It has long been a problem that the tax authority refuses to refund to a supplier the VAT that has already paid by him, even if the customer has not paid the gross purchase price at all. However, in a recent ruling, the European Court of Justice has clearly ruled that if the claim has become definitively unrecoverable, the Hungarian tax authority NAV is also required to refund the VAT on that claim to the seller. This decision now also allows other affected taxpayers to request a refund of the VAT on their unrecoverable receivables within a maximum of six months.

A recently released NAV guidance gives a list of those signs that could indicate that a security firm is involved in VAT fraud. The list will certainly help companies that accept invoices from such security firms, but it’s still a pity that the guidance wasn’t issued ten years earlier.

It has been clear for some time that Hungary is in breach of EU law by not allowing the refunding of VAT on bad debts. The fact that cases of Hungarian taxpayers have now been brought before the European Court of Justice (ECJ) has forced Hungarian lawmakers to move on the issue. While the package of tax amendments submitted last week provides an opportunity to reclaim such VAT, in certain cases – due to the planned administrative restrictions – it will still only be possible to enjoy this right with reference to EU law.

“It’s such a good deal that it won’t last for long”, cried hundreds of business owners in response to the suggestions of setting up an ESOP. However, a bill recently adopted by the Parliament suggests that if a company uses this type of employee benefits scheme for its intended purpose, they should be able to count on it in the long term as well.

Our traditional survey again looks at how many types of taxes there are in Hungary. The number of Hungarian taxes has fallen by one again this year, so we’ve counted 58 this time. The decrease, however, is of a technical nature only, while at the same time we continue to live with taxes such as the seemingly ineradicable charge payable on household employees or the newly introduced poster tax.

New laws taking effect on 1 January next year will transform the tax audit procedure and the way tax lawsuits unfold. While some of the amendments are business-friendly, they also conceal a number of traps that are clearly detrimental to taxpayers’ interests. For example, the rights of taxpayers to defend themselves against the tax authority, and to make use of experts, will be compromised.

There is no use of winning a lawsuit against the tax authority if the enterprise goes bankrupt before the judgement is rendered. And such an outcome is by no means uncommon, as under the current laws the tax authority can initiate enforcement proceedings against a business while the suit is still in progress. What’s more, experience shows that the tax authority doesn’t shy away from enforcement even in the absence of the solid legal grounds for pursuing that route.

In our traditional beginning-of-year review, we again counted the number of taxes levied in Hungary today. This time we got 59. Although the number of taxes has decreased by one since last year, the scale and structure of the tax system has not changed. In terms of tax revenue generated, VAT continues to top the list, bringing in approximately HUF 3,300 billion in 2016.