Material scope

Hungarian VAT applies to the following transactions:

• Supply of goods by taxable persons

• Supply of services by taxable persons

• Intra-Community Acquisitions by taxable persons

• Imports

Examples of transactions falling outside of the material scope of VAT (use of code ATK):

• Supplies within a VAT groping or various units of the legal person (except IC movement of own goods)

• Transfer pricing adjustments

• Disbursement of costs, handling money in the name and on behalf of another person

• Issue of shares

• Contributions, successions, and transfers of going concern (use code noVatCharge)

Territorial scope

• Transaction with the place of supply in Hungary

• Territory of Hungary includes bonded warehouses and special areas as well as the territory of diplomatic bodies governed by the international law

Supplies performed by the Hungarian established taxable persons with the out of territorial scope of Hungary include the following examples:

·Supplies of B2B services where the recipient is established in another EU member state (EUFAD37 code)

• ·Supplies of B2B services related to land located outside Hungary (EUFADE code)

• ·Supply of B2B services where the recipient is established outside the EU (HO code)

Taxable person:

General rule: ‘Taxable person’ shall mean any person or organization having the capacity to perform legal acts who (that), in its own name, carries out in any place any economic activity, whatever the purpose or results of that activity.

Special rules and cases:

·Supply of new means of transport from Hungary to the EU

·Serial supply of the immovable property

·VAT grouping

·VAT-registered persons

·Exceptions:

·Employment contracts and other hierarchical legal relationships

·Organizations acting in the capacity of the executive power structures /public bodies /

Taxpayer

Taxpayer: Persons that have rights and obligations during the Tax Procedure (Act on Rules of Taxation)

Persons liable to pay VAT as defined by the VAT Act

• Direct charge: supplier

• Reverse charge: recipient / buyer

• Special cases:

• Importer

• Fiscal representative and indirect customs representative

• Issuer of the invoice

• „Parttaker” taxable person 

Place of establishment of a business (as per EU Implementing Regulations)

·Place of the central administration

·Place where the essential decisions concerning the general management of the business are taken

·Place where it has its registered office

·Place where management meets.

Fixed Establishment:

·Any establishment, other than the place of establishment of a business, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to provide the services which it supplies.

·Usually means presence of assets and persons for at least 6 months

·Subcontractors are usually not taken into account (unless the company uses their technical and human resources as its own)

According to HTCA FE starts when

·The presence starts if the length could have been anticipated at the start

·After the presence becomes permanent (expiry of the 6 months period)

·Special case with continuous supplies

·Branch in itself is not an FE (unless other conditions are met)

Non established foreign companies must register for VAT if:

•they supply goods or services

•in Hungary (place of supply in Hungary)

•not subject to the international reverse charge

•(it could be exempt or taxable)

Examples include:

·You buy and sell goods in Hungary;

·You bring in goods from another EU country;

·You supply goods from a warehouse in Hungary (could be a bonded warehouse);

·You bring in your own goods to Hungary from another EU country or remove your own goods from Hungary to another EU country (some exceptions apply);

·You deliver goods on a turn-key basis (supply goods with installation or assembly) if you are established;

·You supply goods to final consumers (B2C supplies) from a local stock

·You are involved in certain chain transactions

·You are providing B2C land-related services (land located in Hungary)

International reverse charge

International reverse charge is applicable to the following transactions:

·Supply of certain turn key construction projects

·Supply of goods with installation /assembly

·Supply of gas and electricity to the wholesalers

·Supply of B2B services under the main rule

·Supply of services related to real estate located in Hungary

·Supply of passenger transport

·Access to events

·Catering services

Conditions:

·Supplier must not be established in Hungary

·Recipient must be VAT registered in Hungary

Intra-Community Acquisitions are subject to the international reverse charge

Domestic reverse charge

Domestic reverse charge is applicable to the following transactions:

·Supply of certain turn key construction projects

·Supply of certain construction services subject to authority permit

·Supply of staff related to certain construction services

·Supply of certain products such as scrap material, agricultural products

·Carbon dioxide rights

·Non new real estate

Conditions:

·Supplier and recipient must be VAT registered in Hungary

·Shouldn’t have status incompatible with payment of VAT

Supplies without consideration – common features

·Applicable if the input VAT related to the product or service was deductible

·Intention at the point of purchase should be taken into account

Supply of goods without consideration

Permanent disposal of goods forming part of taxable person’s business assets - without any compensation - for his own or his employees’ private use, or more generally, for purposes other than those of his business, or if supplied to others free of charge

Exceptions:

·Charitable donations

·Supply of samples of goods

·Supply of goods of small value

·

Supply of services

Where a taxable person temporarily disposes of goods forming part of his business assets - without any compensation - for his own or his employees’ private use, more generally, for purposes other than those of his business, or if transferred to others free of charge, where the VAT on such goods or on its component was wholly or partly deductible by the taxable person.

There are some exceptions to this rule, such as donations

These transactions are treated as non-supplies (outside material scope of VAT)

Non supply rules apply to the following cases:

·Non-monetary contribution

·Transformation with succession (i.e. mergers, demerges or partial transformation)

·Transfer of going concern (transfer of a business line, i.e. business line that can be operated independently, typically includes the transfer of contracts, assets, people)

·Supply of the assets to the trust

·Some other marginal cases

General conditions

·Parties must be registered for VAT

·Must not have status which could jeopardize paying VAT (for example, exempt status)

·Must undertake joint and several liability

Tax pointts

Tax points are important as they define the time of the chargeable event, influence content of the invoice, exchange rate and reporting

These are the tax points:

·Standard tax point – when the taxable even takes place

·Partial invoice – the supply is partially delivered (the supply must divisible and the parties should agree in the partial acceptance of the supply)

·Advance payment – when the consideration is paid before the taxpoint (usually followed by the

·Periodic supply – parties agree to settle the deliveries on a periodic basis OR the consideration is related to the time period

Periodic supplies not to be confused with aggregate invoices (several invoices are issued in a single document)

VAT should be charged on

•the supply of goods or services

•performed by the taxable person

•in Hungary

•not subject to reverse charge

•not exempt

VAT rates:

·27% VAT

·18 % VAT

·5 % VAT

·0 % VAT

In addition to the above rates certain supplies are exempt from VAT with the right of deduction (such as exports or IS Supplies of goods) and certain supplies are exempt from VAT without the right of deduction (financial services, certain real estate transactions, etc.)