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Articles by: Grant Thornton Hungary

VAT refund on bad debts dating before 2016

A few days ago, the Court of Justice of the European Union (ECJ) published its order in case no. C-292/19 of PORR Kft., which makes it clear that member states must allow the decreasing of the VAT base (and thereby also a reducing of the applicable VAT) in case it can be proved that a claim has become finally irrecoverable.

In case of irrecoverable, or bad debts (and subject to compliance with strict conditions), the Hungarian VAT Act will allow the decreasing the VAT tax base from 1 January 2020. Under the transitional provisions, the amendment will be applicable to irrecoverable claims arising from the supply of goods or services in the years 2016 to 2019.

In our present newsletter, we would like to call attention to the fact that the above decision of the ECJ has created an opportunity for businesses to reduce their tax base, in the framework of a separate procedure, and thereby reclaim certain amounts of VAT already paid. This separate procedure may be started within 180 days of the publication of the order; however, it is worth starting the procedure already in 2019, since:

  • at the end of 2019, certain earlier periods of tax returns will be subject to statutory limitation;
  • until the end of 2019, the reduction of the tax base and thereby of the VAT due is also possible with respect to such claims which were deemed finally irrecoverable (until the end of 2019), but which do not satisfy the strict rules in effect from 2020, for example, by reason of the fact that their performance date was before 2016.

Our experts are at your disposal to answer any questions that may arise in connection with the above, as well as with the professional and quick drafting of the request for the VAT refund.

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

Update – Online Invoicing 2.0

We would like to share additional information with respect to our newsletter published at the beginning of September, dealing with the Online Invoicing 2.0.

In the meantime, the tax authority has published the XML API documentation in English too, further the XML-scheme definitions and the API example XML are available as well (https://onlineszamla.nav.gov.hu/dokumentaciok).

In addition, the tax authority also published the main dates of the change. The 2.0 system can be used in the test environment as of 15 October 2019, and it is expected that the new interface can be used in the real-version from February 2020. The current interface can be used until 31 March 2020, from 1 April 2020 (0 o’clock) the tax authority will solely accept the data transmissions completed in accordance with the 2.0 rules.

 

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

Opting for Small Business Tax Regime

As we informed our clients in our Summer Tax Package newsletters, starting from 2020 the small business tax (SBT) rate will decrease from the current 13% to 12%. SBT is a simplified tax which substitutes for the following three taxes: corporate income tax (9%), social contribution tax (17.5%) and vocational training contribution (1.5%).

The tax rate cut makes the SBT scheme even more attractive for a wide range of companies being eligible for it. The major eligibility criteria are the annual sales revenue and balance sheet total both capped at 1 billion HUF (to be considered on a group level), the annual average headcount capped at 50 employees (also to be considered on a group level) and 31 December balance sheet date.

Generally, it can be stated that the SBT scheme is recommended if a company’s payroll expenses exceed its profit before tax, and if a company is planning on internally financed investments. Since opting for the SBT scheme triggers an obligation for extraordinary preparation of annual accounts, in order to minimize additional administrative burden, it is advisable to schedule the transition for 1 January as the 1st day of a financial year.

Consequently, the period before the year end is the most appropriate for assessing whether or not it is worth opting for the SBT scheme. Our experts would be pleased to assess the tax savings available under the SBT scheme and assist you in making the decision.

 

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

Group taxation – the deadline is approaching

Starting from 1 January 2019 companies may opt for a group taxpayer status also for corporate income tax purposes. Taxpayers willing to take advantage of this opportunity from 2020 onwards should file a request with the Hungarian Tax Authority (the HTA) shortly.      

The provisions regulating the group taxpayer status for corporate income tax purposes came into effect on 1 January 2019, therefore those who wanted to be member of such a tax group apply from the tax (and calendar) year 2019, should have filed the respective request between 1 and 15 January, 2019. However, this deadline was to be applied only in the first, introductory year of the new rule coming into force.

Following the introductory year, a group taxpayer status request shall be submitted to the Tax Authority between the 1st and the 20th day of the month preceding the last month of the tax year. Consequently, taxpayers whose business year aligns with calendar year and who are willing to opt for a group taxpayer status from year 2020 should file their requests between 1 and 20 November 2019. The aforementioned period is a mandatory time limit, that is failing to submit the request in a timely manner shall result in not qualifying for the status.

Should your Hungarian company or group of companies be still uncertain as to whether it would be advantageous, in their particular circumstances, to establish a group taxpayer status, or to join an existing taxpayer group comprised of their related companies, please don’t hesitate to contact our experts who will be pleased to render all necessary assistance in preparation of such an assessment.

 

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

VAT – Intra-Community supply of goods

The purpose of our current newsletter is to present the changes in the relevant provisions of law concerning the documentation of cross-border trade within the EU.

One of the conditions of the VAT-exemption of intra-Community supplies of goods is that the goods sold must actually leave the member state of origin and be transported to another member state. In case of a tax authority audit, the supplier of the goods is required to evidence the satisfaction of this condition. In the past, there was no specific provision of law concerning the manner in which the above proof could be documented.

By way of modifying Implementing Regulation no. 282/2011 (hereinafter: the Regulation), the EU introduced the so-called “Quick Fixes” package, effective from 1 January 2020. As a result of the amendments introduced in the summer, three of the four points of the package have already been incorporated into the VAT Act; however, the Hungarian laws still do not prescribe any rules in the issue of the fourth element, namely the manner of documenting deliveries. Nevertheless, irrespective of the transposition of the rule into the national laws, this change will also be applicable from next year in Hungary. The reason for this is that the rules defined in the implementing regulations that are added to the VAT Directive are binding (also) without actual transposition into the national laws of the member states.

The Regulation lists certain types of documents in possession of which the transport of goods between member states are assumed to have taken place. We wish to emphasise that these are only assumptions that may be rebutted by the tax authority (with the latter also bearing the burden of proof in such a case).

In the basic case, the Regulation provides that the assumption may be made on the basis of two separate documents which may be issued by persons other than a party to the transaction (e.g. the forwarder, warehousing operator, etc.) and are in line with each other. Further, depending on who organised the transport, a requirement is also the existence of the customer’s declaration, or an indication from the supplier that transport is (directly or indirectly) organized by him.

In case the transport is made or organised by the SUPPLIER, the assumption can be made on the basis of 2 documents (which must be non-contradictory and prepared independently from one another). Possible cases:

  1. The supplier has any 2 of the following documents pertaining to the transport of goods:
    • signed CMR document or
    • CMR waybill, or
    • invoice issued by the forwarder, or
    • air bill, or
    • bill of lading, or
    • other document pertaining to the forwarding/shipping,

OR

  1. The supplier has 1 document pertaining to the transport of goods according to point a) and 1 other document. Such other documents may be any of the following:
    • insurance policy pertaining to the forwarding of goods, or
    • banking document certifying payment for the forwarding of the goods, or
    • a public document issued by a public authority (e.g. a civil law notary), which certifies the arrival of the goods in the member state of destination, or
    • a receipt issued by a warehouse in the member state of destination that certifies the warehousing of the goods.

In case the transport is made or organised by the CUSTOMER, the assumption can be made on the basis of 3 documents.

  1. The supplier must have 2 (non-contradictory and prepared independently from one another) documents according to the point above (applicable in case the transport is organized by the supplier).

AND

  1. the written declaration of the customer. This declaration must contain the following:
    • the customer’s statement that the transport of goods is carried out by the customer or by a third party on behalf of the customer,
    • the member state of the destination of the goods,
    • the date when the declaration was issued,
    • the name of the customer,
    • the address of the customer,
    • the quantity and nature of the goods,
    • the date when the goods arrived,
    • the date when the goods substituted by,
    • the identification data of the person taking receipt of the goods,
    • (in case of the sale of a vehicle, the identification number of the vehicle).

The above declaration must be made available by the customer to the supplier by the 10th day of the month following the month of supply.

In addition to the above, the supplier may, of course, also support the fact of the intra-Community transport of goods with other evidential documents; however, the acceptance of such documents is at the discretion of the tax authority.

In an earlier newsletter we have already informed our clients, but due to the importance of the topic, we would like to emphasis once again that in addition to the above changes, which affect the rules of documentation, the substantial conditions of tax exemption have also been extended. Under the VAT Act changes entering into force on 1 January 2020, it shall be additional conditions of VAT-exemption in case of the intra-Community supply of goods that:

  • the customer has an EU VAT number, and
  • the supplier correctly completes the summary report (form A60) with respect to the transaction.

 

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

Online Invoicing 2.0

On the last day of August the Hungarian Tax Authority has published the development documentation of the Online Invoicing 2.0 version and the new XML schema definitions. Based on these the necessary developments relating to the conversion can be initiated. The referred documents can be found on the following link: https://onlineszamla.nav.gov.hu/dokumentaciok.

Upload of further supporting materials, such as sample XMLs and the English language specification document is in progress, these are not yet available.

Version 2.0 of the XML API is expected to be fully accessible in the test environment from the end of September, up until that only the new query functions can be used.

The current 1.1. version continues to be applicable, the mandatory conversion to the 2.0 version is postponed to the first quarter of 2020. Further details of the conversion are to be shared by the Tax Authority in the future, however we recommend starting the necessary developments in due course.

 

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!

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