VAT Registration for Foreign Companies

What is necessary to register a foreign company for VAT in Hungary?

Foreign companies based not just in the European Union, but also in third countries may register for Value Added Tax (VAT) in Hungary. In certain cases VAT registration is compulsory while some companies register voluntarily in the interest of being able to reclaim the Hungarian VAT they incurred in the course of their business activity. The following overview of the VAT registration process describes the documents to be filed and the steps to be taken.

Mandatory and voluntary VAT registration

Registration for VAT is mandatory when the supply of the foreign company is deemed to be effected in Hungary pursuant to the Hungarian VAT Act and the reverse charge mechanism does not apply.

However, foreign companies may also voluntarily register in order to be able reclaim Hungarian VAT in a timely manner. This may be a good alternative as compared to the general VAT refund procedure for non-EU countries, which allows only companies from Lichtenstein, Switzerland, Norway, Serbia and Turkey to reclaim Hungarian VAT in a rather lengthy and complicated process. Registration for VAT is not limited to specific countries and it is possible to register retroactively, which means that some companies register and file retrospective tax returns for several years back. It is to be noted however, that registration results in a surplus administrative burden for the company, because it will be treated as a Hungarian VAT taxpayer from an administrative point of view.

Registration procedure

Foreign companies shall submit the following documents to the Hungarian Tax Administration for VAT registration:

• Form T201 which can be found and downloaded from the Tax Authority’s website. While filling the form, the following information is required: exact name of the company, the core activity and activity code, official seat of the company, personal data of the company’s representative(s). The representative will receive a Hungarian tax ID number which is generated automatically while submitting the form T201.
• Certificate of incorporation containing the effective company information as recorded in the company register
• A certificate issued by the foreign Tax Authority on the company’s taxpayer status
• Specimen signature of the representative(s)
• If a Hungarian tax advisor is entrusted with the administration of the affairs, the power of attorney
• Personal ID document (i.e. passport) of the representative(s)

The abovementioned documents shall not be older than 30 days.
The documents shall be submitted to the Tax Administration in paper and the company shall be registered within 2 weeks of submission. Please note that the Tax Office requires the originals of the documents mentioned above. After generating the VAT number the Hungarian Tax Administration will inform the company and the registration of the tax number can be viewed in the taxpayer database on the website of the tax authority or in the EU database.

VAT compliance after registration

Once registered for VAT, the company will have similar VAT obligations as Hungarian VAT subjects and it will be obliged to file VAT returns electronically on a monthly basis. Companies registered for VAT purposes are also obliged to report their invoicing software and all Hungarian invoices issued to the Hungarian Tax Administration. The invoicing software must enable online data transfer to the tax authority. An exception to this rule is invoicing under the EU one-stop shop (OSS) VAT system.

Electronic invoice reporting (RTR)

All invoices under Hungarian VAT rules must be issued electronically with simultaneous reporting to the Tax Authority NAV.  This obligation covers B2B and B2C invoices as well as invoices relating to intra-Community supplies and exports.

These reporting rules apply not only to Hungarian entities, but also to foreign companies regularly or occasionally issuing invoices under their Hungarian VAT number. Exceptions pertain only to invoices issued for the supply of goods or services by distance selling in the EU one-stop-shop VAT scheme.  Further exceptions should be considered in the case of providing services. Therefore, foreign companies delivering goods from Hungarian warehouses generally automatically underlie Hungarian invoice reporting and VAT obligations. 

Software solutions for invoice reporting

Businesses that do not issue a large number of invoices with Hungarian VAT are often best served if they use an already existing commercial Hungarian invoicing software that automatically enables RTR.

In more complex cases, foreign companies invoicing with Hungarian VAT as well as domestic entities using foreign software solutions will need individual software development to enable the XML data communication over an API surface. Purchasing a ready-made plugin may in some cases be a more simple solution, such as  the SAP-plugins that are available for compliant invoice reporting.

Relation of VAT registration to other taxes

Finally, it is worth noting that in some cases a foreign company may be liable not just to VAT but also to corporate income tax in Hungary, for example because it has a permanent establishment or it owns or uses real estate. In such cases the company will have to register as a corporate income tax subject. Liability to VAT and/or corporate income tax as well as other taxes are therefore to be assessed separately as based on Hungarian Law and the relevant international treaties, such as double tax conventions. A list of double tax conventions can be found on the NAV Hungarian Tax Authority website.