Taxes in Europe Database v2
Act 127 of 2007 on value added tax.
Hungary applies – as an option – a special exemption scheme for small enterprises, whose annual turnover is no higher HUF 6,000,000.
The general flat rate compensation percentage is 12 % for some products, and 7 % for some products and services.
According to the Hungarian legislation, the international transport of passengers shall be exempt, if either the point of arrival or the point of destination, or both, are located outside Hungary. In other cases these are taxed transactions, where the standard VAT rate is applicable.
Taxable person providing supply of goods or services. Taxable person shall mean any person or organization with legal capacity who carries out any economic activity under his own name, regardless the location, purpose or results of that activity. In case of import the person liable for payment of tax is the person importing the goods. If the customs procedure is handled by an indirect customs representative on behalf of the importer, the person liable for paying VAT on import is the customs representative. In case of Intra-Community acquisition of goods the person acquiring the goods. Council directive 2008/8/EC amended the Directive 2006/112/EC as regards the place of services. As of 1st of January 2010 for supplies of services to taxable persons, the general rule with respect to the place of supply of services should be based on the place where the recipient is established, rather than where the supplier is established.
In accordance with the amendment of the VAT Directive’s legislation, as of 1st January 2013 the place of hiring, other than short-term hiring, of a means of transport to a non-taxable person shall be the place where the customer is established, has his permanent address or usually resides. However, the place of hiring a pleasure boat to a non-taxable person, other than short-term hiring, shall be the place where the pleasure boat is actually put at the disposal of the customer, where this service is actually provided by the supplier from his place of business or a fixed establishment situated in that place.
For the purposes of applying the rules concerning the place of supply of services, a non taxable legal person who is identified or should be identified for VAT purposes shall be regarded as a taxable person.
The following transactions shall be subject to VAT: Supply of goods and services for consideration, importation and Intra-Community acquisition of goods. If the taxable person transfers goods (services) forming part of his business assets, or uses or utilizes goods (services) for own purposes free of charge, where VAT on the goods (services) in question was wholly or partly deductible, shall be treated as supplies made for consideration. The supply of goods for consideration shall include the transfer of goods by a taxable person from his undertaking to another Member State except the transfers with the following purposes:
As of 1st January 2013 the transfer of a business unit is not considered a supply of goods.
The tax base is the consideration. The consideration shall include everything received or to be received by the supplier whether from the customer or a third party, such as price subsidies and other budgetary subsidies directly affecting the price. The tax base shall include taxes, duties, levies and charges, excluding the VAT. The tax base shall also include incidental expenses such as commission, packing, transport costs etc.. The price reductions, price discounts, rebates shall be excluded from the tax base. In respect of supplies of goods free of charge but deemed to be supplies for consideration the taxable amount is the market value, in absence of such value the production costs. Concerning supplies of services carried out free of charge but deemed to be supplies for consideration the taxable amount shall be the full cost to the taxable person of providing the services.
In case of importation the taxable amount is the value determined for customs purposes, including also taxes, duties, levies and other charges, but excluding VAT. The tax base shall also include incidental expenses, such as commission, packing, transport costs (etc.) incurred up to the first place of destination.
By way of derogation from Article 193 of the VAT Directive in accordance with Article 395 of the VAT Directive, Hungary is authorized as of 1st July 2012 to apply a reverse charge mechanism to the supply of certain specific agricultural products, such as wheat and meslin, rye, barley, oats, maize, triticale, soya beans, whether or not broken, rape or colza seeds, whether or not broken, sunflower seeds, whether or not broken.
The taxable person can deduct from the tax payable the input VAT if the following conditions are met:
There is no right to deduct input VAT where the goods or services acquired are used for tax exempted transactions. However there are tax exempted transactions with right to deduct, such as export and like transactions, international transport, exempted Intra-Community supply of goods. The tax exempted transactions without right of deduction include inter alia insurance, financial services, postal services, human health care, education, public radio and television broadcasting, some sport services, gambling services, letting and leasing of immovable property etc.
It is prohibited to deduct input VAT on the purchase of the following goods and services even when it is used for business purposes:
Until 31 December 2011 it was prohibited in our legislation to deduct input VAT in connection with hire of passenger car, motorcycles, yachts, sport and pleasure boats. As of 1st January 2012 the taxable person, who rents the abovementioned vehicles, can deduct the input VAT.
However in many cases if those purchases are effected for resale, or used as being included in the taxable amount - shown under material costs - of the supplied service, or if the services are procured with a view to the supply of services where the taxable person is acting in his own name but on behalf of another person the tax is deductible.
For example, there is no prohibition of tax deduction on goods and services related to the construction and renovation of housing, where the taxable person is engaged in construction for resale. By way of derogation from the abovementioned regulations, the taxable person is allowed to deduct the input VAT of the passenger car, if it is purchased for the purpose of resale, or used for the supply of taxi services, or for leasing or letting. The prohibition of deduction of VAT related to car operation and maintenance does not apply if the goods are effected for resale, or if the services are procured with a view to the supply of services where the taxable person is acting in his own name but on behalf of another person. Furthermore, the VAT of these goods and services is deductible, if used as being included in the taxable amount - shown under material costs - of the supplied car leasing service.
The input tax on supplies of residential properties is deductible as well, if those purchases are effected for resale, but if the supply of the residential property according to general rules is exempted from VAT, it is necessary that the supplier opts for the taxation in order to be able to deduct the input VAT.
As of 1st January 2012 the standard VAT rate is 27% in Hungary. The scope of the reduced rate of 5% and 18 % changed as aforesaid: as from 20th July 2012 reduced rate of 18 % is applicable to the entrance to open-air festivals, as from 1st January 2013 reduced rate of 5 % is applicable to some medical aids and as from 1st January 2014 we apply 5 % reduced rate on live pig and pig carcasses.
The tax returns are to be filed and tax is to be paid on a monthly, a quarterly or a yearly basis. The applicable tax period depends on the amount of the VAT paid by the taxable person in the preceding tax year. The tax has to be paid until the 20th day following the month, or quarter in question. In case of taxable persons filing on a yearly basis, tax is to be paid until 25th of February following the year in question.
National Tax and Customs Administration