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!