HUNGARY | Update of Value Added Tax 2017

Several VAT rates are used: it has been long overdue in the case of food, the reduction of VAT in hospitality has not really been thought out in detail, and the reduced VAT rate of the Internet is rather a political will than an economic decision. The reporting obligation concerning online billing is significantly tightened and the use of persons authorized to accept service shall also be reported.

VAT

• The revenue value limit of tax exempt status is increased to HUF 8 million. If the tax-exempt taxpayer exceeded the valid value limit of HUF 6 million in 2015, then he can still choose to be tax-exempt in 2017.
• A real property built on the basis of a simple report shall be considered a new real property for a term of 2 years following the date of issue of the official certificate of the completion of construction.
• It is obligatory to indicate the tax number of the buyer on invoices if the amount of the charge VAT reaches or exceeds HUF 100,000. This value limit was HUF 1 million in 2016, therefore on invoices issued in 2016 with the fulfillment date in 2017 the rules valid in 2016 shall still be applied.
• The VAT rate of Internet provision service is reduced to 18 per cent. The beneficial rate may be applied if the date of the issue of the invoice and the date of tax payment are in 2017.
• The VAT rate of poultry, poultry offal, egg and fresh milk is reduced to 5 per cent. The VAT rate of UHT and ESL milk remains 18 per cent.
• The VAT rate of hospitality in restaurants is reduced to 18 per cent in 2016 and 5 per cent in 2018, except the turnover of intoxicating beverages.
• Services related to the construction of real properties subject to simple reporting will also fall in the scope of reverse charge VAT.

Regime of taxation

• It is a new condition for the classification of reliable taxpayer that the annual tax performance should be positive, and that no executory procedure has been initiated in the relevant year and in the four preceding years against the taxpayer.
• The tax authority shall be allowed to require, in a resolution, a member who formerly transferred his or her shareholding, to pay the uncollectible tax debt of a legal entity operating with limited liability, if the former member had shareholding or voting rights of at least 25 per cent in the company, and the debt exceeds 50 per cent of the subscribed capital of the company. The tax authority may claim the uncollectible debt to an extent proportionate with the shareholding of the former member.  The member may request that he or she be released from the collection of the debt if he or she demonstrates compliance with the requirements listed in the law.
• Data shall be provided to the tax authority electronically on any invoices that contain recharged tax of 100,000 forints or more (VAT). From July 2017 data on invoices containing a deductible or charged VAT of more than HUF 100,000 shall be provided to the tax authority simultaneously with the VAT report.
• The hiring of a person authorized to accept service shall be reported to the tax authority. A taxpayer who hires a person authorized to accept service shall automatically become a risky taxpayer if a failure penalty is imposed on him/her on account of obstructing a tax administration procedure.
• From July 2017 the billing software applications shall supply data to the tax authority real-time on any invoice created by the billing software, application and containing a recharged tax of at least 100,000 forints. In the case of defective fulfillment or failure the tax authority shall impose the fine in the amount of the number of invoices to be reported, multiplied by the fine to be imposed.
• If the tax authority calls the attention of the taxpayer to the need to eliminate a risk explored by a risk analysis procedure of the tax authority, it will initiate a so-called supporting procedure. Participation in the supporting procedure is voluntary, but if the taxpayer fails to remedy the explored errors, then the tax authority shall initiate a tax audit.