Amendment of foreign VAT refunding rules

The rules of foreign VAT refunding changed significantly from 1st January, 2010 in the Member States of the European Community.

VAT refunding from other Member States of the European Community

From 2010, the VAT-payers having a seat or permanent establishment in the Republic of Hungary no longer have to request the refunding of the value added tax charged to them in another Member State of the European Community (hereinafter: “Foreign VAT”) from the competent authority of the Member State concerned (hereinafter: “Foreign Tax Authority”) but from the Hungarian Tax Authority. In this procedure, the Hungarian Tax Authority only performs a preliminary screening as the refund requests have to be forwarded to the Foreign Tax Authorities within 15 days of their receipt if the applicants comply with the relevant legal regulations.

We have to note that from 1st January , 2010 the refunding of Foreign VAT relating to 2009 already may only be requested with the cooperation of the Hungarian Tax Authority. Requests must be submitted to the Hungarian Tax Authority until 30th September of the period concerned by the reclaim, otherwise the Foreign Tax Authority rejects the request without substantial inspection. By default, there is a four-month administration deadline; however, if the Foreign Tax Authority asks for the submission of supplementary information – such as, for instance, original invoices concerned by the Foreign VAT – the administration deadline is extended but the decision must be made in eight months in this case also.

The Foreign VAT refund request may be submitted for the whole calendar year or for a part of the calendar year provided that the Foreign VAT amount reaches the equivalent of EUR 50 for the entire calendar year or for the fractional period ending on the last day of the calendar year or the equivalent of EUR 400 for the fractional period of at least three months ending prior to the last day of the calendar months. VAT-payer group members may not submit Foreign VAT refund requests through the group’s representative, only individually.

Requests may only be submitted through the central electronic services network using the electronic form introduced by the Hungarian Tax Authority for this purpose in Hungarian and English. Applicants must pay special attention to the following:

· the refund request must be submitted in the language or one of the languages prescribed by the Member State concerned by the Foreign VAT, and
· the refund request must detail the products and services relating to the Foreign VAT in accordance with the coding system applied in the given Member State, and
· if required by the given Member State, applicants must attach to the request copies of the invoices and import documents concerned by the Foreign VAT on which the equivalent of an amount of at least EUR 250 in the case of fuel sales and at least EUR 1,000 in the case of other transactions was indicated as the tax base.

If a subsequent change occurs in the amount of reclaimable Foreign VAT, the applicant is obliged in case of a decrease and is entitled in case of an increase of the reclaimable amount to settle the difference by a so-called adjustment.

Similarly to tax returns, Foreign VAT refund requests may also be submitted to the Hungarian Tax Authority through an authorized representative, such as a tax advisor or employee of a business entity licensed for tax consulting.

VAT refunding from Hungary

The conditions of eligibility for the refunding of VAT charged to VAT-payers having a seat or permanent establishment (hereinafter: an “establishment”) in another Member State of the European Community or in a so-called acknowledged third state (currently, the Swiss Confederation and the Principality of Liechtenstein) are practically unchanged.

From 1st January, 2010, the VAT-payers having an establishment in another Member State may only reclaim the VAT charged to them in respect of 2009 already by way of an electronic request submitted to the Foreign Tax Authority; however, the VAT-payers with an establishment in an acknowledged third state may still submit requests directly to the Hungarian Tax Authority and this not only on paper but also in the form of an electronic message.

It is new that from 1st January, 2010 VAT refund requests may be submitted until 30th September of the year following the period concerned by the refund. A VAT refund request may be submitted for the whole or a part of the calendar year provided that the Foreign VAT amount reaches the equivalent of EUR 50 for the entire calendar year or for the fractional period ending on the last day of the calendar year or the equivalent of EUR 400 for the fractional period of at least three months ending prior to the last day of the calendar months.

In contrast to previous regulations, from 1st January, 2010 VAT may not only be reclaimed on the invoices the consideration of which including tax was settled in the period concerned by the request as in the future, not the date of payment but the date of performance of the transaction relating to the VAT amount will be considered for VAT refund purposes.

The VAT refund request may be submitted in Hungarian and in English and applicants must attach to the request copies of the invoices and import documents concerned by the VAT reclaimed on which the HUF-equivalent of at least EUR 250 in the case of fuel sales and at least EUR 1,000 in the case of other transactions was indicated as the tax base. The administration deadline for the judgment of requests is four months. This period may be extended if supplementary data and information need to be submitted but the administration deadline may not exceed 8 months.

The persons defined by the Act on Tax Procedure as eligible for tax representation may act as contact persons in the VAT reclaim procedure. Such persons may be among others authorized tax advisors or employees of business entities licensed for tax consulting.

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