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.
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 and Serbia 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.
Foreign companies shall submit the following documents to the Hungarian Tax Administration for VAT registration:
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.
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 to the Hungarian Tax Administration. The invoicing software must enable online data transfer to the tax authority.
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 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.
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