Indirect tax ebook - Hungary

Reporting

Resident companies
Foreign taxable persons
Recovery of VAT
Sales lists/VAT information exchange system (VIES)
Group registration/fiscal unity
Foreign taxable persons/fiscal representatives
Intrastat
Penalties
Large / small traders

Resident companies

Gerenal
As a general rule, VAT returns are filed quarterly. As an exception, VAT returns can be filed monthly or yearly, based on the data of the second year preceding the actual year. Taxpayers with a total VAT balance reaching a positive HUF 1,000,000 in the reference year are liable to file monthly returns. Taxpayers with a total VAT balance below HUF 250,000 in the reference year are to file annual VAT returns (regardless of the algebraic sign).
Taxpayers with EU tax number can submit their VAT returns monthly or quarterly only. VAT groups can submit their VAT returns monthly. Companies in the year of registration have to submit the VAT returns quarterly (calendar quarter).

Taxpayers liable to quarterly returns may apply for monthly returns and taxpayers liable to annual returns may apply for the quarterly return frequency. The Tax Authority permits the frequency of the returns to be higher than stipulated by law for a given tax year. The permission is generally granted if the VAT rate applicable to the supplies of the taxpayer is lower than the VAT applicable to acquisitions or if an investment is implemented by the taxpayer.

Taxpayers liable to annual returns are obliged to switch to quarterly returns during the year if the threshold of HUF 250,000 is reached. Taxpayers with their VAT balance reaching a positive HUF 1,000,000 are obliged to switch to monthly returns from the first month following the quarter (regardless of whether they were liable to annual or quarterly returns).

The amount of VAT computed in a currency other than HUF is to be translated to HUF at the selling exchange rate of a Hungarian trade bank or at the exchange rate of the Hungarian National Bank. If the taxpayer wishes to apply the exchange rate of the Hungarian National Bank (MNB), may choose it, if he declares his choice to the tax authority.

The deadline to submit the VAT return is the 20th day of the month following the return period.  The VAT return is to be filed on the form of the Tax Authority, the number of it is yy65.

A delinquency fine up to HUF 500,000 can be levied (HUF 200,000 for private individuals as taxpayers) if the declaration obligation is fulfilled with delays. The Tax Authority also sets a deadline for the elimination of the default. Should this deadline be not adhered to, the duplicate of the original fine is levied as delinquency fee.

In case of the delayed payment of taxes a late fee is to be paid for the days of delay, but for a maximum of three years. The daily late fee amounts to the duplicate of the official National Bank Prime Rate divided by 365 (calculated with the interest rate valid in the period of delay and not the one valid when charged).

In the case of self-assessment calculations, mistakes or other similar misprints are corrected officially by the Tax Authority. Should this correction affect the amount of tax liability or tax reclaim, the taxpayer is notified within 30 days. For returns filed with errors, for non-natural persons a delinquency fine of up to HUF 100,000 HUF (private individuals up to HUF 20,000) can be levied.

Fines for errors detected during the Tax Authority’s inspection or during the inspection prior to VAT return (VAT shortfall or illegitimate VAT reclaim) may amount to 75 per cent of the tax difference detected as debiting the taxpayer. For a tax shortfall due to an incorrect declaration (the VAT paid is less than the liability stated by the Tax Authority) a late fee will be charged in addition to the tax fine.

Taxpayers can modify their own declarations before a tax inspection is started by way of self-assessment. The self-assessment fee is 75% of the late interest (50% in case of first amendment of a return).

Quarterly VAT returns
Most entrepreneurs/taxable persons are required to submit VAT returns each calendar quarter. VAT returns must be filed and VAT amounts paid by 20th of the month following the tax period.

Monthly VAT returns
Monthly filing required when the VAT amount payable reaching a positive HUF 1,000,000 in the second preceding year or within the actual year.

Annual VAT returns
Entrepreneurs/taxable persons whose VAT balance does not exceed HUF 250,000 on a yearly basis in the second preceding year are to submit an annual VAT return.

Importers
VAT is levied on importation of goods into the territory of Hungary. As a general rule, every person importing goods will be responsible to pay VAT to the Customs Authorities. Taxpayers are entitled to the deduction of import VAT in the VAT declaration period in which the payment is made. It is a prerequisite for deduction that the taxpayer should have the certificate issued by the Customs Authority.

Large trading companies can apply for a permission to use the reverse charge system. Taxpayers with permission of the Customs Authority are entitled to recover VAT paid on the importation of goods acquired for the purpose of business activities in the same VAT declaration in which the input VAT is shown. The permission is valid for one year.

The prerequisite of tax recovery is that the taxpayer should have the resolution on putting the goods into free circulation as well as documents authentically certifying the data necessary for the determination of the VAT amount on the import of goods.

Should an indirect customs representative be appointed by the taxpayer to act in the import procedure, the taxpayer is entitled to recover VAT paid on behalf of him by the indirect customs representative.

The indirect customs representative is entitled to recover VAT on importation if he or she:

• is a taxpayer and meets the personal conditions of tax recovery;
• has the resolution on putting the goods into free circulation;
• has the documents necessary for the determination of the VAT amount;
• has paid the input VAT; and
• has charged it to the person represented.

Foreign taxable persons

Non-resident entrepreneurs/taxable persons making taxable supplies in Hungary must, as a general rule, file a quarterly VAT return. A monthly VAT return has to be filed based on the current year’s or the second preceding year’s data (see above).

Recovery of VAT

If the VAT amount deductible exceeds the amount payable, the negative difference can be claimed back in the actual VAT return. Should the VAT return show a repayment due the amount that can be claimed in that period is reduced by the input tax on purchase invoices unpaid at the period end.  This amount is then carried forward to be claimed on the following period's return.

The VAT refund has to be made within 45 days (30 days under HUF 500,000) by the tax authority from the deadline of submitting the VAT return.

If a non-resident entrepreneur/taxable person does not make any taxable supplies in Hungary, in order to recover the VAT paid in Hungary in the course of his business, a request for a refund should be filed in accordance with the New VAT Directive or Thirteenth VAT Directive. Thirteenth Directive claim is available on a reciprocity basis for taxpayers from Switzerland and Liechtenstein.

Sales lists

General
In 2009 recapitulative statements (EC Sales list) are to be filed by those having EU VAT numbers to the Tax Authority by the 20th day of every month following a quarter. In 2010 the reporting liability is monthly or quarterly, in accordance with the VAT return period.

Recapitulative statements are the following:

• yyA60: Recapitulative statement on the Intra-Community supplies and on the Intra-Community acquisitions.

Recapitulative statements include the net value of the turnover in the given period for each partner taxpayer, including services.

In addition to the recapitulative statements, those obliged are to file the following special declarations to the Tax Authority:

• yy86: VAT return for special customers and legal entities as non-taxpayers liable to pay taxes on the Intra-Community acquisitions and for taxpayers without an EU VAT number on the Intra-Community acquisition of new means of transport not regarded as passenger cars; and
• yyA88: Data supply on new means of transport supplied by taxpayers within the Community to customers of another member state without an EU VAT number.

The VAT returns yy86 are to be filed by the 20th day of the month following the month when the tax liability occurred, the data supply yyA88 is to be filed by the 20th day of the month following the month when the tax liability occurred. 

Group registration

In Hungary persons constituting a VAT group file only group VAT return and EC sales list.

Foreign taxable persons/fiscal representatives

A fiscal representative with a general licence must file EC Sales lists under the Hungarian VAT identification number issued to his non-resident client. If a fiscal representative is acting as such for several non-resident companies, separate EC Sales lists must be filed for each client.

Intrastat

Intrastat declarations are to be filed with the Central Statistical Office (KSH) by the 15th day of the month following the month in which supplies of goods within the Community exceeded the threshold of HUF 100 million either for Intra-Community acquisitions or HUF 100 million for Intra-Community supplies during the last 12 months.

The Central Statistical Office is informed on the Intra-Community turnover of the given enterprises on the basis of the VAT returns filed with the Tax Authority. Based on this, the Central Statistical Office notifies the taxpayers with Hungarian and EU VAT numbers not yet registered at the Office in a letter that they are to report on their Intra-Community transactions of goods in the Intrastat declaration.
The declaration may have two formats: the simplified and the detailed questionnaire. Both questionnaires can be divided into two parts, there is a declaration for incoming and one for outgoing supplies.

In 2010 a detailed questionnaire is to be filled in by taxpayers:

• with acquisitions exceeding HUF 2.5 billion in 12 months; and
• with dispatches  exceeding HUF 10 billion in 12 months or 2.5 billion HUF (the lower limit is for those having contract manufacturing transactions, as well).
  
  

Penalties

General
If VAT is underpaid or over-recovered the negligent person is liable to penalties as well. In case of the delayed payment or over-recovered taxes a late fee is to be paid for the days of delay, but for a maximum of three years. The daily late fee amounts to the duplicate of the official National Bank Prime Rate divided by 365 (calculated with the interest rate valid in the period of delay and not the one valid when charged).

Fines for errors detected during the Tax Authority inspection or during the inspection prior to VAT return (VAT shortfall or illegitimate VAT reclaim) may amount to 75 per cent of the tax difference detected as debiting the taxpayer. For a tax shortfall due to an incorrect declaration (the VAT paid is less than the liability stated by the Tax Authority) a late fee will be charged in addition to the tax fine.

Administrative penalties
Failure to register for VAT

Should taxpayers have delays, errors or misstatements, deficiencies in fulfilling the registration (initial registration and registration of changes), data supply obligation or fail to register or supply data, a delinquency fine up to 500,000 HUF can be levied for non-natural persons (the fine may amount to a maximum of 200,000 HUF for private individuals as taxpayers). The Tax Authority also sets a deadline for the elimination of the default. Should this deadline be not adhered to, the duplicate of the original fine is levied as delinquency fee.

Late returns
For non-natural persons a delinquency fine up to 500,000 HUF can be levied (200,000 HUF for private individuals as taxpayers) if the declaration obligation is fulfilled with delays. The Tax Authority also sets a deadline for the elimination of the default. Should this deadline be not adhered to, the duplicate of the original fine is levied as delinquency fee.

Incorrect returns
In the case of self-assessment calculations, mistakes or other similar misprints are corrected officially by the Tax Authority. Should this correction affect the amount of tax liability or tax reclaim, the taxpayer is notified within 30 days. For returns filed with errors, for non-natural persons a delinquency fine of up to 100,000 HUF (private individuals up to 20,000 HUF) can be levied.

Fraud
Those misrepresenting or concealing any facts (data) significant for the determination of the tax and contribution liability for the authority and thus or by any other misleading behaviour reduce the amount of the revenues from taxes or contributions commit an offence and can be punished with imprisonment up to two years, community service or fine.

Should the fraud be of greater extent (between HUF 200,000 and 2,000,000), imprisonment of up to three years can be imposed.

Should the fraud be of significant amount (between HUF 2,000,000 and 50,000,000), imprisonment of between one and five years can be imposed.

Should the fraud be of an especially significant amount (over HUF 50,000 000), imprisonment of between two and eight years can be imposed.

Late or incorrect Intrastat
Intrastat declarations on the movement of goods within the Community are to be filed with the Central Statistical Office by the 15th day of every month following a month if the movement of goods exceeded the threshold for either the Intra-Community acquisitions or the Intra-Community supplies of goods. Delayed or non-fulfilment is not sanctioned at present.

Failure to keep register of EC sales and acquisitions

A summary declaration on the Intra-Community supplies of goods and acquisitions is to be filed quarterly with the Tax Authority. From 2010 the reporting period is a month or a quarter, depending the VAT return period and services have to be reported, too. Non-fulfilment, fulfilment with delays, errors, misstatements or deficiencies can be sanctioned by imposing a delinquency fine of up to 500,000 HUF (private individuals as taxpayers up to 200,000 HUF).

Large / small traders

The Hungarian VAT act doesn’t provide special regulations for large traders, but they can apply for a permission to use a reverse charge import VAT system.

Small traders
Taxpayer’s exemption

Taxpayers opting for activities with the taxpayer’s exemption are not liable to taxes, but may not assert the right of tax recovery, either. The taxpayer’s exemption can be opted in the following cases.
If the value of the expected supplies of goods and services does not reach HUF 5,000,000 in the tax year prior to registration, and in the year of registration. A further condition is that the head office should be in Hungary. The option is valid until the end of the tax year and can be prolonged. The taxpayer’s exemption ceases when the threshold is exceeded. The taxpayer’s exemption cannot be opted for again until the end of the second tax year following the ceasing of the exemption.

Taxpayers opting for the taxpayer’s exemption are generally not liable to tax recording, determination, declaration and accounting. Exceptions are imports and certain cases regarded as supplies of goods or services.

For Intra-Community acquisitions taxpayers may assert the right of option whether or not to pay taxes up to €10,000, but the right of recovery may not be asserted in this case, either.
Simplified Entrepreneurial Tax (EVA)

Taxpayers may be sole proprietors; general partnerships; limited partnerships; limited liability companies; co-operatives; forest possessing associations; bailiff’s offices; lawyer’s offices; or patent management offices. Taxpayers of the Simplified Entrepreneurial Tax may be persons who were not subject to differential taxation or the special taxation rules concerning tourism activities from the aspect of VAT and have performed activities in at least two tax years.

Taxpayers of the Simplified Entrepreneurial Tax are not VAT payers and thus may not recover the VAT content of the invoices issued to them, but are liable to issue invoices (receipts). On the invoices issued the VAT amount according to the rates stipulated by the Act on VAT is to be indicated. The VAT content of VAT invoices issued by the taxpayers of the Simplified Entrepreneurial Tax may be recovered by the customer according to the general rules.

• Introduction
• Scope
• Registration
• Tax rates
• Reporting & filing
• General tax application/Time of supply