VAT Returns & Recovery in Hungary
Hungarian taxable persons have the option to file their VAT returns and make associated payments at monthly, quarterly, or annual intervals. However, they are required to file their VAT returns and make tax payments on a monthly basis if the total amount of tax calculated for the year preceding the previous year is positive and reaches at least 1 million forints. Additionally, newly formed companies must report VAT on a monthly basis in the year of registration and the following year.
Read more about VAT recovery and VAT returns in Hungary in our comprehensive guide.
VAT Returns in Hungary
If taxable persons do not have EU tax numbers, they must file VAT returns and pay their taxes on an annual basis if the following conditions are met:
- Their annual total taxes for the year preceding the previous one, or the estimated taxes projected to an annual level, do not exceed 250,000 forints (whether positive or negative)
- The net amount of goods sold and services provided does not exceed 50 million forints.
Taxable persons who are required to file their VAT returns and pay their taxes on a monthly or quarterly basis must submit their returns and pay their taxes by the 20th day of the month following the relevant period. For annual returns, the deadline is February 25 of the year following the year being reported on. However, for acquisitions within the EU, taxable persons are not allowed to file annual tax returns and must file monthly or quarterly tax returns instead.
Regarding the procurement of new means of transportation (excluding passenger cars and motorbikes on which registration tax is due), the tax return must be submitted and tax paid by the 20th day of the month following the month in which the tax payment obligation arises.
Corrective returns
In Hungary, it’s possible to amend VAT returns retrospectively. Taxpayers can refile the same tax return—typically online—and indicate the updated information by selecting a particular option on the form. The type of amendment can be classified either as a “self-revision,” commonly applied when the adjustment impacts the taxpayer’s VAT calculation, or as a straightforward correction.
Should the correction lead to additional VAT liability, a self-revision surcharge is applicable. This fee is determined based on the daily prime rate of the Hungarian National Bank. For any subsequent self-revision for the same period, the surcharge increases to 1.5 times the prime rate.
Selling in Hungary?
Interests and Penalties
Late payment interest is charged to Hungarian taxpayers for each calendar day under Section 209 of the Hungarian Tax Rules Act. The formula used for calculating the late payment interest is the central bank lending rate, also known as the “prime rate,” at the time of delay plus 5 percentage points, divided by 365.
In cases of tax assessment, the Tax Authority may order taxpayers to pay late payment interest only from a later date and not from the original due date of the tax. However, under Section 65 of the Hungarian Tax Rules Act, if the Tax Authority pays out a VAT refund to the taxable person with a delay, then they must also pay the late payment interest.
Risky taxpayers may be subject to additional penalties under Section 160 of the Hungarian Tax Rules Act. The amount of late payment interest imposed on these taxpayers is equal to 150% of the general late payment interest. In cases of tax assessment, the Tax Authority must order the risky taxpayer to pay late payment interest from the original due date of the tax.
Exempt Supplies and Equivalent
Exempt supplies are not subject to VAT, and taxpayers are not eligible to claim an input VAT deduction for VAT expenses that are associated with these supplies. Chapter VI of the Hungarian VAT Act outlines that specific goods and services, including:
- financial services
- and medical care, are classified as exempt supplies that do not allow for input VAT deduction.
In order to exercise the right to deduction, a taxable person must possess a valid VAT invoice or another relevant document.
To support their economic activities, a taxable person in Hungary has the right to deduct input VAT that has been paid on supplies of goods and services. This right to deduct is provided for in Article 120 of the Hungarian VAT Act.
Taxable persons can choose to exercise their input tax deduction rights in the year in which they arise or during the following calendar year. If the deduction is not utilized by the end of the year following the year in which it arose, the taxpayer can still claim the VAT deduction by amending the relevant tax return within the statutory period.
Non-deductible Input Tax
For purchases made for personal reasons (such as items acquired for private use) or for transactions that are exempt, the related input tax cannot be reclaimed (e.g., assets employed in offering financial services). Moreover, certain business expenditures may not qualify for input tax reimbursement. Below are examples of expenses that cannot be deducted as input tax, alongside instances where expenses can be deductible provided they serve a taxable business objective.
Non-deductible input tax items include:
- Personal or non-business related expenses.
- Personal use automobile purchases.
- 50% of the leasing cost for a passenger vehicle, irrespective of its actual business use.
- Taxi fares.
- Fifty percent of the expenses for car maintenance services.
Partial exemption
Input tax that is directly associated with producing exempt goods cannot be claimed back. In Hungary, when a taxable entity engages in both exempt and taxable activities, it cannot fully deduct all input tax, a situation referred to as “partial exemption.”
Regarding refunds, taxable entities registered in Hungary can apply for a VAT refund through their VAT return submitted to the state Tax Authority. A refund is possible when the VAT paid on purchases surpasses the VAT due to the state (collected from sales), with the minimum amounts for refund eligibility as follows:
- HUF 1 million for entities required to submit monthly VAT returns.
- HUF 250,000 for entities required to submit quarterly VAT returns.
- HUF 50,000 for entities required to submit annual VAT returns.
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
