Mária Lakatos

Taxation in General: Hungarian Tax System

Genuinely VAT exempt transactions

Definition

Genunine exemption from vat: The peculiarity of genuine tax exemption is that it is coupled with no actual payment obligation, but the input tax incurred in the course of performance can be deducted.

Within the internal market in the EU, the sales from one to the other country (exports) as well as in case of third countries are tax-free within the state of origin of the transaction. The buyer, however can calculate the tax payable according to the VAT regulations of the buyer’s country.

Passenger transport is also tax-free, if either of the points of departure and arrival or both are abroad. The sale of commodities is tax-free, too, if it takes place on a train, boat/ferry or airplane as part of the transport of passengers within the EU and the commodities sold are to be eaten/drunk on board.

Deduction of the tax

Making account with the budget is very simple – or it is at least, when it is made according to the basic rule, which says that the amount of the tax payable during the return period must be reduced by the input tax (the amount of tax paid previously as tax associated with the procurement and the difference between the two shall be paid or reclaimed.

Still, in case of certain products and services the VAT Act (Áfa tv.) limits the right to deduct taxes, irrespective of the fact whether or not the tax subject (tax client) purchases them in connection with his/her/its business activities. This means that, among others, the following cannot be deducted, (input tax levied on).

other products necessary for the operation or maintenance of passenger cars,
passenger cars,
residential houses,
the construction or renovation of residential houses,
foodstuffs,
drinks,
cabs, parking, road use,
catering services,
mobile telephone, services, data transmission service to secure the possibility of speech on the basis of some internet protocol (in the later case 30 % of the input tax).

Exemption is possible only in case of the regulation limiting the possibility of tax deduction. The tax client (tax subject) can be exempted from the provision limiting tax deduction only in specific cases. As a main rule, the tax client (tax subject) can be exempted from the VAT payment liability if he/she/it purchased the commodities for resale, and the resale is a transaction subject to taxation. The deadline for submitting the VAT returns depends on the volume of the firm’s turnover, which means that the tax client can be subject to monthly, quarterly or annual returns filing obligation.

Those, who have to make monthly returns must file their returns and pay the tax payable based on such returns until the 20th of the following month; those who have quarterly filing obligations until the 20th day of the months following the quarter in question, and those making annual returns only, until 15th February, next year. This is also from these dates on that they can claim VAT reimbursement.

Taxpayers are subject to monthly returns filing obligation if they are registered into tax groups, and also those whose recognizable tax two years before the year of assessment on the annual level reached HUF 1 M and had a positive balance, (or if the period of operation was shorter, multiplied pro rata of the earnings falling for one day would have been at least this much).

Taxpayers are subject to annual filing obligation if their recognizable tax two years before the year of assessment, on the annual level reached HUT 250,000, (or if the time period of taxation was shorter, then the tax obligation was calculated pro rata of the actual daily earning for the annual level and reached this sum). This is so, irrespective of whether the above amount had a positive or negative balance. To qualify for annual filing the taxpayers must not have an EU tax number.

All other taxpayers must file their VAT returns quarterly.

Nevertheless, the amount calculated as aforesaid shall not by all means be identical with the amount of tax that can be reimbursed to the tax client, as the VAT Act (Áfa tv) introduces further limitations. Namely, that no reimbursement can be applied for as long as the taxpayer failed to pay in full the input taxes on procurements. Even if this condition is fulfilled, then the tax client may ask for the reimbursement of the tax if its amount reaches or exceeds the following

in case of those subject to monthly returns: HUF 1,000,000;
in case of those subject to quarterly returns: HUF 250,000; and
in case of those subject to annual returns HUF 50,000.

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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