and crafts
Option to tax for exempt supplies
A taxable person may opt to pay VAT on transactions that would otherwise be exempt from VAT. This decision should be reported to the tax authority before beginning the VAT-exempt activity. The taxable person who exercises the option to pay VAT is required to continue paying VAT for the following five calendar years. After the five years, it can again choose VAT exemption by submitting a notification form to the tax authority by 31 December of the preceding year.
The following supplies are eligible for the option to apply VAT:
- The rental or leasing of immovable property or parts thereof (either only for commercial property or both commercial and residential property)
- The sale of immovable property and sale of land (either only for commercial property or both commercial and residential property)
Time of supply
The time at which VAT becomes due is called the “time of supply” or “tax point.” With some exceptions, the time of supply is deemed to be when the supply is made or when an invoice is
Deposits and prepayments.
A prepayment or deposit creates a tax point when the payment is received. The amount is considered to be inclusive of VAT. When a reverse charge applies between taxpayers, the prepayment shall not be deemed as a tax point if it is with intra-Community acquisitions and supplies of goods. If a Hungarian taxable person makes a prepayment with respect to services purchased from other EU Member States or third countries (that fall under the general reverse-charge mechanism), the amount shall be regarded as being exclusive of VAT and the Hungarian taxable person is required to self-charge the VAT on the advance payment it paid.
Continuous supplies of goods and services.
Parties may agree that a supply of goods and services may be invoiced periodically or paid in installments. As of 1 January 2016, the following date-of-supply rules apply concerning such transactions:
- In general, the date of supply is the last day of the period in question.
- If the date on which the invoice (receipt) was issued and the payment deadline both fall before the last day of the period concerned, the issue date of the invoice (receipt) is the date of supply.
- If the payment deadline falls on a later date than the last day of the period in question, but not later than the 60th day following the last day of that period, the payment deadline is the date of supply.
- If the payment deadline is later than the 60th day following the last day of the period in question, the date of supply is the 60th day following the last day of the period in question. Invoices relating to intra-Community supplies of goods cannot refer to a period longer than one calendar month. In other cases the period can be up to 12 months. However, in the case of services purchased from other EU Member States or third countries, the period is deemed as ending on 31 December each year, provided the agreed period exceeds twelve (12) months.
The tax point for intra-Community acquisitions of goods is the date of issuance of the invoice or the 15th day of the month following the month in which the supply takes place, whichever is earlier. For services, it is the date on which the supply is
The tax point for imported goods is either the date of acceptance of the customs declaration or the date on which the goods leave a duty suspension regime, if the taxable person is not entitled to self-account import VAT.
Reverse-charge services (other than intra-Community acquisition/ importation of goods and purchase of services from abroad).
If the reverse-charge mechanism applies to a transaction, the tax point date is the earliest of the following dates: (i) the receipt of the invoice, (ii) payment of the consideration or (iii) the 15th day of the month following the month in which the supply takes place.
The cash accounting taxation method may be applied by the following taxpayers:
- Taxpayers that qualify as small enterprises on the first day of the year based on the relevant act, or that would qualify as small enterprises if they were subject to the relevant act
- Taxpayers that have a fixed establishment in Hungary or, in the absence of a fixed establishment, a permanent address or place where they usually reside
- Taxpayers for whom the sum of both the expected and the actual consideration in a given year does not exceed the equivalent of HUF125 million (approximately EUR422,000)
Taxpayers may opt for cash-based taxation for domestic transactions subject to VAT, but considerations for supplies that are outside the scope of Hungarian VAT and for supplies subject to the reverse charge regime are also included in the threshold. Revenue deriving from the sale of tangible assets, from the assignment of intangible property on a permanent basis, from intra-Community supply, from certain VAT-exempt supplies and from services ancillary to financial services is not considered when applying the threshold.
New companies must meet the financial conditions proportionately in the first calendar year. Taxpayers may apply this taxation method based on the calendar year. Taxpayers that apply cash-based taxation must refer to this special taxation method and indicate it on their invoices.
Taxpayers that opt for cash-based taxation:
- Will have to pay output VAT when they receive the consideration, including the VAT for their supply
- Will be entitled to deduct input VAT when they pay the total gross amount of the invoice to their suppliers
Taxpayers may decide to terminate the application of cash-based taxation from the year following the year in question or during the suspension of their activities. Taxpayers whose suppliers apply the cash-based accounting scheme are entitled to deduct the input VAT charged by the supplier at the time they pay the consideration (including the VAT) to the supplier. Cash-based taxation will be terminated automatically if a taxpayer’s revenue exceeds the threshold or if the taxpayer is subject to insolvency or discontinuation of operations proceedings. The termination of this taxation method must be announced to the tax authority within 15 days.
Intra-Community supplies of goods.
The date of supply for intra-Community supplies of goods is the date of issuance of the invoice or the 15th day of the month following the month in which the supply takes place, whichever is earlier. For services, it is the date on which the supply is made.
Open-end financial leasing transactions (when buyers can decide whether or not they want to obtain the title of the leased assets at the end of the lease contracts) qualify as rented assets, so each installment should be invoiced with VAT. Closed-end financial leasing transactions (when it is fixed in advance that the buyer will automatically obtain the title of the assets upon the payment of the last installment) qualify as sale of goods where the tax point is the delivery date of the asset, i.e., the total value including VAT has to be invoiced at the beginning and no separate invoices have to be issued on the installments (that are not subject to VAT).
Goods sent on approval for sale or return.
VAT shall become chargeable upon the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled. In the case of a supply of goods, the supply occurs where the right to dispose over the goods is transferred from the supplier to the customer. It is the wording of the agreement that determines whether the supply takes place if the goods are sent on approval. In the case of return goods, the reason of the return and other contractual arrangements must be analyzed to establish the proper
For instance, return of defective goods where the supplier provides the customer with a new product from the same type is a no-supply for Hungarian VAT purposes. However, in the case of a resale, the transaction can qualify as a taxable event.
Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for a taxable business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made. Input tax includes VAT charged on goods and services supplied in Hungary, VAT paid on intra-Community acquisitions and imports of goods and VAT self-assessed for reverse-charge services received from outside Hungary and for certain reversecharge domestic transactions. The amount of VAT reclaimed must be supported with a valid VAT invoice.
Under the general rule, input VAT is deductible from output VAT charged in the same VAT period. If the amount of input VAT exceeds the amount of output VAT in the period, the excess can be carried forward to the next filing period, offset against the taxpayer’s other Hungarian tax liabilities or refunded to the taxpayer’s bank account.
Nondeductible input tax.
Input tax may not be recovered on purchases of goods and services that are used for nonbusiness purposes (for example, goods acquired for private use) or VAT-exempt transactions (for example, assets used for providing financial services). In addition, input tax may not be recovered for some items of business expenditure. The following lists provide some examples of items of expenditure for which input tax is not deductible and examples of items for which input tax is deductible if it relates to a taxable business use.
Examples of items for which input tax is nondeductible
- Nonbusiness expenditure
- Purchase or lease of cars (private use)
- Fuel (and other goods used) for cars
- Taxi services
- 50% of car maintenance service costs
- 30% of telecommunication services
Examples of items for which input tax is deductible (if related exclusively to a taxable business use)
- Purchase, lease or hire of cars, vans and trucks
- Books related to business activities
- Attending exhibitions
Input tax directly related to making exempt supplies is generally not recoverable. If a Hungarian taxable person makes both exempt supplies and taxable supplies, it may not deduct input tax in full. This situation is referred to as “partial exemption.”
The amount of input tax that may be deducted is calculated in the following two stages:
- The first stage is the direct allocation of VAT to exempt and taxable supplies. Input tax directly allocable to exempt supplies is not deductible, while input tax directly allocable to taxable supplies is deductible. Exempt with credit supplies are treated as taxable supplies for these purposes.
- The second stage is the proration of the remaining input tax that relates to both taxable and exempt supplies based on the percentage of taxable supplies to total supplies made (called the deduction ratio). This treatment may apply, for example, to input tax on business overhead. The deduction ratio is calculated up to two decimal places. The amount of VAT recoverable must be rounded up to units of HUF1,000.
When calculating the proration, a taxable person may initially use the deduction ratio amounts for either the current tax year or for the preceding tax year. However, if the preceding year’s amounts are used, the calculation must be adjusted at the end of the VAT year, using the relevant information for the year in question.
Capital goods are tangible items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption deduction ratio in the VAT year in which the acquisition took place. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial exemption deduction ratio changes during the year under review and if the difference with respect to a particular capital asset exceeds HUF10,000.
In Hungary, the capital goods adjustment applies to the following assets for the number of years indicated:
- Land and buildings: adjusted for a period of 20 years
- Tangible capital assets: adjusted for a period of five years
- From 2014, intangible rights related to capital goods: the same adjustment period as the underlying capital asset
The adjustment is applied each year following the year of acquisition, to a fraction of the total input tax (1/20 for land and buildings and 1/5 for other tangible capital assets). The adjustment may result in either an increase or a decrease in the deductible input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared with the year in which the capital goods were acquired.
If a Hungarian taxable person sells an asset on which no input tax was deducted, a proportion of the input tax becomes deductible. The qualifying period for this treatment is the same as the capital goods adjustment period, which is 60 months (five years) for tangible assets and 240 months (20 years) for land and buildings.
If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person has an input tax credit. A taxable person may request a refund of the credit if this excess exceeds the following amounts:
- HUF50,000 if the taxable person files VAT returns annually
- HUF250,000 if the taxable person files VAT returns quarterly
- HUF1 million if the taxable person files VAT returns monthly
If a taxable person is not allowed to request a repayment, the excess input tax may be carried forward to the following period to offset output VAT payable. From 1 January 2016, taxpayers significantly not complying with tax rules (“risky taxpayers”) will receive the VAT refund within 75 days; taxpayers properly complying with the tax rules (“trusted taxpayers”) will receive the VAT they reclaim within 45 days as of 1 January 2017, and within 30 days as of 1 January 2018.
Taxpayers not qualifying as either risky or trusted will continue to receive the VAT refund based on the following rules: If a repayment is claimed, the VAT authorities must pay it within 75 days after the due date of the return. However, if all the supplier invoices that are recorded as deductions on a given VAT return have been paid by the time of filing of the VAT return and this fact was indicated on the filed VAT return, the tax authority must refund VAT repayment claims that exceed HUF1 million within 45 days. Repayment claim amounts under HUF1 million will be transferred within 30 days (if all supplier invoices have been paid).
If the repayment is not made within the time limits indicated above, the VAT authorities must also pay interest, calculated from the due date of the repayment.
Input tax on preregistration costs is deductible as long as the (future) taxpayer can demonstrate that the goods or services were issued in preparation of a future economic activity. In practice, this means that the VAT on these costs can be deducted in the first VAT return of the taxable person becoming VAT registered.
Write-off of bad debts.
VAT cannot be recovered on bad debts.
A taxable person that carries out both taxable and noneconomic activities cannot deduct input VAT incurred in connection with the noneconomic activities.
Recovery of VAT by non-established businesses
The Hungarian VAT authorities refund VAT incurred by businesses that are not established in Hungary nor registered for VAT purposes there. Non-established businesses may claim Hungarian VAT to the same extent as Hungarian taxable persons. Hungary applies the reciprocity principle to refunds. Under this principle, refunds are granted to businesses established in countries that refund VAT to Hungarian businesses. Refunds are currently allowed to businesses established in another EU Member State, Liechtenstein, Switzerland and Norway.
The deadline for submitting applications is 30 September following the claim year. This deadline is strictly enforced. The claimant must submit its application to either the tax office in its country of establishment in the EU or the Hungarian tax office for Swiss, Liechtenstein and Norwegian businesses. Non-EU claimants must file a form issued by the Hungarian VAT authorities together with the relevant documents, including the original invoices. The claimant must also submit a certificate issued by the VAT authorities in the country in which it is established, certifying its status as a taxable person. The applicant must prove that it paid the gross amount of the invoices. Hungarian suppliers may also provide a declaration that the invoices have been paid in full. The form may be completed in Hungarian, English, German or French. However, all correspondence with the tax authorities must be in Hungarian. A non-established claimant may appoint a lawyer, legal advisor or tax consultant resident in Hungary to represent it in any dealings with the VAT authorities.
If a representative is used, the original power of attorney appointing the representative must accompany the repayment claim form. All documents relating to the VAT reclaim must be sent to the Hungarian VAT authorities at the following address:
NAV Kiemelt Ügyek Adó- és Vámigazgatósága
Dob utca 75-81
In accordance with EU Directive 2008/9/EC, EU claim ants must file their refund applications electronically with their home country tax office, together with, in general, soft copies of invoices with a value over EUR1,000. The claim period is a minimum of three months if the VAT recoverable in that period exceeds EUR400. The maximum claim period is one calendar year. The minimum claim allowed is EUR50. Non-established businesses cannot submit more than five claims with respect to a specific calendar year. Refunds are paid in Hungarian forints into the bank account notified by the claimant. This account may be either a bank account in Hungary or in the country in which the claimant is registered.
If the claimant provides the tax authority with a foreign bank account number, the costs related to the bank remittance and exchange are the claimant’s responsibility and the refunded amount is reduced accordingly.
Hungarian law provides that repayments must generally be made within 75 days of the date on which the claim is approved. If the VAT authorities do not repay the claim
within this time limit, the claimant is entitled to interest.
VAT invoices and credit notes. Generally, a Hungarian taxable person must provide VAT invoices for all Hungarian taxable supplies made, including exports and intra-Community supplies, in line with the Hungarian invoicing provisions. If the supplier is not established in Hungary and (i) the supply is subject to the reverse-charge mechanism or (ii) the place of supply is outside the EU, Hungarian invoicing standards are not applicable (except in cases in which the invoices are issued by the buyer within the self-billing process).
Invoices must be issued no later than 15 days after the date of supply (or, for intra-Community supplies, no later than the 15th day of the month following the month in which the supply took place) (see Section E). If the consideration is paid in cash or using cash-substitute payment instruments, the supplier is obliged to issue the invoice immediately.
A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply. The document must be clearly marked “credit note” and refer to the original invoice. A credit note must also indicate the date on which it was issued, the reason for and the numerical result of the correction and any new items arising from the correction.
Although the Hungarian VAT law permits electronic invoicing in line with EU Directive 2010/45/EU, local rules and practice of the Hungarian tax authority are very strict and formalistic.
Proof of exports and intra-Community supplies.
VAT is not charged on exports and intra-Community supplies. To qualify as VAT-exempt, exports and intra-Community supplies must be accompanied by evidence that the goods have left Hungary (in the case of exports, within three months). Suitable documentary evidence includes the following:
- For an export, a copy of the single administrative document or other export declaration endorsed by the customs office of exit on the actual exit of the goods
- For an intra-Community supply, a shipping document or any other credible evidence
If an invoice is issued in any currency other than Hungarian forints, the taxable value must be converted into Hungarian forints using the foreign exchange offer rate on the date of supply of any domestic credit institution that has a foreign-exchange permit. (In case of continuous supplies, the exchange rate effective on the issue date of the invoice should be applied.) The taxpayer may use the official exchange rate quoted by the National Bank of Hungary or the European Central Bank, provided it has reported this decision to the Hungarian tax authorities in advance. Once a taxpayer has exercised this option, it cannot be changed until the end of the following calendar year.
If the domestic credit institution in question does not quote the foreign currency used, the Hungarian National Bank or the European Central Bank rate must first be used for conversion into euros. The conversion is based on the euro exchange rate for the quarter preceding the date of supply of the transaction.
Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronically supplied services to non-VAT taxable customers. For further details of the VAT rules on electronic services in the EU, please refer to the European Union chapter.
Registering and documenting invoicing software.
In connection with invoicing software, taxpayers have an obligation to inform the tax authority of the following:
- The software they use for issuing invoices, including complex Enterprise Resource Planning (ERP) systems that are able to issue invoices
- Online invoicing systems
Reporting should be done on the relevant form within 30 days after obtaining or starting to use the program whether the software was acquired from a supplier or was developed in-house. Discontinuing the use of an invoicing program or online invoicing service should also be reported to the tax authority within 30 days. Invoicing software registration is planned to be abolished once the online invoicing regime (please see below) becomes effective as of 1 July 2018.
Taxpayers using invoicing software should possess detailed documentation of the software in Hungarian, English, German or French, such as a user manual, and retain it until the expiry of the software license. The manual does not have to be submitted to the tax authority but must be available for review during a tax audit. The documentation should contain a detailed description of the software’s operation and functions. The invoicing software should be able to perform only those functions detailed in the user documentation.
The invoicing software should furthermore comply with Hungarian invoicing rules, and the user documentation should contain descriptions accordingly, even if the issuer of the invoice is a foreign enterprise having only a VAT number in Hungary or uses the company group’s invoicing software developed abroad.
Data export function integrated into invoicing software.
From 1 January 2016, invoicing software and ERP systems of taxpayers with Hungarian VAT numbers must have a special data export function. Taxpayers will need to use this function to perform data queries concerning invoicing-related information upon the request of the tax authority. The range of data to be included in the report created by the ERP system or invoicing software and the data structure of the report are predefined by law.
Online reporting of invoice data directly from invoicing software. As of 1 July 2018, taxpayers will have to provide the tax authority with prescribed invoice data electronically, directly from their own invoicing system. This obligation will become mandatory for all taxpayers. (Data relating to invoices amended or canceled will also have to be provided to the tax authority in the same way.)
VAT returns and payment
In general, Hungarian taxable persons must file quarterly tax returns. However, three categories of taxable persons must file monthly returns (and EC listings):
- Newly registered taxpayers during the first two calendar years after registration
- Taxable persons whose net VAT payable or reclaimable in the tax year in question, or in the second year before the year in question, exceeds HUF1 million
- VAT groups
Taxable persons whose VAT payable or reclaimable for the second year preceding the year in question does not exceed HUF250,000 may file VAT returns annually if they were not given an EU VAT identification number. However, they may opt to file quarterly returns.
Monthly and quarterly VAT returns must be filed by the 20th day of the month following the tax period. Annual returns are due by 15 February in the year following the tax year in question. Payment in full is required on the same date.
VAT liabilities must be paid in Hungarian forints.
Domestic Summary Report.
Taxpayers must file reports on their domestic sales and purchases of goods or services at invoice level. This obligation concerns those invoices on which the VAT payment is due or the taxable person deducts input VAT in the tax period in question and the amount of VAT exceeds HUF100,000.
For incoming invoices, the threshold concerns the aggregate amount of deductible VAT per supplier. From 1 July 2018, this threshold will be lowered to HUF100,000. Due to the introduction of the mandatory online reporting of invoice data from 1 July 2018, Domestic VAT Summary Reports will cover the incoming invoices whereby the taxable person deducted input VAT, provided the VAT amount of that invoice exceeds HUF100,000 or the supplier issued more invoices to the taxable person and the aggregate VAT amount of the invoices exceeds HUF100,000.
Electronic control system on the movement of goods on the road
(EKAER). Effective 1 January 2015, the EKAER system was introduced so that the tax authority can track the movement of goods on the road from the point of dispatch. Under this system, taxable persons have a reporting obligation in relation to the road transportation of goods executed with toll vehicles for certain transactions prior to the start of the transportation. The tax authority continually performs on-road audits by stopping trucks to check whether taxpayers have met this reporting obligation. In the case of noncompliance, the goods transported can be confiscated, a customs seal can be placed on the truck and a 40% penalty may be assessed based on the value of the goods. Carriers are obliged to keep the authority seal unbroken until the tax authority removes it. In the event of a road accident or other vis major events, the carrier must immediately report the damage of the seal to the National Tax and Customs Authority.
Electronic filing and archiving.
If a taxable person performs any intra-Community transactions or is required to submit Domestic Summary Reports in Hungary, it must file all of its tax returns electronically with the tax authority. To be able to file the tax returns electronically, a tax representative or employee of the taxable person must fill out a special registration in Hungarian and submit it in person in Hungary. Tax representatives can also be authorized to file the tax returns electronically on behalf of the taxpayer.
Electronically filed Intrastat reports should be prepared in CSV file format. The CSV file should be encrypted and signed with a specific program available on the website of the Hungarian Central Statistics Office. For encryption and signature purposes, the digital signature is also applicable.
Taxpayers that file quarterly or monthly returns do not file annual returns.
A default penalty (maximum of HUF500,000) applies to the late submission of a VAT return, Intrastat return, Recapitulative Statement or Domestic Summary Report. Penalties of similar amount can be levied for other mistakes as well (e.g., for not complying with the invoicing rules; for a missing or inaccurate VAT return or Domestic Summary Report).
If the VAT liability is paid late, late-payment interest is charged. The interest rate used is double the prevailing prime rate of the Hungarian National Bank multiplied by 1/365 for each day late. If the VAT liability is not reported by the due date and this is discovered during a tax audit, the tax penalty is 50% of the tax arrears, plus late-payment interest.
Late-payment interest is not imposed if the taxable person is able to justify the default. Based on the circumstances of the individual case, the default penalty may be reduced or canceled by the tax authorities.
From 1 January 2016, taxpayers significantly not complying with tax rules (“risky taxpayers”) are subject to higher penalties, whereas taxpayers properly complying with the tax rules (“trusted taxpayers”) are eligible for lower penalties.
A taxable person that trades with other EU countries must complete statistical reports, known as Intrastat. For 2018, the threshold for Intrastat Arrivals is HUF170 million and the threshold for Intrastat Dispatches is HUF100 million. Intrastat filing is to be filed on a monthly basis due the 15th of every month following the calendar month that they relate to.
The method of the filing is electronic, through the website of the Hungarian Statistical Office. If the taxpayer fails to file the Intrastat report in time, the tax authority can levy default penalty up to HUF2 million in this regard.
A taxable person must also file Recapitulative statements (EU Sales Lists and EU Acquisition Lists) for both goods and services. Penalties may be imposed for a late, missing or inaccurate Intrastat return or Recapitulative Statement.