Foreign business entities that are not registered or established in Hungary (i.e. they do not have a registered office or any other fixed establishment, and do not carry out business activity in Hungary) may still pay Hungarian VAT on goods or services purchased in Hungary. Since they cannot deduct this input VAT through regular VAT returns (as domestic or registered persons do), they have to reclaim it via a special procedure governed primarily by Directive 2008/9/EC (and, in some cases, under the so-called 13th Directive for recognised third-country businesses). This process is commonly referred to as the Hungarian VAT refund for non-established taxable persons.
To qualify for the VAT refund in Hungary, the foreign business entity must meet several requirements:
- The business entity must be established in another EU Member State (or in a “recognised” third county that has a reciprocity agreement with Hungary).
- The foreign business entity must not perform supplies of goods or services in Hungary (with certain exceptions) that would obligate them to register for Hungarian VAT.
- The goods or services for which VAT is claimed must be used for taxable business activities. In case of mixed activities (some taxable, some exempt) only a proportional amount of VAT will be reclaimable.
In addition, the Directive sets minimum refundable amounts: EUR 400 for refund periods of at least three months, and EUR 50 for annual claims.
The procedure
The application process depends on the place of establishment.
The application for VAT reclaims of EU based business entities must be submitted electronically in the foreign business entity’s own country via the respective local tax authority, which will forward it to the Hungarian Tax Authority (NAV). By contrast, recognised third country business entities must submit the application directly to NAV.)
The filing deadline is 30 September of the year following the refund period (usually the calendar year). Importantly, an application is only considered valid if submitted with all the required information, and late submissions are not accepted.
The application does not need to be accompanied by all the invoices and supporting documents, but for applications lodged for Hungary, the Tax Authority often asks foreign business entities to submit supplementary documents within the set (usually one-month) deadline. Foreign business entities can easily miss this deadline due to (generally) harmless administrative reasons.
In recent years, many refund claims were rejected on this ground. However, in May 2024, the Court of Justice of the European Union (CJEU) issued a key ruling, holding that Hungarian Tax Authorities must still examine the substance of refund applications even if supplementary documents were not provided in time, and that such documents may be submitted later in the appeal procedure. This judgement strengthened the position of non-established taxpayers seeking VAT refunds in Hungary.
Once a complete application has been received, the Hungarian Tax Authority must decide on the application within 4 months. This period may be extended if further information is requested.
Tips and tricks
The foreign entities must always keep an up-to-date registry of the respective invoices, payment certificates, and documents that can evidence that the purchased goods/services are eligible for VAT refund and were used for business purposes.
The foreign entities must always keep in mind the limitation period (30 September of the next year) for submitting the application and should expect the requests from the Hungarian Tax Authorities for supplementary documents with a strict deadline.
When submitting the application, it can be worthwhile to engage a local representative or tax advisor familiar with Hungarian VAT refund law and give his/her contact details to the Tax Authorities as contact person.