MAIN HIGHLIGHTS OF HUNGARIAN VAT LEGISLATION AND RECENT LEGISLATIVE CHANGES 2017 LILLA STRICCA, ITL GROUP TRA ANNUAL CONFERENCE MILAN, ITALY 11-12 MAY 2017
Main VAT highlights 1. • Hungarian VAT rules are harmonized with EU VAT directive. • Taxable transactions: VAT is levied on domestic supply of goods and services and on imports. • What qualifies domestic supply, i.e. when is the place of supply in Hungary for VAT purposes? • Rates: standard VAT rate is 27% with reduced rates of 18% and 5%. • VAT registration: there is no minimum sales limit for VAT registration, except for distance selling: if it exceeds 35.000 EUR the seller has to register for VAT in Hungary. • Fiscal representative: for EU companies optional, for third countries compulsory; joint and severe liability with the taxpayer. 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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Main VAT highlights 2. Important practical information on VAT registration in Hungary • Retrospective VAT registration is possible. This is useful when operations have already started in Hungary and expenses incurred there. The input VAT becomes deductible provided the date of effective registration is earlier than the date of supply of the invoice. • VAT registration normally takes 2weeks from the moment of submitting all the necessary documents (notarized translation required of certain corporate docs) • Obtaining online access takes another 2 weeks • Even if the effective registration date falls to mid-month, a full monthly report has to be submitted for that month. • Compliance starts with monthly filings. 11-12 MAY 2017
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Main VAT highlights 3. • Filing and payment: monthly, quarterly and annul filing and payment may be required depending on the amount of the VAT liability. • Main risks in VAT compliance: errors are easily detectable by tax authority during tax audits • Sanctions in case of detected tax arrears: tax penalty between 50-200% of the tax arrear + late payment interest (twice the base bank rate) • Statute of Limitation period: 5 + 1 years. This is also valid for VAT compliance, i.e. within this period both the company and the fiscal representative are in risk!
11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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Main VAT highlights 4. Important Deadlines: • The VAT report shall be filed by the 20th of the month following • Each month in case of monthly filing obligation • Each Quarter in case of quarterly filing obligation • Each year in case of yearly filing obligation • At the same time VAT liability shall be paid immediately (the same day) • Deductible VAT can be rolled-over to next period or reimbursed (latter sometimes is heavily controlled) • Cash-flow implications could be severe if date of supply (invoicing) and payments are not carefully planned. 11-12 MAY 2017
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Main VAT highlights 5. • Rules of Taxation: the taxation moral of taxpayers is monitored centrally, thus taxpayers my qualify qualified (i.e. reliable) taxpayers which have a clean history in the 4 previous years. This means clean compliance history with timely filings, no tax penalties and tax collection procedures against the taxpayer. • Such VIP status is rewarded by privileged rights such as decreased default tax penalty (50% instead of 100%) • There are also the so-called risky taxpayers which fail to meet the above requirements and thus have no clean history in the previous 3 years. 11-12 MAY 2017
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Main VAT highlights 6. • EKÁER-system: as of 1 March 2015 the regulation on Electronic Public Road Trade Control System was introduced for transportation of goods in Hungary. • Accordingly, there is an obligation to submit report on taxable supplies of goods transported by tolled vehicles (that is to say, vehicles with a total weight larger than 3.5 tons) in public road transport in cases of o acquisition of goods from another Member State of the European Union to the territory of Hungary or acquisition for other purposes, o supply of goods from the territory of Hungary to another Member State of the European Union or supplies for other purposes, and, o first supplies of goods subject to taxation in domestic trade, to users other than end users. • Who should submit the report? The Consignee or the Consignor, depending on the direction of transport. The carrier or the agent (organizing the transport) has no submission obligation but it can also do it provided the Consignee or the Consignor gives the authorization to do so on the EKÁER electronic surface. 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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Main changes in 2017 • As of 1 January 2017 the sales of some basic food products (poultry meat, eggs, fresh milk) has been subject to 5% preferential rate , which is a very positive measure, however, it has created serious negative cash flow effect for VAT payments of poultry product producers due to the fact that the supplier invoices are still apply 27% VAT rate. Here a VAT planning is required to avoid bankruptcy! • Provision of internet service and restaurant service are subject to 18% preferential rate, where the latter will be further reduced to 5% as of 1 January 2018. Same problem will arise here. • A new tax (tourism development contribution) will be introduced on restaurant services levied on the net revenues generated by such services at a rate of 4%. 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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The existing invoicing requirements for VAT registered companies in Hungary • Besides the rigorous formal requirements regarding the format and content of the invoices, only those sales invoices are eligible for VAT deduction that are generated by a Hungarian invoicing software! • Main requirements regarding the Hungarian invoicing softwares: • Has to be registered with the Hungarian tax authority (the service provider does it) • Has to ensure the uninterrupted sequential numbering preventing retrospective modifications • Sanctions on failure to meet the this obligation is high: up to 500.000 HUF (appx EUR 1,700) per invoice 11-12 MAY 2017
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The new invoicing requirements in 2017-2018 • Requirements regarding the contect of invoices: the customer’s VAT number has to be included on the invoice also for domestic transactions if the amount of output tax is larger than 100.000 HUF (appx 330 EUR) • As of 1 July both supplier and purchase invoices have to be included in the domestic summary report (1765M) if output tax is larger than 100.000 HUF (appx 330 EUR). • Reverse charge taxation is applicable also to those construction services that are not subject to prior authorization and only required to be reported to the competent authorities. 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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The new invoicing requirements in 2017-2018 • Live invoice data reporting requirement: companies VAT registered in Hungary will have to report their sales invoice data with in real time in an online connection with the tax authority in their B2B relations. • Initially from 1 July 2017 the real-time data reporting was to be introduced but it was postponed to 2018 due to the problems arising for the IT companies providing the invoicing software, which has to ensure such function. • Problem arise with the preparation of accounting, tax compliance and IT HR staff for the new requirements which are unique in the EU 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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Some important VAT rules: Consignment stock VAT facilitation • Hungary also has this VAT facilitation treatment in place • EU member states suppliers non-domiciled and not registered in Hungary for VAT purposes are eligible to VAT payment exemption for their stock transported into Hungary to the consigment warehouse. • Conditions: • The Hungarian customer owns or rents the warehouse • The goods stored in the warehouse are legally owned by the supplier • The change of legal title is at the customer’s discretion • Quantitative control and record keeping of the stock • Tax implications: • For the supplier: qualify non-taxable intra-community sales of goods (no VAT registration obligation) – if the supplier is already VAT registered it is not applicable • For the customer: intra-community acquisition of goods (reverse charge VAT) • Third countries are not eligible for this facilitation rule, they have to assign a fiscal representative and pay VAT. 11-12 MAY 2017
TRA ANNUAL CONFERENCE, MILAN, ITALY
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Some important VAT rules: Distance selling rules • As of 1 January 2015 new rules in the EU has been introduced: certain B2C services (radio and audiovisual, media, telecomm, ecommerce services) are taxable in the country of consumption. • E-commerce services: online shops, webshops, webportals, mobile apps traders, e-books traders, distance learning and training providers, etc. • These could have VAT presence in all 28 EU member state. • In order to simplify administrative burdens, MOSS (mini-one-stopshop) has been introduced for VAT compliance meaning they can submit VAT returns in their country of residence. Tax authorities coordinate the division of payments between each other. • VAT is paid in the country in which the consumer is resident or present. 11-12 MAY 2017
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Thank you for your attention!
11-12 MAY 2017
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