Key takeaways
- Hungary’s VAT system is administered by the NTCA, with a standard rate of 27%, reduced rates of 18% and 5%, a zero-rate VAT rate, and exemptions.
- Foreign companies must register for Hungarian VAT to take advantage of its refund process, while fiscal representatives can provide assistance with compliance obligations.
- Deadlines for filing returns must be met to avoid penalties, as well as complying with Intrastat reporting requirements and e-invoicing/real-time reporting regulations.
In short: Hungary’s standard VAT rate is 27%, the highest in the EU, with reduced rates of 18% and 5%. Hungarian VAT is run by the National Tax and Customs Administration (NTCA). Foreign companies must register in certain cases. VAT returns are due by the 20th of the following month, and invoice data must be reported in real time.
If your business operates in Hungary, you need a clear understanding of Hungarian VAT. From VAT rates to registration to invoice rules, there’s a lot to take in. In this post, we walk you through Hungarian VAT and the compliance requirements that come with it.
How does the Hungarian VAT system work?
The Hungarian VAT system, known locally as Általános Forgalmi Adó (ÁFA), is a key part of the national tax framework. Hungary is a member of the European Union, so it follows the EU VAT Directives. These set general VAT rules that all member states must follow.
The National Tax and Customs Administration (NTCA) runs VAT compliance in Hungary. You must inform the Hungarian Tax Authority when you start a taxable activity, as this may affect your tax liability.
Standard VAT rate: 27%
Hungary’s standard VAT rate is 27%, the highest among EU member states. The 27% rate applies to most goods and services in Hungary. Certain goods and services qualify for reduced rates or exemptions.
Reduced VAT rates: 18% and 5%
Hungary has two reduced VAT rates of 18% and 5% on top of the standard 27% VAT rate.
- The 18% rate covers some foodstuffs and admission to certain music and dance events.
- The 5% rate applies to certain food products, books, newspapers and periodicals, hotel accommodation, and some pharmaceutical products.
These reduced rates can change. Stay up to date with the latest rules to make sure you comply.
Zero-rate VAT and exemptions
In Hungary, zero-rated VAT typically applies to international transactions, such as exports and intra-community supplies. Exempt goods and services cover a wide range. These include health and dental care, social services, insurance and financial services, and education.
There is one key difference between zero-rate VAT and VAT exemption in Hungary. Zero-rate VAT lets you recover input VAT, but VAT exemption does not. We cover this in more detail in A Guide to VAT Rate Belgium and Compliance Requirements.
How do foreign companies register for VAT in Hungary?
Foreign companies must register for VAT in Hungary in certain cases. To register, you submit the required documents and data. These include the taxpayer’s name, address, corporate seat, and tax ID number in its foreign home country. For a closer look, see Hungary to Introduce E-Receipts and E-Cash Registers in 2024.
Foreign businesses operating in Hungary can also register for VAT voluntarily. Voluntary VAT registration lets you recover Hungarian VAT quickly. This can be a useful alternative to the standard non-EU VAT refund process.
Appointing a fiscal representative
Appointing a fiscal representative is not mandatory for foreign businesses in Hungary. But a fiscal representative can offer valuable help and peace of mind with the Hungarian VAT system. A fiscal representative makes sure you meet your tax obligations, including invoicing rules and record keeping. However, companies based outside the European Union must appoint a fiscal representative by law. Related reading: Understanding Intra-Community VAT in Slovenia 2024.
What are the Hungarian VAT filing and payment deadlines?
Hungarian monthly and quarterly VAT returns are due by the 20th of the month after the reporting period. Annual returns are due by February 25. You must file and pay by these deadlines to avoid penalties.
VAT returns must be filed electronically.
What are the Intrastat reporting requirements in Hungary?
Businesses in Hungary must report through Intrastat once their trade in goods with other EU countries passes certain thresholds. The Intrastat thresholds are HUF 500 million for arrivals and HUF 200 million for dispatches.
Intrastat reporting collects statistical data on trade in goods between EU member states. It gives authorities full information on the movement of goods.
Is e-invoicing mandatory in Hungary?
No, e-invoicing remains optional in Hungary, but real-time reporting is compulsory. Real-time reporting applies to B2B and B2C transactions, for both resident and foreign businesses. It helps reduce VAT fraud and improve compliance.
Under the Hungarian real-time invoice reporting (RTR) obligation, you must report all domestic sales invoices issued to Hungarian VAT payers. This applies whatever the amount of VAT charged.
Invoice requirements
A VAT invoice in Hungary must contain specific mandatory details, including:
- The date of issue
- A unique, sequential number identifying the invoice
- The VAT number (the taxpayer identification number) of the supplier
- The VAT number of the customer (for B2B transactions)
- The full name and address of the supplier and customer
- A description of the quantity and nature of the goods supplied or the extent and nature of the services rendered
- The date the goods or services were supplied or completed, or the date of any payment on account. Include it if it can be determined and differs from the invoice date
- The taxable amount per VAT rate or exemption, the unit price exclusive of VAT, and any discounts if they are not included in the unit price
- The VAT rate applied
- The VAT amount payable
- In case of an exemption, reference to the applicable provision of the VAT Act, or any other reference indicating that the supply is exempt from VAT
- In case of a reverse-charge mechanism, a reference to that effect
What are the VAT penalties and compliance risks in Hungary?
In Hungary, the National Tax and Customs Administration (NTCA) can impose penalties for late filing or misdeclared VAT returns.
The Electronic Public Road Trade Control System (EKAER) is another compliance risk. Hungary’s Tax Authority introduced EKAER in 2015 to reduce VAT fraud in road transport, in line with the VAT Directive.
EKAER reporting covers certain goods moved from Hungary to another member state and from another member state to Hungary. Incorrect reporting under EKAER can lead to default penalties of up to 40% of the value of the goods reported incorrectly.
Conclusion
Hungary’s VAT system poses various challenges for businesses, mainly due to its high standard rate and complex compliance rules. But you can manage Hungarian VAT successfully. Stay informed about current rates, understand the reduced and exempt categories, and follow registration and reporting rules carefully.
Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.
How Taxually handles this
Taxually’s CrossTax handles VAT registration, VAT, OSS and IOSS returns and fiscal representation in the countries you sell into, and checks your sales data against 250+ validation rules before each filing. OneTax then pays every tax authority with one bulk payment in your chosen currency.
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Frequently asked questions
What is the VAT rate in Hungary?
The standard VAT rate in Hungary is 27%. This applies to nearly all services and products that do not qualify for reduced VAT rates. It is the highest rate among EU member states, with the average rate in the EU being around 21%.
Is there a reduced VAT rate in Hungary?
Yes, there are two reduced VAT rates in Hungary of 18% and 5%.
Is it mandatory for foreign companies to register for VAT in Hungary?
Yes, under certain circumstances, foreign companies are required to register for VAT in Hungary.
