VAT Registration Required in Hungary

When is VAT registration required in Hungary?

Hungary requires businesses to register for VAT (known locally as “ÁFA”) if they meet specific criteria. This ensures compliance with EU tax directives and local regulations.

Mandatory registration scenarios:

  • Turnover Threshold: If your annual taxable turnover (e.g., sales of goods/services subject to VAT) exceeds HUF 8 million(approx. €21,000), registration is compulsory. This threshold applies to both Hungarian and foreign businesses operating in Hungary.
  • Intra-EU Activities: Companies selling goods/services to/from other EU countries (e.g., distance selling, cross-border B2B services) must register, even if below the threshold.
  • Non-Resident Businesses: Foreign companies without a physical presence in Hungary must register if they supply taxable goods/services there (e.g., e-commerce, digital services). They must appoint a Hungarian tax representative(unless exempt under EU rules) to act as a liaison with tax authorities.

Voluntary registration:

  • Businesses below the threshold can register voluntarily to reclaim input VAT (e.g., VAT paid on purchases). This is common for startups or businesses with high upfront costs.

Hungary VAT registration process:

  1. Documents required:
  • Company registration documents (e.g., Articles of Association, tax ID).
  • Proof of business activities (e.g., contracts, invoices showing Hungarian transactions).
  • Bank account details (Hungarian or EU-based).
  • For non-residents: A tax representative agreement (mandatory for non-EU businesses).

Receive VAT number:

NAV typically issues a VAT number (HU + 8 digits) within 30 days. Once registered, businesses must:

  • Charge VAT on taxable supplies.
  • Display their VAT number on invoices.

How to VAT filing and compliance?

  • Monthly returns: Businesses with annual turnover over HUF 100 million(€260,000) must file monthly.
  • Quarterly returns: Default for smaller businesses (unless NAV specifies otherwise).

Key deadlines:

  • Monthly returns: Due by the 20th day of the following month (e.g., February 20 for January transactions).
  • Quarterly returns: Due by the 25th day after the quarter ends (e.g., April 25 for Q1).
  • EC sales list (ESL): Required for intra-EU transactions (B2B). Submit by the12th day of the following month.

How to file VAT return?

Online submission:

    • Use NAV’s e-filing system.

Payment:

    • Settle VAT liabilities in HUF (Hungarian Forint) to NAV’s designated bank account.
    • Late payments incur interest penalties (central bank base rate + 10%).

  Penalties for non-compliance

  • Late Filing: Up to HUF 500,000 (approx. €1,300) per offense.
  • Incorrect Returns: Fines for errors or underpayment (up to 50% of the unpaid tax).

When is VAT deregistration in Hungary required?

When to deregister:

  • Cessation of Activities:  If your company stops taxable activities in Hungary.
  • Turnover Below Threshold: If annual turnover falls below the HUF 8 million threshold for two consecutive years (unless you continue intra-EU supplies).

Deregistration process:

Notify NAV:

Final VAT return:

    • File a return covering the period up to deregistration.
    • Settle any outstanding VAT liabilities or claim refunds.

Revocation of VAT number:

    • NAV will confirm deregistration and invalidate your VAT number.

Note for non-residents: Deregistration is mandatory once activities in Hungary cease. Failure to deregister may result in penalties.

 Practical tips for compliance:

  • VAT rates in Hungary:
    • Standard rate: 27% (highest in the EU).
    • Reduced rates: 5% (e.g., medicines, books) and 18% (e.g., dairy products, hotel services).