VAT, or Value Added Tax is a consumption based tax. It is added to the net price of the product sold. In Hungary, the standard rate is 27%. Some lower rates apply to certain products or services (5% on specific medicines and medical devices, performing arts activities, books, magazines, newspapers and sheet music, as well as live hogs and half hogs, cattle, sheep and goats; 18% on dairy products, bread, district heating and commercial accommodation services).
When you issue an invoice with your Hungarian company, you include the VAT on the invoice. Your buyer pays the VAT to you along with the net price. You then have to pay the VAT to the Tax Authority (VAT payable). Since you automatically get a VAT number with your Hungarian company, you can deduct the VAT amount you paid on goods or services connected to your company’s activity (VAT reclaimable). Note that you cannot reclaim VAT for certain expenses (fuel or maintenance for a passenger car) or just reclaim part of the expenses (e. g., only 30% of the phone bill is reclaimable).
Your accountants file a monthly or quarterly VAT report on your behalf. The frequency of VAT reports depends on your trade volume or activity. The report is filed by the 20th of the month following the relevant month or quarter. If your VAT reclaimable is more than your VAT payable, you can reclaim the difference in the VAT amount from the Tax Authority. The limit for reclaims is 250 000 HUF for monthly taxpayers, and 1 million HUF for quarterly payers.
The Tax Authority usually transfers the reclaimable VAT within 75 days of your accountants submitting the claim. You can also request a payment within 45 days if all purchase invoices of the relevant period were duly paid by the filing date of the return.
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