HUNGARY: COVID-19 VAT IMPLICATIONS

HUNGARY – Update 10^th June

VAT penalty relief, invoice reporting requirements effective 1 July 2020 (COVID-19)

Under value added tax (VAT) changes that are effective 1 July 2020, all invoices issued to Hungarian domestic taxpayers must be reported online to the tax authority; thus, the current threshold of HUF 100,000 for electronic reporting will cease to apply.
 
Source Credit – KPMG
 

HUNGARY – Update 9^th June

Hungarian Opposition Party LMP Proposes Reducing VAT On Basic Foodstuffs

The opposition LMP is proposing the reduction of VAT to 5% on basic foodstuffs, such as fruit, vegetables, dairy products and bakery.

Party lawmaker Antal Csárdi told an online press conference that a reduction is needed because many Hungarians cannot afford to buy increasingly dear food due to its high VAT content. Currently restaurant bills carry only 5% VAT but the retail price of vegetables and fruit from shops include 27% VAT. Further price increases affecting food can only be avoided by reducing the VAT, he said.

Source Credit – xpatloop

HUNGARY – Update 5^th May

Special retail tax in Hungary due to the COVID-19 situation

The special tax of retailers was re-established in Hungary as on 14 April 2020 the Government Decree on the rules of the special retail tax during the COVID-19 crisis was published. However, the new legislation extended its scope to foreign seated e-commerce companies as well.
As per the Government Decree, Hungarian retailer activity is considered to be taxable in Hungary, the tax liability extends to foreign retailers as well where the goods are dispatched to Hungary. The regulation highlights that even those foreign resident companies are subject to the special retail tax, which do not perform their business activities through a registered branch in Hungary so are arguably without a permanent establishment as well.  As a result, the popular online webshops could also become taxable entities during the period of the COVID-19 crisis.
Generally, the basis of assessment equals to the total sales revenue derived from goods dispatched to Hungary with some adjustments.
Progressive taxation applies for both domestic and foreign entities, where retailers with the tax base of less than HUF 500 million (approx. EUR 1.4 million) are tax exempt. The additional tax rates are determined as follows:

• for the part of the tax base exceeding HUF 500 million (approx. EUR 1.4 million), but not exceeding HUF 30 billion (approx. EUR 84 million) the tax rate is 0.1%;
• for the part of the tax base exceeding HUF 30 billion (approx. EUR 84 million), but not exceeding HUF 100 billion (approx. EUR 280 million) the tax rate is 0.4%;
• for the part of the tax base exceeding HUF 100 billion (approx. EUR 280 million) the tax rate is 2.5%.

The tax payable is the proportionate amount of the special retail tax calculated for the whole financial year covering only the days of the crisis period (as defined by the Hungarian Government).  Currently Hungary is deemed to be in a crisis period from 11th of March for an undefined period.  The tax return has to be submitted within 30 days following the end of the financial year or the last day of crisis period (whichever comes earlier).
Taxpayers are also obliged to pay tax advances on a monthly basis with the first advance payment due on 31 May 2020. Going forward, the tax advance payments have to be fulfilled by the last day of each month during the crisis period. The amount of the tax advance payments equals to 1/12 of the annual special retail tax calculated based on last year’s figures.  Note that in case the total taxable sales revenue of the taxpayer has fallen by at least 40% (e.g. due to the COVID-19 crisis) compared to the same period of 2019, the value of the monthly tax advance payments might be decreased accordingly by the Hungarian Tax Authority.
Companies with a tax base not exceeding the HUF 500 million (approx. EUR 1.4 million) (exempt) threshold will not be obliged to submit the monthly and annual tax returns.
At the current stage it is not clear from the legislation how foreign seated companies with no Hungarian VAT number should be registered in Hungary in order to comply with the rules of the special retail tax. Moreover, calculating the advance payments for those who become liable for the tax (i.e. calculating their implicit taxbase for the 2019 period) could create a tough administrative burden.  Last but not least, arguably, this tax is not covered by the existing double tax treaties of Hungary.
 
Source Credit – PWCHUNGARY – Update 30^th April

Refund VAT to SMEs within 30 days and 20 days for “reliable taxpayers”

Small and medium-sized enterprises may expect earlier refunds of value added tax (VAT) as a relief measure in response to the coronavirus (COVID-19) pandemic.
According to a communication from the Hungarian Ministry of Finance, the Ministry has requested that the Hungarian tax authority (NAV) accelerate refunds of VAT claimed by small and medium-sized enterprises (SMEs). Under this relief measure, the tax authority would be expected to refund VAT to SMEs within 30 days (instead of 75 days) of the filing date of the refund claim. For “reliable taxpayers,” a VAT refund could be made within 20 days of the filing of the refund claim.
For this purpose, SMEs are those that employ fewer than 250 people and have either an annual turnover not exceeding the HUF equivalent of €50 million or an annual balance sheet total not exceeding €43 million.

Source Credit – KPMGHUNGARY – Update 29^th April

Expedited refunds of VAT (COVID-19)

Small and medium-sized enterprises may expect earlier refunds of VAT as a relief measure in response to the coronavirus (COVID-19) pandemic.
According to a communication from the Hungarian Ministry of Finance, the Ministry has requested that the Hungarian tax authority (NAV) accelerate refunds of VAT claimed by small and medium-sized enterprises (SMEs).
Under this relief measure, the tax authority would be expected to refund VAT to SMEs within 30 days (instead of 75 days) of the filing date of the refund claim. For “reliable taxpayers,” a VAT refund could be made within 20 days of the filing of the refund claim.
For this purpose, SMEs are those that employ fewer than 250 people and have either an annual turnover not exceeding the HUF equivalent of €50 million or an annual balance sheet total not exceeding €43 million.
 
Source Credit – KMPG

HUNGARY – Update 24^th April

Payment relief shall not be granted or VAT taxpayers of a tax group during the period of the tax group

One important part of the latest tax relief measures is that companies may ask for their tax to be reduced ¬– without being subject to stamp duty – if they have fallen into difficulty because of the pandemic. This can amount to no more than HUF 5 million (roughly EUR 14,000) per company. Furthermore, up to a tax debt of HUF 5 million (roughly EUR 14,000) companies can ask for payment in instalments over 12 months without any extra charge, or a payment deferral for 6 months, again without any extra charge.

Source Credit – WTS Klient

HUNGARY – Update 23^rd April

 2.5% retail turnover tax 1 May for the duration of the COVID-19 crisis

Source Credit – Richard Asquith – (Avalara)

HUNGARY – Update 17^th April

The Hungarian tax and customs office has issued notice of tax payment deferrals following the spread of the COVID-19 virus. The measures mostly target individuals. However, businesses may apply for tax (including VAT) payment deferrals. But there is a HUF10,000 administrative fee.The Hungarian tax and customs office has issued notice of tax payment deferrals following the spread of the COVID-19 virus. The measures mostly target individuals. However, businesses may apply for tax (including VAT) payment deferrals. But there is a HUF10,000 administrative fee.The measures for tax and associated penalties and interest include:

• Postponement of tax payments
• Step repayment schedule
• Tax forgiveness

Source Credit – Accordance VAT

HUNGARY – Update 17^th April

Hungary to Tax Retailers for Revenue in Fight Against Virus

Hungary will impose a special tax on the retail sector to raise money to fight the coronavirus crisis.

The tax will be 0.1% on annual net sales higher than 500 million Hungarian forint ($1.56 million) and up to 30 billion forint; 0.4% on sales exceeding 30 billion and up to 100 billion forint; and 2.5% on sales exceeding 100 billion forint, according to a decree published earlier in the month.

The tax will be in effect from May 1, and is to be paid in monthly installments until the end of the state-declared coronavirus emergency. Both resident and non-resident retailers must pay the tax, according to the decree. Affiliated companies will have their net sales consolidated for the purpose of setting the applicable tax rate. The decree follows last week’s announcement that Hungarian banks will pay 55 billion Hungarian forint this year in a special tax on the financial sector.

Source Credit – Bloomberg Tax

HUNGARY – Update 26^th March ⁽¹⁾

• XSD-schema to be uploaded to the Online Invoice system is postponed from 1^st April 2020 to 1^st July 2020

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