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Reverse Charge & “Call Off Stock” in Hungary

  • Generally, the parties obliged to account for VAT are suppliers. However, under some instances, as specified in Article 142 of the Hungarian VAT Act, the reverse charge applies, and the receiver is responsible for VAT. 
  • A supplier’s call-off stock is products sent to a warehouse or storage facility so that a certain client may take them as they choose. The client often owns or has control over the warehouse.

Read more about Reverse Charge and “Call-off stock” in Hungary in our comprehensive guide.

VAT Guide Hungary

Reverse Charge in Hungary

Local Reverse charge 

As an anti-fraud measure, the reverse charge mechanism applies to the following supplies made to a registered taxpayer, regardless of whether they are made domestically or cross-border: 

  • Real estate-related services (e.g., building, enlargement, and demolition) that need acknowledgment or notice by the Construction Authority;
  • Supplies of real estate subject to land register that was constructed as a consequence of building activities, regardless of whether the client donated the materials;
  • Until July 1, 2022, sales of iron and steel, as well as specified grains, beans, and seeds, including maize, wheat, meslin, barley, rye, oats, triticale, sunflower seeds, rape or colza seeds, and soya beans;
  • Certain forms of toxic waste;
  • Goods supplied as security and being implemented;
  • Goods or services valued at more than HUF 100.000 to an entity in liquidation;
  • Greenhouse gas emission limits until July 1, 2022; and 
  • Labour provision (e.g., secondments and temporary hires).

 

Cross-Border Supplies  

Non-residents’ supply of services to resident taxable persons is generally subject to Hungary’s reverse charge mechanism, which requires receivers of services to account for and pay VAT on purchases.  

 The reverse charge does not apply to transportation, cultural services, or goods private individuals provide. 

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Hungary – “Call off stock”

There is a registration requirement for sales of call-off stock that entail the transit of items into Hungary just as there is for consignment stock. Since January 1, 2020, EU-registered call-off stock providers may avoid registration in Hungary by using the EU “Quick Fix” simplification program. Before that date, a different simplification approach was in place. 

 

Simplifying the EU’s call-off stock regime   

 

Call-off stock arrangements are standardized throughout the EU on or after January 1, 2020, under one of the “Quick Fixes” provided by Article 17a of the EU VAT Directive, which is incorporated into Hungarian legislation by Articles 12/A and 22 of the Hungarian VAT Act. 

 

Certain restrictions apply if a supplier moves goods to a warehouse in another EU Member State to make a later delivery to a known purchaser. The transfer to the warehouse is not a taxable event under the simplification rule. Instead, the following transfer of ownership of the items to the receiver is a taxable event. The taxable transfer is recognized as an intra-Community supply of goods from the supplier to the recipient (which is exempt with the right of deduction) and an intra-Community purchase by the recipient in the Member State of acquisition. This approach removes the supplier’s need to register for VAT in the Member State of destination. 

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Hungary – Import VAT

Import of goods means the entry of goods into the Community from a third country. Liability for Hungarian VAT is based on where supplies of goods or services are made, not on where a supplier may be located. VAT is payable on all purchases of goods bought from outside Hungary, at the point of importation, at the same rate that would apply to the goods or services if supplied in Hungary. When services are purchased from a supplier established outside Hungary, place of supply rules or a “reverse charge” mechanism reach an equivalent result. 

 

For VAT purposes, goods are treated as imported when: 

  •  They arrive in Hungary directly from outside the EU and enter free circulation in Hungary or customs duty otherwise becomes chargeable on them; or
  •  They have been placed under a customs suspension arrangement and the goods are released into free circulation in Hungary or customs duty otherwise becomes chargeable.

Technically, the arrival of products in Hungary from another EU Member State is referred to as an “intra-Community acquisition” rather than an import. At the same time, the cross-border supply of services is excluded from the import system. 

When products from outside the EU are imported into Hungary, the importer is normally required to pay VAT on the commodities (as well as customs and excise duties, if applicable). In this context, the term “importer” refers to a business that makes sales in Hungary and is, therefore, most likely required to register as a VAT payer. 

 

However, suppose the importer is not registered for VAT. In that case, the Hungarian receiver of the products is required to pay import VAT in addition to customs excise taxes upon receipt of the items. 

On or after July 1, 2021, international suppliers from third countries may opt to use the Import One Stop Shop (IOSS) to simplify VAT payment on low-value items imported into Hungary. 

 

 

Last Updated: 21/06/2022

 

Disclaimer

 

The information provided by Global VAT Compliance B.V. on this webpage is intended for general informational purposes only. Global VAT Compliance B.V. is not responsible for the accuracy of the information on these pages, and cannot be held liable for claims or losses deriving from the use of this information. If you wish to receive VAT related information please contact our experts at support@gvc.tax

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