The Hungarian regulation on VAT refunds for foreigners violates EU rules

By RockedBuzz 5 Min Read

Obstacle course: VAT refund for foreigners in Hungary

It just isn’t unusual for a international firm to obtain an bill for companies utilized in Hungary or merchandise bought in Hungary, on which Hungarian VAT is charged. Unlike the overwhelming majority of home companies, international companies can not deduct or reclaim the VAT on these invoices in their very own VAT return, as they’ve neither a Hungarian institution nor a Hungarian tax quantity.

Foreigners can solely get their Hungarian VAT again in the event that they request it yearly inside the framework of a particular process. It just isn’t needed to connect all invoices and supporting paperwork to the applying, however the serial numbers of the affected invoices have to be indicated on the shape.

Since it’s not necessary to connect invoices and different paperwork (e.g. contracts, efficiency certificates, and many others.), the Hungarian tax authority invitations international corporations to submit extra paperwork in lots of instances in the course of the evaluation, with a deadline of 1 month.

Those who missed out, missed out – till now

The drawback is that the Hungarian tax authority communicates with the international firm or its designated contact individual solely by the digital channel specified within the utility (sometimes the e-mail deal with offered). However, it typically occurs that the international firm gives the fallacious contact deal with, or the designated contact individual not works for the corporate, or is maybe on trip, and due to this, the international firm doesn’t submit the requested paperwork by the deadline. Due to failure to satisfy the deadline, the tax authority terminates the process and doesn’t return the VAT to international companies.

Many folks attempt to save the scenario by moreover submitting the paperwork requested by the primary occasion tax authority within the authorized treatment (attraction) process towards the primary occasion choice of the tax authority. However, these are robotically rejected by the second-instance authority, referring to the truth that, based mostly on Hungarian procedural rules, it’s not attainable at hand over paperwork within the attraction process that the taxpayer didn’t hand over regardless of the request of the tax authority. And with that, the VAT stays within the Hungarian finances, and the international firm can not entry it.

Maybe there’s a method out in spite of everything?

In an ongoing tax continuing, the final counsel’s opinion revealed yesterday acknowledged that the Hungarian tax legislation rules are opposite to EU legislation, as they don’t enable international corporations at hand over the paperwork beforehand requested by the primary occasion tax authority within the second occasion (attraction) process. The Hungarian rule violates many fundamental rules – for instance tax neutrality is the essential precept of efficient enforcement and proportionality.

What will be anticipated based mostly on these and what are the additional questions?

In its subsequent choice, the Court of Justice of the European Union will give particular consideration to the opinion of the Advocate General and the solutions proposed therein. Although he comparatively not often deviates from it in tax issues, on the similar time it doesn’t bind him when making his choice. If the paper type prevails, the Court of Justice of the European Union will even declare that the Hungarian regulation violates EU legislation.

Such a choice may presumably outcome within the transformation of the present Hungarian rules and will additionally increase the query of whether or not these international corporations who’ve walked in related footwear can subsequently, by referring to this choice, get entry to their VAT caught within the Hungarian finances. Additional questions might also be raised as as to whether the reasoning of the General Counsel’s opinion can be used within the attraction part of different kinds of instances (similar to different tax refund purposes or tax audits).

Cover picture supply: EU

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