Indirect tax ebook - Hungary

Tax rates

In Hungary the following categories of VAT rates are applicable:

• Standard rate 25% - all goods and services standard rated unless defined to be reduced rated or exempted. 
• Reduced rate 18%
• basic foods (milk; some kind of dairy products; products made with the help of cereals, flour, stark of milk) 
• accommodation
• supply of district heating services (before 1 January 2010). 
• Lower reduced rate 5%
• some therapeutic products
• newspapers and books
• supply of district heating services (from 1 January 2010).
• Exempt supplies
  Tax exempt services in Hungary are contained in Article 85-87 of the Act on VAT. Accordingly, the VAT of business expenses to be allocated to these services is not deductible.

The most important tax exempt activities are as follows:

• sale or rental of land (except sale of building plots);
• sale and rental of real estate (except for the sale of building plots and the sale of such real estate and parcel belonging to that, which have not been taken yet into use or the usage licence is not older than 2 years);
• transfer of ownership rights;
• financial services;
• insurance;
• gambling services; 
• education;
• human health provision;
• social provision;
• postal services;
• public radio and TV broadcasting services; 
• recreational and amateur sport services(except utilisation of sport facilities, entrance fees to sports events, swimming pools and lidos); and 
• sale of tangible assets which are used exclusively for the purposes of tax-exempt activities and for which the deduction is prohibited.

The sale of real estates after 2 years of licence for use is tax exempt, but it is possible to opt for the use of the normal VAT. A separate decision is possible for the taxation of non-residential properties. In respect of the rent of real estates it is possible to opt to be liable to the normal VAT for both for residential and non residential properties or for one of these groups only. The decision is in force for 5 years and within this period it cannot be changed.

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