Foreign merchants have the option to register for VAT in Hungary not only without establishing a permanent business location but also by setting up a permanent place of business. They can accomplish this by reaching out to the National Tax and Customs Administration.

Should they decide to designate a financial representative, it is necessary to include a statement confirming the legitimacy of this representation and to attach various documents related to the financial representative along with their application.

Taxable Persons

Hungarian VAT Act defines a “taxable person” as any individual or legal entity with the legal capacity to perform legal acts, who carries out economic activity independently, in their own name, and in any place, regardless of the purpose or result of that activity. Joint owners engaged in an activity related to movable or immovable property, for a fee, are also recognized as taxable persons. All individuals or organizations that are recognized as legal persons under Hungarian law are treated as taxable persons for Hungarian tax purposes, regardless of their legal status in their own jurisdiction.

 Mandatory Registration

 All taxable persons are required to register for VAT purposes in Hungary, regardless of their turnover. However, if their annual turnover does not exceed the “Small Business Threshold,” taxable persons with a business established in Hungary can generally opt for the small business regime. Under this regime, small businesses are not required to charge or recover VAT upon registration.

In Hungary, anyone who intends to conduct business activities must register with the National Tax and Customs Administration (NTCA), regardless of their level of sales. VAT-registered individuals must inform the NTCA when they commence their taxable activity. Additionally, anyone who is required to pay VAT must notify the NTCA when they intend to establish commercial relations with any taxpayer established in another EU Member State, in order to obtain a Community tax number.

 Voluntary Registration

 There is no threshold for VAT registration, and anyone intending to engage in economic activities must register for VAT before starting trading. However, non-established businesses may opt for either the general Hungarian VAT rules or the small business regime, where they neither charge nor recover VAT if their turnover is below the Small Business Threshold. For EU-established traders engaged in distance sales into Hungary, voluntary registration is available if they are not required to register based on their distance sales value.

Exemptions from Registration

 An exemption from VAT registration is available to private individuals (excluding sole traders) who solely provide exempt real estate rental or leasing services, provided that they do not opt to tax these transactions and are not required to obtain a Community Number for intra-Community transactions under Article 257(5) of the VAT Act.

Group and Divisional Registration

 Grouping for VAT purposes is optional. This means that not all eligible entities are required to join a group. Instead, a subset of eligible entities may choose to form a group.

Eligible taxable persons have the option to enter into a group taxation arrangement if they meet the following criteria:

• Have established their business in Hungary, or if they don’t have a place of business, have their permanent address or usually reside in Hungary
• Are considered affiliated.

It’s important to note that not all eligible entities are required to join the group, and a subset of eligible entities may choose to form a group.

 VAT Representative

 If taxable persons outside the EU are responsible for VAT on their provision of services or supply of goods in Hungary, they must designate a tax representative, as stated in Article 148 of the Hungarian VAT Act.

If a nonresident individual or entity established within the EU provides taxable supplies in Hungary, they have the option to appoint a VAT representative or agent, but it is not mandatory. However, if the taxable person is established in a third country, they are usually not obligated to appoint a tax representative unless their transactions are subject to the reverse charge mechanism or obligations arise from providing TBE services.

 Distance Sales

 Starting from July 1, 2021, businesses that are not registered for VAT in Hungary but provide services or sell and deliver goods to non-VAT registered customers in Hungary through distance sales can choose to comply with Hungarian VAT requirements via the One Stop Shop (OSS) scheme, without having to register for VAT in Hungary.

The distance sales rule applies when a supplier carries out distance sales over EUR 10,000 within a year. Under the new rules, the VAT due on distance sales can be settled using the OSS scheme, which allows for OSS registration in only one EU Member State where electronic VAT returns are filed for all distance sales, and the total VAT amount is remitted. Through this scheme, Hungarian VAT can be settled after distance sales made to non-taxable Hungarian customers.

Last Updated: 04/04/2024

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