VAT rates in Hungary: A comprehensive overview of the tax system

Value Added Tax, commonly known as VAT, is one of the key fiscal tools used by governments across most European Union countries to fund their budgets. The VAT system covers almost every commercial transaction, whether in the trade of goods or services. Hungary is one of the EU countries that stands out in this regard due to its unique tax structure, particularly because of one of the highest VAT rates in Europe.

Standard VAT rate in Hungary – 27%

The most distinctive feature of Hungary’s VAT system is its standard rate, which stands at 27%. This is the highest such rate among EU countries, making Hungary one of the leaders in tax burden within this category.

This rate is widely applied and covers the majority of goods and services offered on the market. These include:

• Food and beverages,
• Electronics, home appliances,
• Cosmetics and hygiene products,
• Clothing and footwear,
• Furniture and home furnishings,
• Hotel and restaurant services,
• Cultural and entertainment services,
• Renovation and construction services,
• Legal and accounting services.

Such a high VAT rate has a direct impact on the retail prices of goods and services, which can affect the overall standard of living and purchasing power of residents.

Reduced VAT rates – 18% and 5%

Alongside the standard rate, the Hungarian VAT system also includes two reduced rates: 18% and 5%. Each of these applies to specific groups of products and services that, due to their particular nature, social or economic significance, are subject to lower taxation.

18% VAT: The 18% rate applies to selected food items and culture-related services. These include:

• Certain types of milk,
• Dairy products,
• Cereal products and flour,
• Starch,
• Services enabling participation in musical and dance events.

5% VAT: The second reduced VAT rate, set at 5%, has a much broader application and covers products and services crucial for daily life and social development. Among them are:

• New residential properties,
• Selected pharmaceutical products,
• Audiobooks,
• Printed books and newspapers,
• Animal products such as eggs and poultry,
• Internet access services,
• Local catering services.

Zero VAT rate

Hungary’s VAT system also includes cases where a zero VAT rate applies. This mainly concerns services and transactions related to international transport and intra-community transactions. The most important categories include:

• Passenger transport services and intra-community and international transport,
• Work related to movable goods imported into the country and exported outside the EU,
• Financial and insurance services,
• Medical, cultural, and sports services provided as public services.

The zero VAT rate is applied in cases where it is essential to support international trade and public services without additional tax burdens.

VAT registration in Hungary for foreign companies

As a member of the European Union, Hungary requires foreign companies conducting specific activities within its territory to register for VAT. Situations where foreign companies are obliged to register for VAT in Hungary include:

• Storing goods in Hungary,
• Exceeding the EU distance selling threshold (EUR 10,000) under the OSS (One Stop Shop) scheme,
• Making intra-community supplies,
• Organizing events in Hungary,
• Supplying goods to EU countries through Hungary.

The VAT registration procedure requires submitting the necessary documents, including a copy of the VAT certificate in Hungarian, the company’s articles of association, an excerpt from the national register, and a power of attorney if the company uses a tax representative. Upon completion of the procedure, the company receives a Hungarian VAT number, enabling it to conduct legal business operations in Hungary.

VAT declarations and payments in Hungary

The deadlines for filing VAT declarations in Hungary depend on the company’s turnover and the frequency of filing declarations. The Hungarian system provides for monthly, quarterly, and annual declarations:

• Monthly VAT declarations: mandatory for companies that paid more than HUF 1 million in VAT in the previous year,
• Quarterly VAT declarations: for companies that paid VAT in the range of HUF 250,000 to HUF 1 million,
• Annual VAT declarations: for companies that paid less than HUF 250,000 in VAT and are not engaged in intra-community trade.

The deadlines for submitting declarations are the 20th day of the month following the end of the reporting period for monthly and quarterly declarations.

Reverse charge mechanism in Hungary

To prevent tax fraud and simplify tax procedures, Hungary applies a reverse charge mechanism for certain domestic and international transactions. Examples of transactions subject to reverse charge include the trade of scrap metal, steel products, non-ferrous metals, and construction services provided by subcontractors.

In intra-community transactions, the reverse charge mechanism shifts the VAT liability to the buyer, which simplifies tax procedures and reduces the risk of carousel fraud.

VAT refund in Hungary

As in other EU countries, businesses operating in Hungary can apply for a VAT refund, provided they meet certain criteria. A VAT refund is granted if the refund amount exceeds:

• HUF 1 million for taxpayers submitting monthly VAT declarations,
• HUF 250,000 for taxpayers submitting quarterly VAT declarations,
• HUF 50,000 for taxpayers submitting annual VAT declarations.

The Hungarian tax authority typically processes VAT refunds within 75 days, although this period may be shortened to 45 days if all invoices have been paid before submitting the VAT declaration.

Intrastat in Hungary

In the case of exceeding the import and export thresholds, sellers in Hungary are required to submit Intrastat declarations. In 2024, these thresholds are HUF 270 million for imports and HUF 150 million for exports. Taxpayers who exceed these values must register in the Intrastat system and regularly report the transfer of goods. Failure to submit the required declarations may result in penalties imposed by the administration. The Intrastat declaration must be submitted by the 15th day of the month following the reporting period.

Summary

Hungary’s VAT system is one of the more demanding in the European Union, particularly due to the high standard VAT rate. However, reduced VAT rates and mechanisms such as reverse charge and the possibility of applying for a VAT refund provide tools that can help businesses operate. For companies operating in Hungary, it is crucial to understand and strictly adhere to local VAT regulations to avoid sanctions and make the most of the available tax opportunities.