There are three VAT rates in Hungary:

• the standard rate: 27%
• a reduced rate of 18% on dairy products, bread, district heating and commercial accommodation services
• a reduced rate of 5% on specific medicines and medical devices, performing arts activities, books, magazines, newspapers, milk products.

Supplies exempt from VAT fall into the following categories:

• certain supplies of goods and services of public interest (e.g. postal services, certain health services, public service media, folk art products and events)
• certain special activities in accordance with the relevant EU Directives (e.g. insurance, financial institution services, gambling, the sale of land except for building plots etc.)
• optional exemptions i.e. supplies for which it is possible to choose VAT liability (e.g. letting of real estate, sale of real estate older than two years etc.)

The VAT liability usually arises at the time of supply, i.e. when all the elements of the transaction materialise. Special dates of supply apply in the following cases:

• in the case of advance payment, the date of supply is when the advance payment is received (the invoice on the advance payment must be issued by the supplier after receipt of the advance payment)
• in the case of regular supplies of goods or services (supplies settled periodically), the date of supply is the due date of payment, or from 2016 the last day of the settlement period (e.g. rental fee or supply of goods from a consignment warehouse settled monthly)
• in the case of transactions with a reverse charge mechanism, the date of supply is whichever is earliest of the day when the invoice is received, the day when the price is paid or the 15th day of the month after the month of supply.

Content requirements

The requirements regarding the content of invoices conform to the principles specified in the relevant EU Directive. It should be noted that on invoices issued in a currency other than HUF

• the amount of payable VAT must always be indicated in HUF.
• the application of a special exchange rate for the calculation of the HUF equivalent is required by law (in general, it is the selling rate quoted by a domestic credit institution on the date of supply or, if advance notification is given, the medium exchange rate quoted by the Hungarian National Bank or the European Central Bank).

In certain cases, the VAT Act requires a pre-defined text to feature on the invoice (e.g. self-invoicing, reverse charge).

Invoice, billing software

The issuer may comply with the obligation to issue invoices by issuing hard copy invoices with an invoice book (available in shops selling official forms), computer-generated invoices with the help of an invoicing program, or electronic invoices. Special rules apply to issuing, forwarding and archiving of electronic invoices, which concern both the issuer and the receiver.

The invoicing software must meet the requirements set forth in a separate decree; most important are continuous numbering without omission or duplication (with a separate number range for foreign companies), and exclusion of the possibility of retroactive modification or deletion. Data generated with invoicing software must be reported to the tax authority and a detailed user manual must be available.

If the parties agree in writing, the buyer may also issue the invoice (self invoicing).

Retail units are required to comply with the obligation to issue receipts using cash registers suitable for online data transfer that are directly connected to the tax authority.

Real time invoice reporting

The invoicing software has to transfer the data of sales invoices to the tax authorities automatically, without human intervention and immediately as soon as the invoice is approved by the issuer. This liability refers to all sales invoices issued by the taxpayer.

Prohibition of deduction

The deduction of VAT is specifically prohibited by law in the case of certain services and goods except if the item is resold or the purchased item is directly integrated into a new product or service to be sold. The most important types of services and goods in this category:

• passenger car fuel
• services related to the maintenance of a passenger car (50% of repairs, maintenance and similar services of car operation)
• passenger car rental and operative leasing (50%)
• parking fee, motorway toll for vehicles having a total weight of more than 3.5 tons
• food and drink, hospitality, entertainment and taxi costs
• construction and renovation of residential property
• 30% of phone bill

Tax return

Taxpayers with a Community VAT number file tax returns monthly or quarterly; the filing deadline is the 20th day of the month after the relevant month or quarter. In the return, the input VAT of purchases may be offset against the payable VAT. From 2017 transactions with a VAT of more than 100,000 HUF are to be shown separately in the tax declaration.

Refund

If on the basis of the tax return the taxpayer is entitled to a refund, according to a European Court of Justice judgement, the tax authority is required to transfer the amount to the taxpayer if the amount to be refunded exceeds HUF 1 million for taxpayers filing monthly returns or HUF 250,000 for taxpayers filing quarterly returns, regardless of whether the transaction has been settled financially. The transfer is generally made by the tax authority within 75 days but the taxpayer may request that the transfer be made within 45 days if all purchase invoices of the relevant period were duly paid by the filing date of the return.