Value added tax

Definition of new immovable property

As a result of the legislative changes in the administrative authorisation of building commissioning, the definition of the new property in the Hungarian VAT Act will change, which will be incorporated into all provisions of the VAT Act where they are relevant, namely:

• serial sales of immovable property by a private individual;
• taxable supply of new immovable property;
• the supply of new immovable property which is not included in the VAT exemption threshold.

As of 1 January 2023, a property is considered new if its first intended use has not yet taken place, or, if it has, then 2 years have not yet elapsed between the sale and:

• the date when the usage permit became definitive, or
• the date of acknowledgement of the usage, or
• the date of issuance of the official certificate confirming the construction of the residential building whose construction was only subject to a simple notification under the Hungarian Act on the Formation and Protection of the Built Environment.

In addition, in order to facilitate the application of the law, the provision, which until now could only be derived by means of legal interpretation, is incorporated into the definition of new immovable property. As of 1 January, immovable property, the first use of which for its intended purpose has occurred, but the use of which as a separate functional unit (or the number of its functional units) has been changed, and the official certificate confirming this has been issued less than 2 years after the sale, is also treated as new immovable property.

Definition of construction-assembly or other assembly work

The definition of construction-assembly or other assembly work required for the application of the domestic VAT reverse charge also changes due to the adaptation of the changes in the construction sector legislations. The amendment will require the application of reverse charge in all cases where the construction, extension, alteration or other modification of immovable property is subject to a permit or notification to a public authority (i.e. it will clearly include not only works subject to a permit or notification issued by a building authority but also works subject to a permit or notification issued by any another public authority). The new definition will apply to supplies of services where both the supply date and the assessment of the payable VAT tax are due after 31 December 2022.

Invoice data content

The amendment makes clear the relevant provision of the VAT Act that the HUF amount of tax should be indicated only on the invoices issued for domestic supplies of goods and services. This amendment will enter into force on the day following the publication of this amendment.

The future introduction of e-receipts

As a first step towards the future introduction of electronic receipts, the obligation to report data on e-receipts will also be regulated for e-receipts issued by technical methods other than cash registers, which methods have been previously authorised by the competent authority. The details of the law provision will be set out in subsequent ministerial regulations (decrees). It will enter into force on the day following its publication.

VAT-exempt taxpayers – distance selling

It is introduced into the VAT Act if a taxable person having a VAT-exempt status makes distance selling or provides online services, they cannot use their tax-exempt status for these transactions, therefore, the consideration for these sales should not be included in their exemption threshold. Consequently, the law will also provide that a taxable person having a VAT-exempt status should be entitled to input VAT deduction on these supplies and services and, in the case of distance selling of imported goods, to import VAT deduction. These changes will apply to transactions carried out on or after 1 January 2023.

One Stop Shop (OSS) scheme

An amendment makes it clear if the EU One Stop Shop scheme has been opted for declaration and payment of VAT, the OSS scheme should be used for the declaration and payment of VAT on intra-Community distance selling transactions also in the Member States where the taxable person is established for business purposes.

The 5% VAT rate on new residential property

The law amendment extends the preferential tax rate applicable to the sale of new residential property for further 2 years until 31 December 2024, and states the transitional rule related to the phasing out of the preferential VAT rate:

• if the building permit has become final on 31 December 2024 at the latest, or
• if the construction has been notified under the simple notification rules by that date,

the preferential VAT rate may be applied after 31 December 2024 until 31 December 2028.

VAT reverse charge

In line with the EU legislation, the VAT Act will allow the application of domestic VAT reverse charge in respect of the following transactions until 31 December 2026 for the goods and services specified therein:

• the transfer of a tradable right (allowance) to emit greenhouse gases,
• the sale of cereals under specific customs tariff numbers,
• the sale of iron and steel products under specific customs tariff numbers.

***

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

This newsletter provides general information and does not constitute tax advice