It is mandatory for your company to apply for VAT registration with Hungarian authorities before starting your activities. Financial penalties may apply if the application for registration is submitted late.

If your company wishes to register for VAT in Hungary, it is essential to contact the Hungarian tax authorities. There is no need to contact the tax authorities in your country of establishment.

In particular, your company will need to submit the following documents:

• The VAT registration form(s) completed in the language of the country
• A copy of the articles of association
• An extract from the trade register
• A certificate of VAT liability
• Power of attorney (if using a fiscal agent)
• Proof of activity on the territory of the country concerned: a contract, an order form, etc.

The Hungarian tax authorities may require some of these documents to be translated into Hungarian.

If your file is complete, it generally takes one or even two months to obtain the VAT number from the competent Hungarian tax office.

Hungarian VAT authorities may require non-European companies to appoint a fiscal representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.

European companies are not obliged to appoint a tax representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.

Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Hungarian tax authorities.

If your company exceeds certain thresholds, it will be obliged to file an Intrastat statement. The Intrastat statement must be filed by the 15th of the month following the reporting period.

The thresholds in Hungary are:

• Arrivals: HUF 250,000,000
• Shipments: HUF 140,000,000

As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.

The special reverse charge rules have been introduced in Hungary for foreign companies:

For supplies of goods:

Reverse charge mechanism is not applicable to major domestic supplies of goods [with the exception for supplies of goods with installation and for other specific items] made by a business not established in Hungary.

For supplies of services:

Reverse charge mechanism is only applicable to some domestic supplies of services [passenger transportation, cultural services, rental of vehicles, supply of staff and catering services] made by a business not established in Hungary [whether he is VAT registered or not in Hungary], provided that the customer is a taxable person established in Hungary.

Since 2023, specific construction and installation works are also subject to the reverse charge mechanism.

The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.

Hungary has 3 different VAT rates :

• Standard rate : 27%
• Intermediary rate : 18%
• Reduced rate : 5%

 

Since January 1st 2021, all B2B and B2C transaction must be reported to Hungarian tax authorities in real-time, regardless to the transaction amount.

There are several methods to obtain refunds of Hungarian VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Hungary:

• If your company has a VAT number in Hungary, it will have to submit a refund application in the form and within the timeframe required by local regulations. A VAT credit is in principle automatically carried forward to the next period, unless a tax refund has been applied for.

• If your company is established in a European country and does not have a VAT number in Hungary, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.

• If your company is established outside Europe and does not have a VAT number in Hungary, it may have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.

VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.

No input VAT can be recovered on any of the following expenses:

• Petrol and other fuels
• Passenger cars, motorbikes, yachts (...) - subject to condition
• Foodstuffs, drink, and catering services
• ...