Indirect tax - Hungary

The act on VAT prescribes that VAT is to be paid on the goods and services supplied by taxpayers in Hungary, on acquisitions from within the European Union (EU) and on the importation of goods.

The main elements of the VAT liability are as follows:

• there must be a supply
• the transaction must take place inland (actual or deemed)
• the transaction must be VAT taxable (subject to a normal or reduced VAT rate)
• there must be a supply by taxpayers (taxpayers are persons performing business activities on their own accounts)
• the transaction must take place within the framework of business

VAT on imports
In Hungary, import VAT is to be paid on product entries from a so-called ‘third countries’ outside the territory of the EU. For product entries from other EU member states the import rules do not apply but the rules for intra-community entries are applicable.

VAT liability occurs in Hungary, if:

• the goods are imported to the territory of Hungary directly from a third country
• after imported to the territory of the community, the goods are put into free circulation in Hungary

There is no threshold in Hungary for registration, i.e. if a person or entity makes taxable supplies in Hungary, it has to register at the Hungarian tax authority and submit declarations. Special rules refer to the taxpayers using OSS and/or IOSS system.

Taxpayers with their head office in Hungary are entitled to opt to be tax-exempt annually for the given tax year, provided that their revenue is below a certain threshold. This threshold is HUF 18,000,000.

Furthermore, from 1st of January 2025, a taxable person established in the European Union will be able to opt for an exemption in a Member State other than the one in which he is established, by registering only in the Member State in which he is established, if the following conditions are met:

• the taxable person’s aggregated turnover in the Union does not exceed €100,000 euros in the calendar year preceding the current calendar year and in the current calendar year based on actual figures
• the aggregated turnover in the Member State concerned does not exceed the turnover threshold for tax exemption applied by the Member State in question. (In Hungary this threshold is HUF 18,000,000.)

Companies of other member states supplying

• goods from the Community to Hungary to a non-taxpayer (private individual or non-VAT registered entity) hereinafter distance sales and/or
• services to a Hungarian non-taxpayer where the place of supply is determined based on the location of the purchaser

are not obliged to register in Hungary. The requirement is that the total value of these sales to Hungarian customers does not exceed €10,000 in the given year and in the preceding year. If the sales of the given company exceed €10,000 in a calendar year, the foreign company

• has to register in Hungary and to charge Hungarian VAT on these transactions or
• has to use the OSS system instead of Hungarian registration and charge Hungarian VAT on these.

Even if the threshold is not exceeded, the foreign supplier can opt to register, however, the decision is binding for two calendar years. Moreover, the OSS system can be chosen as well independently from the threshold. The above procedure also applies in the opposite situation (Hungarian trader, other EU member states customers).

One Stop Shop (OSS)

The One Stop Shop (OSS) offers a simple, effective electronic method of administration for taxpayers who provide services and perform supplies to entities in the member states who are not subjects of VAT.

The OSS can be utilized for services and distant sales performed in a member state to a non-taxable person, and distant sales within the Community, i.e. transactions where the place of supply is the member state where the customer resides. If the taxpayer does not use OSS for such supplies then tax duties can only be performed by: 

• registering separately to all the national tax administrations of the consumers
• filing separate tax returns and according to the rules of these countries
• making separate payments accordingly.

It is essential to note that the use of the OSS scheme is not compulsory, it is merely an option.

If the taxpayer chooses to use the system, all it has to do after a brief registration is to file a single, consolidated VAT return via the portal of the Hungarian Tax Authority for any member states.

In this case, Hungary, as the member state of identification will forward the return data for all the member states the taxpayer indicated in the return. Taxpaying can also be managed by a single, consolidated transfer to be forwarded by the Hungarian Tax Authority to the member states of consumption by splitting the amount pursuant to the related return.

I.) The EU scheme

Potential economic activities applicable for union OSS have been enlarged. In the MOSS only telecommunications, broadcasting or electronic services substantiated the use of the simplified rules. The OSS already covers Community distant sales and every supply to non-taxpayers in any member state of the Community.

II.) The non-EU scheme

If the taxpayer's place of business is outside the territory of the European Community, does not have a fixed establishment there and has not already registered to the OSS system but would like to do so in Hungary, then the non-EU scheme registering option is the one to choose. This scheme is therefore stricter then the union scheme in terms of subjects (third country businesses only) and respective transactions (services only) as well.

The Import scheme (IOSS)

The import scheme gives ground to fulfill tax obligations to taxpayers established in Hungary or in a third country, provided they supply goods that are dispatched/ transported from third countries/ territories with an intrinsic value lower than 150 euro. By using the scheme, the taxpayer declares and pays VAT of distant sales of goods imported from third countries, therefore the importation to the territory of the Community - following the check of IOSS registration by the customs authorities - takes place without imposing taxes.

Businesses who are not established in Hungary, but for the purposes of the tax are making taxable supplies there, those businesses will need to register for VAT as soon as they commence trading in Hungary, irrespective of the level of turnover.

Foreigners from non-EU countries are obliged to appoint fiscal representatives. Foreigners from EU countries can appoint fiscal representatives for their Hungarian tax issues. Special rules refer to the taxpayers using OSS and/or IOSS.

As a general rule, VAT returns are filed quarterly. As an exception, VAT returns can be filed monthly or yearly, based on the data of the second year preceding the actual year.

Taxpayers with a total VAT balance reaching a positive HUF 1,000,000 in the reference year are liable to file monthly returns.

Taxpayers with a total VAT balance below HUF 250,000 in the reference year and sale income is under 50 million HUF and having no IC tax number are to file annual VAT returns (regardless of the algebraic sign).

Taxpayers with EU tax number can submit their VAT returns monthly or quarterly only. VAT groups can submit their VAT returns monthly. Companies in the year of registration and the next year have to submit the VAT returns monthly (calendar month).

Taxpayers liable to quarterly returns may apply for monthly returns and taxpayers liable to annual returns may apply for the quarterly return frequency. The Tax Authority permits the frequency of the returns to be higher than stipulated by law for a given tax year. The permission is generally granted if the VAT rate applicable to the supplies of the taxpayer is lower than the VAT applicable to acquisitions or if an investment is implemented by the taxpayer.

Taxpayers liable to annual returns are obliged to switch to quarterly returns during the year if the threshold of HUF 250,000 or sale income of HUF50 million is reached or tax authorities given IC tax number for them. Taxpayers with their VAT balance reaching a positive HUF 1,000,000 are obliged to switch to monthly returns from the first month following the quarter (regardless of whether they were liable to annual or quarterly returns).

The amount of VAT computed in a currency other than HUF is to be translated to HUF at the selling exchange rate of a Hungarian trade bank or at the exchange rate of the Hungarian National Bank or European Central Bank (ECB). If the taxpayer wishes to apply the exchange rate of the Hungarian National Bank (MNB) or European Central Bank, may choose it, if it declares its choice previously to the tax authority.

The deadline to submit the VAT return is the 20th day of the month following the return period. The VAT return is to be filed on the yy65 form from the tax authority.

Special rules refer to the returns which are filled through OSS or IOSS system.

Quarterly VAT returns
Most entrepreneurs/taxable persons are required to submit VAT returns each calendar quarter. VAT returns must be filed and VAT amounts paid by 20th of the month following the tax period.

Monthly VAT returns
Monthly filing required when the VAT amount payable reaching a positive HUF 1,000,000 in the second preceding year or within the actual year. Newly registered taxpayers need to submit the returns monthly in their first two years.

Annual VAT returns
Entrepreneurs/taxable persons whose VAT balance does not exceed HUF 250,000 on a yearly basis in the second preceding year and sale income is under 50 million HUF and having no IC tax number are to submit an annual VAT return.

OSS and IOSS VAT returns
OSS returns should be submitted on quarterly base until the end of month follows the given quarter. Returns through IOSS system should be submitted monthly basis until the end of month follows the given month. These returns should be filled in a separate webpage in a separated form.

Importers
VAT is levied on importation of goods into the territory of Hungary. As a general rule, every person importing goods will be responsible to pay VAT to the customs authorities. Taxpayers are entitled to the deduction of import VAT in the VAT declaration period in which the payment is made. It is a prerequisite for deduction that the taxpayer should have the certificate issued by the customs authority.

Large trading companies can apply for a permission to use the reverse charge system. Taxpayers with permission of the customs authority are entitled to recover VAT paid on the importation of goods acquired for the purpose of business activities in the same VAT declaration in which the input VAT is shown. The permission is valid for one year.

The prerequisite of tax recovery is that the taxpayer should have the resolution on putting the goods into free circulation as well as documents authentically certifying the data necessary for the determination of the VAT amount on the import of goods.

Should an indirect customs representative be appointed by the taxpayer to act in the import procedure, the taxpayer is entitled to recover VAT paid on behalf of him by the indirect customs representative.

The indirect customs representative is entitled to recover VAT on importation, if they:

• are a taxpayer and meets the personal conditions of tax recovery
• have the resolution on putting the goods into free circulation
• have the documents necessary for the determination of the VAT amount
• have paid the input VAT.

Late or missed returns

For non-natural persons a default penalty up to HUF 1,000,000 can be levied (HUF 400,000 for private individuals as taxpayers) if the declaration obligation is not fulfilled or fulfilled with delays. The tax authority also sets a deadline for the elimination of the default. Should this deadline be not adhered to, the duplicate of the original penalty is levied as default fee.

Incorrect returns

With regard to self-assessed taxes, Hungarian taxpayers are entitled to correct their tax returns themselves. If the taxpayer reveals that he did not establish the tax liability in accordance with the law or his tax return contains errors in respect of taxes due to miscalculation or other clerical error, it is possible to make corrections in the tax return by way of self-revision. The self-revision has to be submitted prior to the commencement of a tax audit.

If the self-revision results in an increasing the tax payment liability, it is subject to a self-revision surcharge (calculated at the prime rate of the Hungarian Central Bank).

Late payment of tax

In case of the delayed payment of taxes a late payment interest is to be paid for the days of delay, but for a maximum of three years. The late payment interest is calculated for each calendar day of the default, the daily late payment interest rate is calculated as 1/365 of the prime rate published by the Hungarian National Bank on each day plus 5% points.

Data reporting obligation

Failure to comply with the valid data reporting obligation can be penalized up to HUF 1,000,000 per invoice.

EC Sales Lists (ECLs) are to be filed by those having EU VAT numbers to the tax authority and having Intra-community transaction in the given period. The reporting liability is monthly or quarterly, in accordance with the VAT return period. The taxpayer has to file the ECLs monthly instead of quarterly if the EC purchases or sales in the current quarter are more than €50,000. In this case the ECLs for the period covered by the transition should be submitted by the 20th day of the month following the first day of the quarter concerned until the last day of the month, in which the threshold is exceeded. The following ECLs should be prepared and submitted on a monthly basis.

Recapitulative statements (return yyA60) includes the net value of the turnover in the given period for each partner taxpayer in case of Intra-community supplies and, Intra-community acquisitions and services provided and bought within EU.

As part of the VAT return, an additional declaration (domestic purchase list) has to be submitted, about all the domestic incoming invoices in which based the VAT has been deducted in the affected tax period.

Furthermore, the outgoing invoices should be reported as well (data reporting obligation) if they are issued under the Hungarian VAT number. (There is only one exemption: if the taxpayer performed the transaction through OSS (one-stop-shop) system.) If the invoice is issued by invoicing program, then the invoicing programs shall be capable to supply the invoicing data   immediately, electronically and without any human assistance to the Hungarian Tax Authority. If the taxpayer uses pre-printed invoice, it has to be reported manually within four or one day (depending on the amount of the VAT charged, if it equals or exceeds the HUF 500,000 limit then the reporting should be done within 1 day).

In the case of a tax audit, the Tax Authority may establish tax difference if the taxpayer did not assess the tax in compliance with the law. If this tax difference qualifies as a shortage (ie tax difference established to the detriment of the taxpayer and not paid by due date), the Tax Authority assesses:

• a general tax penalty which is 50% of the tax shortage; a maximum penalty of 200% may be levied if the tax
  shortage is linked to hidden revenues or faked or destroyed documents and invoices
• late payment interest.

Hungarian VAT can be reclaimed by taxpayers registered in another member state not having head offices or permanent establishments in Hungary and not supplying goods or services inland except for the transportation of goods in connection with the international movement of goods and related services as well as services where VAT is to be paid by the customer according to the reverse charge procedure.

Taxpayers registered abroad are entitled to tax reclaim to the same extent as taxpayers registered inland are entitled to tax recovery. Tax on goods and services acquired by taxpayers registered abroad by means of their branch offices established inland cannot be reclaimed (in this case branch offices may assert their right of recovery within the framework of the procedure for domestic taxpayers). Furthermore, VAT on goods and services acquired by foreign taxpayers on their own accounts but for the purpose of others cannot be reclaimed.

Taxpayers established in a member state file Hungarian VAT refund claims with the tax authority of the country of registration in accordance with the regulations of Council Directive 2008/9/EC.

VAT on invoices issued in the given year may be reclaimed from 1 January to 30 September of the calendar year following the given year if the request reaches or exceeds €50 (requests are to be filed by this date and non-adherence to this deadline will lead to the forfeiture of rights).

In contrast with the main rule, reclaim may be requested for a three-month-period within the given year, in the month following the quarter if the request reaches or exceeds €400.

Taxpayers can file refund claim maximum five times for a given year.

The Hungarian VAT for taxpayers from non-EU countries is recoverable based on reciprocity only. Reciprocity countries are Switzerland, Norway and Liechtenstein. The refunding request of non-EU taxpayers has to arrive to the Hungarian tax authority in paper form until 30 September of the calendar year following the given year.

As the Hungarian VAT Act is in line with the VAT Directive, the obligatory content of an invoice is the same as described in the VAT Directive:

• the date of the invoice
• the sequential number of the invoice (with a continuous numbering)
• the tax identification number of the taxable person supplying the goods, or services
• the tax identification number of the customer
• the name and address of the taxable person supplying the goods or services, and the name and address of his customer
• the description of the goods supplied, furthermore, the quantity of the goods, the description of the services rendered, as well as the extent and nature of the services rendered, if it can be expressed in some unit of measurement;
• the date of performance, if it differs from the date of issue of the invoice;
• the taxable amount, the unit price of goods exclusive of VAT or the unit price of services exclusive of VAT, if it can be expressed in some unit of measurement, and any discounts or rebates if they are not included in the unit price
• the tax rate applied
• the amount of the tax charged. If invoices are issued in a foreign currency, the amount of the recharged value added tax is to be indicated in HUF as well on the invoice
• the words ‘cash accounting’ when using the special taxation scheme
• the words ‘self-billing’ where the customer receiving a supply of goods or services issues the invoice
• in the case of an exemption, reference to the applicable provision of law or to the VAT Directive, or any other reference indicating that the supply of goods or services is exempt (for example: Intra-Community Supply of Goods)
• the words ‘reverse charge procedure’ where the customer is liable for payment of VAT
• when a new means of transport, that can be a land vehicle, a vessel and aircraft, is sold, the following data shall be indicated: the date of first entry into service, the kilometer reading and the cubic capacity or power of its installed power engine (for land vehicles), the number of hours of sailing and the length of the vehicle (for vessels) and the number of flight hours and the total take-off weight(for aircrafts)
• in connection with the activities of tour operators governed under the special provisions of law, the words ‘margin scheme – travel agents’
• where one of the special arrangements applicable to second-hand goods, works of art, collector’s items and antiques is applied under the special provisions of law, the words ‘margin scheme – second-hand goods’; ‘margin scheme – works of art’ or ‘margin scheme – collector’s items and antiques’ respectively
• where a financial representative is involved, the name, address and tax number of the financial representative.

However, we would like to draw the attention into two Hungarian specific requirements that the invoice should contain: the tax number of the customer in the case of the domestic sales to taxable person.

This rule needs not to be applied by taxpayers not established in Hungary. However, this information will be necessary in order to fulfil the domestic sales report in the Hungarian VAT return. If invoices are made out in a foreign currency, the amount of the recharged value added tax is also to be indicated in HUF in the invoice.

Regarding the exchange rate applicable for the currency translation, for this purpose the rate of the National Bank of Hungary (MNB), European Central Bank (ECB) or the selling rate of any resident (Hungarian) bank (credit institution) holding a foreign exchange licence in Hungary. If a taxpayer opts for the application of the MNB or ECB rate, he has to report this fact to the tax authority, and is not allowed to deviate from that until the end of the calendar year following the year when the selection is made.

The possibilities regarding issuing the invoices in Hungary are as follows:

• using pre-printed invoices
• engage another company to issue the invoices (it can also be the client of the Company)
• issuing by a Software (Word or Excel is not sufficient).

Pre-printed invoices
These invoices can be bought in Hungarian stationery stores. The filling of these invoices can be manually or in some cases with the help of printer. The Company has to keep records about the pre-printed invoices bought.

Another Company
Written agreement about invoicing must be concluded with the partner in advance. The partner should issue the invoices of the Company under separate numbering.

Software
Hungarian and foreign software also can be appropriate, if the principle conditions of invoicing are met (e.g. continuous and separate numbering). Taxpayers are obliged to register and report certain general data (software ID, software name, date of purchase, etc.) of the invoicing software or online invoicing systems they use (or stop using). Additionally, there are some special requirement in connection with the invoicing software:

• data disclosure function. An invoicing software is required to have a special function called ‘data disclosure for inspection by the tax authority’ incorporated in the software, which makes it possible to carry out data exports with the content and in the form set out by the respective regulations. This ‘data disclosure’ function has to enable data export for:
  • invoices issued in a certain period, as defined by way of a starting date and an end date (day, month and year), or
  • invoices falling within a certain range of invoice serial numbers, as defined by way of the first and the last serial number
• online invoice reporting. Invoicing software should provide data electronically to the Tax Authority upon issuance of invoices in a pre-defined format and data structure.