VAT changes
On 21 November 2023, bills T/5893 “on the amendment of certain tax laws” and T/5877 “on additional taxes to ensure a global minimum tax level and amending certain tax laws in this context” (hereinafter jointly: the Autumn Tax Package) were submitted to the Parliament of Hungary. The Autumn Tax Package proposes to make comprehensive changes to the Hungarian tax system and introduces a number of new legal institutions. To give you a more detailed and comprehensive picture of the changes, the Autumn Tax Package is presented in a series of professional articles, the present, third part of which covers the changes affecting VAT (the first part on corporate income tax can be found here, while the second part on tax administration here).
Planned changes to VAT
Next year's amendments to Act CXXVII of 2007 on Value Added Tax (hereinafter: the “VAT Act”) are intended to harmonise the law and to clarify issues that have arisen in practice. The Autumn Tax Package also brings some novelties: it enacts the necessary legal provisions for the introduction of the e-receipt and e-VAT system for the digitalisation of tax compliance. Other important changes include amendments and clarifications to the reduced VAT rate, as well as clarifications and additions to certain specific exemptions from VAT (in view of the public interest nature of the activity).
Rules on the place of performance of virtual events
The place of performance in case of an in-person cultural, artistic, scientific, educational, entertainment, sporting and similar event is the actual place where the event takes place. The Autumn Tax Package provides that place of performance of a virtual event is the place where the party using the service is established. In the absence of establishment, the place of performance is deemed to be the place of residence or habitual abode (permanent or temporary address).
Amendments to the rules on individual VAT exemption
For the purpose of legislative harmonisation, the system of individual VAT exemption will be significantly overhauled from 1 January 2025. Under the new rules, taxable persons will be able to opt for an exemption in a Member State other than the Member State of their establishment for transactions carried out there. However, the law also stipulates that no right of deduction can be exercised if the taxable person makes the supplies relating to the transaction in a Member State in which it is VAT exempt.
Declaration of reverse charge VAT for construction, installation and other works on immovable properties
As of 1 January 2023, the rules on construction, installation and other works for immovable property subject to the reverse charge mechanism have been amended. Under the existing rules, reverse charge can be applied where the construction, alteration, extension, demolition or change of use of immovable property is subject to a permit or notification to the authorities (the recipient of the service must notify the service provider of the permit/notification before the service is provided). As a new rule, from 1 January 2024, the declaration is to be made by the service provider (i.e. “in reverse direction”) to the recipient of the service where it is the service provider that primarily has information on the need for the permit to be issued by or notification to be given to the relevant authority.
Introduction of the eVAT system
Under the Autumn Tax Package, the eVAT system will be introduced from the tax assessment period beginning 1 January 2024. Taxpayers would therefore have 3 options for completing their tax returns:
- Completing and submitting a traditional form available through the ÁNYK system (it is important to note that in case the taxpayer chooses this option, self-revision is only available through the ÁNYK as well);
- Within the framework of the eVAT system, by way of completing, amending and approving the draft tax return prepared by NAV from the available data on the electronic interface created by NAV.
- Approving the draft tax return also created by NAV using a computer interface within the framework of the e-VAT system from the document level data made available by the tax authority in accordance with the standards required by NAV.
It is important to emphasise that in case a taxpayer wishes to fulfil its VAT return obligation within the framework of the eVAT system, i.e. using methods 2 and 3, the draft eVAT return prepared by NAV must be approved by the taxpayer – via the electronic interface provided for this purpose in the case of method 2 and by way of a machine-to-machine interface in the case of method 3. If the taxpayer fails to approve the draft return, NAV will delete the tax records and the draft VAT return on the last day of the month following the return deadline.
Another big advantage of eVAT – in addition to the 15-day exemption from self-revision surcharge discussed in our earlier newsletter and the 15-day moratorium on tax audits for reliable taxpayers – is that those who opt for this VAT return method are exempt from the obligation to prepare and submit a domestic summary statement.
Until 1 July 2024, VAT returns submitted in the eVAT system (methods 2 and 3) cannot not be self-revised within the framework of the system. Therefore, any necessary self-revisions will only be possible by completing and submitting the self-revision form. The self-revision of returns submitted with the use of these methods will be possible within the eVAT system from the second half of 2024.
The electronic interface of the eVAT system (related to method 2) can be accessed by the taxpayer and the taxpayer's authorised representative via an electronic identification service. Authorisation may be granted to another natural person, i.e. a secondary user, to access the interface with limited rights. Such secondary user will only have the possibility to modify and complete the data in the electronic interface, but not to approve the draft VAT return. The secondary user will have the right to use the electronic interface until the authorisation is revoked.
To use the machine-to-machine interface (method 3), the taxpayer must notify NAV that it wishes to use this method to fulfil its VAT return obligation. Once the notification and the reporting obligation have been fulfilled, the taxpayer is registered by NAV.
If the taxpayer fulfils the VAT return obligation in more than one way, the first return submitted will be considered as the taxpayer's valid VAT return, and any subsequent VAT returns submitted will be invalid.
In case of legal succession, the successor will have access to the VAT return data of the legal predecessor via the electronic interface first for the tax assessment period including the day 1 January 2025. The legal successor will then be able to carry out a self-revision on the electronic interface after 1 January 2025 for VAT returns submitted by its legal predecessor via the electronic platform for the tax assessment period ending on the day before 1 January 2025.
It is first for the tax assessment period including 1 January 2025 that a VAT return that can be submitted under the eVAT system for the closing of activities in the case of a taxable person subject to voluntary winding-up, involuntary liquidation or compulsory cancellation proceedings.
Rules on receipts and e-receipts
As of 1 January 2025, the following additions and amendments will be made to receipts, e-receipts and other documents treated as receipts:
The possibility of e-receipts is introduced. E-receipts can only be issued by electronic means, and will be available to customers via a customer application, in a register of receipts. A paper copy of an e-receipt will be issued only at the request of the customer (except where specifically required by law).
- According to the bill, the date of issue of the receipt is the date when the receipt is saved in the receipt register.
| Data content of receipts until 31 December 2024 |
Data content of receipts other than e-receipts from 1 January 2025 | Data content of e-receipts from 1 January 2025 |
Data content of a document treated as receipts
from 1 January 2025 |
|
|---|---|---|---|---|
| Date of issue | X | X | x | x |
| Identification serial number | X | x | x | x |
| Tax number, name and address of issuer | X | x | x | x |
| Value of supply of goods/services (including tax) | x | x | x | – |
| Reference to the receipt the data of which content is modified by the document, nature of the modification and, if any, its numerical effect | – | – | – | x |
| Description and quantity of the goods/services sold | – | – | x | – |
| VAT rate applied (%) | – | – | x | – |
| Indication of exemption from VAT | – | – | x | – |
| In the case of supplies under special rules, the relevant phrase. | – | – | x | – |
| From 1 July 2028, the global trade item number | – | – | x | – |
Clarification and addition of the scope of VAT exemption (in view of public interest activity)
The Autumn Tax Package clarifies that dental prostheses are exempted from VAT among the products sold by a taxpayer providing dental or dental technician's services.
The scope of activities exempted from VAT on account of the public interest nature of the activity is extended to include the transport of injured or sick persons, provided that such activity is carried out by a service provider holding an official licence and using a means of transport specially equipped for the purpose.
Amendments and clarifications concerning the reduced VAT rate
In case of the import of works of art within the meaning of Section 24 of the VAT Act, the VAT rate will be reduced from 27% to 5%.
The Autumn Tax Package also reclassifies some customs tariff headings under the 5% VAT rate, in the categories of foods for special medical purposes (foodstuffs), as well as breast milk substitute infant formulas and follow-on formulas (foodstuffs).
As from 1 January 2024, the VAT rate for products falling under headings 2106 and 1806 (e.g. the chocolate-covered curd snack “túró rudi”) will be reduced from 27% to 18%.
This summary is based on the information available at the date of its publication and is written for general information purposes only; therefore, it does not constitute or replace personalised tax advice in any respect.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.