VAT: General rules, VAT rates, exemptions

Undertakings carrying out taxable activities in Hungary are required to pay, keep accounts of and provide data on VAT.

Kulcsszavak: VAT return frequency VAT exemption invoice VAT rate

Obligations of entities registered for VAT

Foreign undertakings or foreign natural persons not having a place of establishment for the purpose of engaging in an economic activity in Hungary must apply for a tax number in Hungary if the place of supply is in Hungary and they are liable to pay tax.

Foreign taxable entities are subject to the same rules as Hungarian taxable entities in terms of the frequency of VAT returns, deadlines, data provision and the submission of recapitulative statements.

 

  1. Invoices

Foreign taxable entities must (also) observe the Hungarian rules pertaining to invoices in respect of the transactions they carry out as a taxpayer registered in Hungary. You must indicate the Hungarian tax number on your invoice. You can issue paper or electronic invoices either in Hungarian or a foreign language.

Invoices must be issued within 15 days – as of 1 July 2020 within 8 days – of delivery at the latest, or on the spot if the invoice is paid in cash or other non-cash payment instrument (e.g. bank card) is used.

 

You must report the details of your invoice to the tax authority.

To do so, visit the following website:

https://www.onlineszamla.nav.gov.hu

Which invoices are subject to reporting (data supply; data provision)?

  1. Before 1 July 2020, invoices issued to taxpayers registered in Hungary had to be reported to the tax authority if the amount of output tax exceeded HUF 100,000.
  2. From 1 July 2020, every invoice issued to a resident taxpayer for a transaction completed in Hungary irrespective of the amount of output tax, including transactions to which the reverse charge mechanism is applied and exempt transactions, with the exception of sales within the Community.
  3. As of 4 January 2021, all invoices irrespective of the amount of VAT charged and the VAT status of the purchaser (e.g. invoices issued to private individuals), if such invoices are covered by the provisions of the VAT Act (excluding invoices for transactions carried out in another Member State, after which taxable persons fulfil their tax payment and tax return filing obligation using MOSS or OSS, IOSS).

 

Deadlines of data provision:

- The details of paper invoices with an output tax exceeding HUF 500,000 must be uploaded to the above website within 1 day, otherwise you have 4 days to upload data.

- Where invoicing software or on-line invoicing is used, data provision must be immediate and automatic.

 

The invoicing software of the National Tax and Customs Administration of Hungary (NAV) is free of charge for the undertakings concerned, and it reports the statutory data immediately and automatically. The invoicing software is available after you register in the on-line invoicing system of NAV, its use is optional.

 

Data provision also applies to invoices received, these data must be provided on sheet M of the return filed for the VAT period in which the taxpayer exercised their right to deduct VAT based on the invoice certifying completion of the transaction or advance payment. From 1 July 2020, invoices received without regard to the amount of VAT charged must also be reported.

 

  1. Record keeping

Record keeping obligations:

  • A detailed record of the tax must be kept, which is suitable for monitoring the exercise of rights and the fulfilment of obligations regulated by the VAT Act, both in terms of legal basis and amount. The records must state the tax liabilities by the VAT rate applied, and the sub-ledgers must indicate VAT exemptions and input taxes, the latter broken down into the deductible and non-deductible amounts of VAT payable.

 

Document retention obligation:

  • Documents (invoices, contracts, records) generated during an economic activity must be retained until the right to assess tax expires. Generally, such right expires on the last day of the fifth year following the calendar year in which you were required to file the corresponding VAT return.

 

  1. VAT assessment

 

VAT base

The VAT base is the price of the goods sold or services rendered. As a general rule, the amount of VAT payable must be established at the time of delivery.

 

VAT rates

  • The general rate of VAT is 27 per cent.
  • The preferential VAT rate is 18 and 5 per cent.
  • Certain transactions are exempt from VAT, see section ‘Exemption from VAT’.

 

VAT must be assessed and paid in HUF. For transactions made in a foreign currency, taxpayers may apply

  1. the exchange rate set by a credit institution authorised to exchange currencies in Hungary, or
  2. the foreign exchange rate published by the National Bank of Hungary (MNB) (based on prior arrangement), or
  3. the foreign exchange rate published by the European Central Bank (ECB) (based on prior arrangement)

to determine the value in HUF.

For foreign currencies with no HUF exchange rate set, the EUR exchange rate for the given currency determined by the MNB should be used (exchange rate applicable to the previous quarter).

 

VAT exemption

There are two types of exemption: VAT exempt status (only resident taxpayers may use this option if their annual sales revenue does not exceed HUF 12 million, taxpayers registered for VAT may not) and VAT exemption granted on the basis of activity. The latter is independent of residency, it depends on the type of the activity conducted, such as public interest activities (postal, healthcare or educational services) or other specific types of activities (e.g. financial services, lease or sale of real estate).

 

When applying for a tax number, taxpayers must state on the form if they only conduct VAT-exempt activities.

 

In the following cases, a taxpayer may request that an activity exempt from VAT as per the Act on Value Added Tax be subject to VAT: sale and/or lease, rental of freehold property (except new properties) or land not built on (except building plots). Taxpayers may choose to have only the sale and/or lease of non-residential property be subject to VAT. As a general rule, to the sale or lease of property subject to VAT a VAT rate of 27% must be applied.

 

 

The right to deduct VAT

Conditions of the right to deduct VAT:

  • Conditions pertaining to the taxpayer: you must be a taxpayer engaging in an economic activity, and you may deduct VAT in proportion to the part of your purchases you utilise for your taxable activity. Taxpayers only engaging in VAT-exempt activities may not deduct VAT.
  • Other conditions: as a general rule, the documents substantiating the amount of input tax (invoice, decision) must be available.

 

Hungarian rules restrict the right to deduct VAT for the purchase of certain goods or services (ban on deduction).

No VAT may be deducted for the purchase of goods and services that can typically be used (also) for private purposes,

such as the purchase of fuel, passenger cars, motorcycles with a cubic capacity over 125cm3, yachts, sports vessels, food and beverages, the use of restaurant services, the purchase of residential property or goods necessary for the construction of residential property, the purchase of goods or use of services related to the operation and maintenance of passenger cars, and the use of taxi service and parking service. 30 per cent of the output tax charged on telephone, mobile phone or voice over IP services is non-deductible. 50 per cent of the input tax charged on the rental of passenger cars or services required for their operation and maintenance is non-deductible.

 

The law establishes exceptions from these restrictions (removal of the ban on deduction), for example in the case of purchase for resale.

 

Scaling of VAT

Taxpayers conducting both activities entitling to (taxable activity) and activities not entitling to VAT deduction must state the amounts of deductible and non-deductible input tax in their accounts separately. If VAT related to the two different types of activity cannot be stated separately, the amount of non-separable tax must be broken down into deductible and non-deductible tax according to the rules of scaling (for the method of scaling, see Annex V of the Act on Value Added Tax). Taxpayers can only deduct VAT charged on activities entitling to VAT deduction, in the proportion described above.

 

  1. Reporting VAT liability (i.e. filing the VAT return)

You must report your VAT liability. VAT returns can be filed on a monthly, quarterly or annual basis.

  • Taxpayers must file a monthly VAT return in the year of starting their economic activity and in the following one, as well as taxpayers whose amount of tax aggregated on an annual basis to be accounted for in the second year preceding the current year has a positive sign and reached HUF 1 million.
  • Taxpayers not submitting a monthly or annual VAT return must file a quarterly VAT return.
  • Taxpayers not holding a community tax number whose VAT liability did not reach HUF 250 thousand in the second fiscal year preceding the current year (either positive or negative) and the net consideration of the transactions performed by him/her does not exceed HUF 50 million must file an annual VAT return.

 

Your VAT liability (payable or refundable) is determined for these VAT periods after the end of the VAT period. Taxpayers may reduce the amount of VAT they are required to pay by the total amount of deductible input tax generated in the VAT period.

 

 

  1. Payment of VAT

If your VAT liability balance is positive, you must pay VAT by the deadline for submitting your VAT return by bank transfer.

 

If your VAT liability balance is negative,

  1. you may carry it over to the next VAT period before expiry and use it as an item reducing your VAT liability for that period, or
  2. you may reclaim it from the tax authority.

 

  1. Claiming a VAT refund

If your VAT liability balance is negative and you wish to reclaim this amount, you must indicate this in your VAT return. You can claim a VAT refund if its amount exceeds

  1. HUF 1 million if you are required to file a monthly VAT return,
  2. HUF 250 thousand if you are required to file a quarterly VAT return,
  3. HUF 50 thousand if you are required to file a VAT return annually.

Refundable VAT must be carried over to the next period as long as the carried over amount does not reach the above refund threshold.

 

The tax authority usually pays the refundable VAT after 75 days which can be reduced to 45 days if all invoices for which VAT has been deducted are paid by the time your VAT return is submitted.

If you do not pay VAT on time or pay an incorrect amount of VAT, you may have to pay default penalty. In case of late payment you must pay a late payment charge.

Taxpayer:

 

Tax authority:

Deadline for the processing of returns and data provisions: 30 days.

Payment of VAT refunds: 75/45/30 days.

Form 65 VAT return

 

Form A60 Recapitulative statement

 

Form SZAMLAZO

 

General Form-filling Software (ANYK)

https://nav.gov.hu/nav/letoltesek/nyomtatvanykitolto_programok

For taxpayers registered for VAT, the Large Taxpayers’ Tax and Customs Directorate of the National Tax and Customs Administration

In the case of establishment for the purpose of engaging in an economic activity (seat, place of business), the competent local directorate of the National Tax and Customs Administration of Hungary.

Appeals Directorate of the National Tax and Customs Authority

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Decree No 23/2014 of 30 June 2014 of the Minister for National Economy on the identification of invoices and receipts for tax administration purposes and the audit of e-invoices by the tax authority

NAV