The VAT paid abroad is reclaimable until 30 September, 2023

The VAT paid abroad in the calendar year 2022 is reclaimable until 30 September 2023. The VAT refund possibility also applies to EU Member States and certain countries outside the European Union (Switzerland, Liechtenstein, Norway, Serbia, as well as Turkey and the United Kingdom under certain conditions).

Who is entitled to a VAT refund and how?

Only taxable persons who have a right of VAT deduction in Hungary (e.g. who are not in the VAT-exempt status) and whose relevant expenses incurred for the benefit of their businesses are entitled to claim back their VAT paid abroad. If these conditions are jointly met, they can reclaim any VAT that has been charged to them in another EU Member State as foreign taxable persons from the perspective of that Member State.In addition, VAT can also be reclaimed on services and goods purchased in a third (non-EU) country if Hungary has a bilateral reciprocity agreement with that country.

VAT refunds within the EU are made through a one-stop shop system electronically. Applications submitted on paper are automatically rejected. For third countries, the application must be submitted directly to the tax authorities of the foreign country.

Which goods and services are subject to VAT refunds?

Foreign taxable persons may reclaim the VAT charged on the supply of goods and services with the place of supply in another country and on imports into that country. If the rules in force in that country impose a deduction ban on the goods or services in question, the foreign taxable person is not entitled to a refund. Therefore, the rules of the country of refund should always be taken into account. For example, the VAT on petrol used for a personal vehicle cannot be reclaimed in any form in Hungary, but in Germany, the VAT paid on fuel purchased for a personal vehicle can be reclaimed, provided that the appropriate certificates are in hand.

According to a tax change this year, VAT on real estate acquired by a taxable person established in another EU country can also be reclaimed.

In which annual refund procedure can the value of an invoice be claimed back?

According to the Hungarian VAT Act, it is not the date of issuance of the invoice, but the date of supply that determines in which application period the pertaining VAT amount can be reclaimed. Thus, the amount of VAT paid abroad on an invoice issued on 23 January 2022, but with a supply date of December 2021 can only be reclaimed until 30 September 2022. In addition, this deadline is also a mandatory time limit, that is the Hungarian Tax Authority does not accept any applications for restitutio in integrum submitted after the deadline. We recommend that you make sure to check your invoices for the date of supply as well, to avoid inadvertently missing the filing deadline.

How long does it take to process a refund request?

The tax authorities must decide on the refund within 4 months. In the case that any further documents were required by the tax authority in charge, this time limit may be extended to 8 months.

VGD Hungary can help:

• in filing the refund requests by Hungarian companies for the VAT they paid in any of the EU Member States and also in the six non-EU countries with reciprocity (the United Kingdom, Switzerland, Liechtenstein, Norway, Serbia, Turkey), and
• in filing the refund requests by the companies established in the European Union and in the six non-EU countries with reciprocity .

Reclaiming the VAT paid abroad is a complicated process and, in the case of supplementary requests for documentation, the communication with the tax authorities of the state of refund is in the language of the state of refund, so it is always advisable to involve a tax expert when initiating the procedure, especially when a significant amount is concerned.

The experienced tax advisors of VGD Hungary, part of the Nexia International tax advisory network, will be pleased to assist their Clients also in filing VAT refund claims.

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Should you have any questions regarding this newsletter,
the experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute advice.