EU VAT guide – Hungary

How much is VAT in Hungary? 

The Standard VAT Rate (Általános Forgalmi Adó” (ÁFA)) în Hungary is 27%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and banking services.

The exact list of taxable transactions and allocated Hungary VAT rate can be found in VAT Hungary regulations. 

VAT thresholds in Hungary 

Valuable information about the VAT threshold in Hungary and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: No registration threshold

VAT registration threshold for non-resident businesses: No registration threshold

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold

VAT Taxable Activities in Hungary

A taxable person by Hungary VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Hungary VAT: 

• The supply of goods and rendering of services in Hungary for consideration;
• Receipt of reverse-charge services by a taxable person in Hungary;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Hungary VAT on their transactions. 

Tax Representative in Hungary 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. 

For EU-established companies, having a tax intermediary isn’t compulsory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Hungary 

Electronically Supplied Services 

Consistent with the European Union’s push towards embracing the E-commerce package, Hungary incorporated the most important changes into its national law. 

By adopting these updates from the EU’s VAT legislation, Hungary has laid the groundwork for uniform tax rules in the digital economy. 

This regulatory move made things less complicated when understanding the tax obligations for digital products and services.

Taxability Rules for ESS

The rollout of the E-commerce regulatory package in July 2021 was a logical move, welcomed and needed to respond to the digital economy’s continuously growing demands. With the birth of new business models and taxability scenarios, there was a need to implement EU-wide, coherent, and transparent indirect tax rules for e-commerce operations. 

By implementing this legislative framework, the EU established a comprehensive set of VAT regulations covering the entire Single Market. These regulations encompass Electronically Supplied Services (ESS) and the distance selling of physical goods, aiming to enhance the consistency and clarity of tax operations.

Taxability rules stemming from the E-Commerce package:

• B2B Transactions for Electronically Supplied Services: In transactions where a buyer is a taxable person, general rules for the place of supply should be used.
• B2C Transactions for Electronically Supplied Services by Non-Resident Companies: Businesses making supplies to customers based in other EU countries should know the specifically designed legislation for this purpose.
• B2C Transactions for Electronically Supplied Services by Non-EU Suppliers: Suppliers based outside the EU must comply with EU standards for determining the place of supply without having a possibility to leverage the instituted threshold of the EUR 10,000.
• VAT Rules for Distance Sales of Goods and B2C ESS: EU-based suppliers generating less than EUR 10,000 annually from distance sales of goods and/ or B2C ESS can opt between applying the VAT rules of their home country or adhering to the One-Stop Shop (OSS) rules, offering flexibility for smaller enterprises.
• VAT Rules for Distance Sales of Goods and B2C ESS: For annual turnovers exceeding EUR 10,000, suppliers must apply the VAT rate attributable to the customer’s place of residence.  Aligning the applicable tax rules with the place of consumption and ensuring VAT is levied where economic activity occurs.

This uniformity in VAT regulations simplifies the compliance process for businesses operating within the European Union and extends its benefits to international entities engaging with the EU market. 

How much is VAT in Hungary for Electronically Supplied Services?

VAT rate Hungary: A standard VAT rate of 27% is applied in most cases on sales of Electronically Supplied Services in Hungary.

E-Commerce VAT Rules in Hungary

On July 1, 2021, the European Union made the necessary but highly effective decision to update VAT regulations, responding to the rapidly evolving needs of the digital economy. Legislative realignment was needed, with a primary focus placed on reducing the complexity for businesses involved in cross-border transactions. 

Key Features of the 2021 E-Commerce VAT Reforms:

• Cross-Border Sales of Low-Value Goods: These reforms have established a cohesive tax framework for EU customers importing low-value goods from outside the EU. This approach ensures clarity and uniformity in the taxation process, significantly enhancing transparency for consumers and tax authorities;
• Intra-Community Distance Sales: The reforms have eliminated the varying VAT thresholds previously set by individual Member States, often complicating cross-border business operations. This change brings simplification for intra-community transactions, less bureaucracy, and less compliance costs;
• Domestic Sales by Deemed Suppliers: The VAT reforms provide clear guidelines for sales conducted within a single Member State, specifically targeting situations where the deemed supplier and the customer reside in the same country;
• Provision of B2C Services: There has been a broadening in the range of cross-border services to EU residents that are eligible for reporting via the One-Stop Shop (OSS) schemes. This expansion simplifies VAT reporting for businesses providing digital services across the EU, fostering a more streamlined approach to VAT compliance and reducing administrative burdens.

These adjustments reflect the EU’s commitment to simplifying VAT compliance, reducing business operational hurdles, and enhancing transparency and fairness in the digital single market.

E-Commerce VAT Simplification:

Far from being just an update, this reform involved a thorough reevaluation of the existing VAT systems and introduced the Import One Stop Shop (IOSS) scheme. The refinement of VAT special schemes, particularly the addition of a new reporting tool – IOSS, represents a key stride in the EU’s strategy towards e-commerce taxation.

This initiative greatly eases the challenge of managing VAT responsibilities for businesses, paving the way for a streamlined and cohesive digital market.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Non-Union Scheme can be leveraged by

The Non-Union Scheme is tailored for businesses not based in the European Union. This scheme provides an effective solution for non-EU suppliers, enabling them to utilize it as a streamlined method for reporting almost all their B2C supplies of services that fall within the specified parameters.

Union Scheme can be leveraged by

• EU-based businesses: Taxable entities that are residents of EU Member States can take advantage of this scheme if they are providing B2C services or engaging in intra-community distance sales of goods. An important condition that cannot be overlooked is that domestic supplies, i.e., where the customer is a resident of the same MS, cannot be reported under this scheme. 
• Non-EU Based Businesses on Intra-Community Sales: Businesses not based in the EU are also eligible to use the Union Scheme specifically for intra-community distance sales of goods.
• Digital Marketplaces: Whether based in the EU or not, digital marketplaces facilitating intra-community distance sales of goods and for certain domestic supplies can leverage the Union Scheme. 

Import Scheme can be leveraged by

The Import Scheme is available to any taxable entity involved in the distance selling of goods imported from non-EU countries or territories, provided these goods are shipped in consignments valued at or below EUR 150. 

This special scheme is accessible to a broad range of users, including EU-established businesses, entities without establishment in the EU, and operators of electronic marketplaces. It offers a simplified method for managing VAT obligations on low-value imports.

These schemes, integral parts of the extensive regulatory framework of the E-commerce landscape, are designed to simplify things for different types of taxable persons that make their supplies within the EU.  Their goal is to streamline VAT compliance, making it feasible and uniform throughout the European Union. 

Thus, they support enterprises of all sizes in navigating the complexities of VAT regulations with greater ease and consistency.

OSS Return and Payment 

The Hungary VAT rules don’t provide a simplified registration or reporting approach tailored explicitly to suppliers of Electronically Supplied Services. Nonetheless, businesses can engage with the EU-wide One-Stop Shop (OSS) schemes, simplifying VAT obligations on a broader scale.

Developing the OSS schemes will ease compliance challenges for many businesses operating cross-border with customers residing in Hungary. Before the introduction of the VAT updates that came along with the E-commerce package, many businesses that provide services or goods to customers residing in Hungary would have to register for local VAT numbers.  

Should international businesses find themselves ineligible for the OSS schemes for transactions with customers in Hungary, adherence to Hungary’s specific VAT registration and reporting guidelines becomes mandatory.

Electronic Platform and Deemed Supplier Rules 

Hungary has incorporated the EU’s VAT rules for e-commerce into its national legislation. This move will make it easier for cross-border businesses with end customers based in Hungary to report underlying supplies and, thus, reduce bureaucratic and compliance burdens. 

This integration facilitates the application of the “deemed supplier” principle, significantly simplifying the tax process for certain online transactions.

When specific criteria are fulfilled, a digital platform facilitating the distance sale of goods is recognized as the “deemed supplier,” bearing the VAT responsibilities for the sale.

At the present moment, from the EU VAT Directive perspective  for two multi-sided sales scenarios, we have a direct trigger when the digital marketplace operator becomes a “deemed supplier”: 

• The importation of goods valued at EUR 150 or below from non-EU territories and countries, which are then sold to EU consumers by the original vendor through the marketplace;
• The sale of goods that are in free circulation within the EU and are originally sold by non-EU vendors through the marketplace.

This adoption reflects Hungary’s dedication to adhering to EU VAT standards, aiming to improve the transparency and uniformity of tax regulations applicable to digital sales. Consequently, this adjustment introduces new obligations for deemed suppliers, significantly altering the VAT implications of this sales model.

This regulatory framework introduces additional responsibilities for deemed suppliers, vastly changing this sales model’s VAT obligations for taxable entities. In this multi-sided business model, we have two separate transactions: 

1. The initial supply from the original vendor to the digital platform is recognized as a business-to-business (B2B) transaction.
2. The subsequent supply from the platform to the final consumer is classified as a business-to-consumer (B2C) transaction.

This ensures compliance and facilitates smoother operations under the simplified tax framework provided by the EU.

Invoice Requirements in Hungary 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services;
• Unique invoice number issued in sequence.

Seller information:

• Company name;
• Full address(head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address is different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
• Net amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information for non-resident business.

Foreign Currency Invoice in Hungary  

In Hungary, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in local currency.

VAT Return in Hungary 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Hungary rules should submit monthly or quarterly declarations depending on their turnover. 

Penalties for late reporting and omitted declarations 

Taxpayers should charge Hungary VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

• For late filing of VAT return, the taxable person could be sanctioned with a penalty up to HUF 500,000

If the taxpayer doesn’t notify the tax authority about important elements related to its VAT registration details, it could expect a fine between HUF 200,000 to HUF 500,000.

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