The Hungarian deadline for submitting an application for reclaiming value added tax (VAT) paid abroad during the 2024 calendar year is 30 September 2025. The reclaim process is complex; below we present, without claiming completeness, the most important detailed rules.

Hungarian resident companies cannot reclaim abroad paid VAT (“VAT”) in their Hungarian VAT return. The reason is that in the case of services used abroad or goods purchased there, the VAT paid by the Hungarian company is paid into the budget of the foreign country and not into the Hungarian budget; therefore, in such cases, the Hungarian Tax Authority (NAV) is not the competent authority.

By what methods can VAT paid abroad be reclaimed?

The right to deduct VAT (subject to other conditions being met) applies to all taxpayers established within the territory of the European Union; therefore, there are two methods available for reclaiming VAT paid abroad (which, however, are not alternatives to each other):

• registration (tax registration) in the given EU Member State; or
• reclaiming foreign VAT as discussed in this article.

The former (reclaim by way of registration) is only possible if in the given EU Member State a taxable economic activity was also carried out to which a locally performed transaction is linked. Since in the vast majority of cases this is not the case, in the absence of such activity as well as of a local seat or establishment, VAT may only be reclaimed through a separate procedure, according to the rules of foreign VAT refund.

It is in any case necessary to define what we mean here by “abroad.” For Hungarian taxpayers – based on Council Directive 2008/9/EC – VAT paid in all EU Member States (currently 26 countries in addition to Hungary) may be reclaimed. Outside the EU, however, only VAT charged in a country with which Hungary has concluded a bilateral reciprocity agreement may be reclaimed. At present, the following six countries are included: the United Kingdom (which left the EU), as well as Liechtenstein, Norway, Switzerland, Serbia and Turkey.

Thus, in relation to the foreign VAT reclaim procedure discussed here, a total of 32 (European) countries are concerned: 26 EU Member States and 6 “others.”

Who can apply for a refund of VAT paid abroad?

The reclaim process can be started by completing a special application form (the so-called ELEKAFA form) and submitting it (exclusively) electronically. The reclaim has several conjunctive (simultaneously applicable) conditions:

• the applicant must qualify as a foreign taxpayer in relation to the country concerned;
• the applicant may not have had an establishment in the country concerned during the application period;
• the applicant may not have had any locally performed transaction in the country concerned during the application period;
• the applicant must have used the goods or services concerned for taxable economic activities.

Consequently, a Hungarian taxpayer is not entitled to a refund of VAT paid abroad if, by virtue of its domestic activities, it is not entitled to deduct VAT at all, or if it has chosen exemption for small taxpayers.

When reclaiming foreign VAT, the rules of the source country apply!

For reclaims from any of the 26 EU Member States, the application must be submitted to the Hungarian Tax Authority (NAV), whereas for the other six countries – including the United Kingdom – it must be submitted directly to the tax authority of the country concerned. Applications submitted to the NAV are automatically forwarded by NAV to the tax authority of the Member State concerned, and the applicant has no further action to take in this respect. In all cases, the application is assessed by the tax authority of the country concerned.

As a result, the language of the procedure is not Hungarian, and if the foreign tax authority has further questions, it will almost certainly not contact the applicant company in Hungarian. Based on our experience, it is advisable to regularly check the spam folder of the e-mail inbox during the procedure, and it may also be worth involving a foreign tax advisor as a contact person to make communication with the foreign tax authority easier and faster and thus speed up the assessment of the refund claim.

For fuel, if the tax base reaches EUR 250, and in other cases if it reaches EUR 1,000, copies of the invoices proving the economic activity must also be attached to the application. It is essential to collect the invoices and other documents concerned in advance, as only one application can be submitted per period and per country. It should also be noted that above EUR 400, it is not mandatory to wait until the annual submission deadline, as in this case an application may already be submitted for a period covering at least three months. However, even then the single-application rule applies.

It should be emphasized that in the case of foreign VAT refund, in all cases the national rules of the source country are applicable, i.e. only that VAT may be reclaimed which can be deducted in the country concerned (regardless of whether such VAT would also be deductible in Hungary). Although VAT regulation is in principle harmonised at EU level (as national VAT Acts were all prepared on the basis of the same EU Directive), there may still be national specificities in certain details. A typical example is that, unlike in Hungary, in some EU Member States the VAT content of fuel for passenger cars is also fully deductible.

The deadline is of forfeiture nature

In the case of EU Member States, the deadline for submitting the application is forfeiture: 30 September (this year it falls on a Saturday; nevertheless, the relevant legislation does not extend the deadline to the next working day). Missing this deadline means there is no remedy or request for justification possible. In the case of the six non-EU countries, specific deadline rules apply.

Applications are usually assessed within 4 months. If the foreign tax authority requests supplementation or a statement, the deadline may be extended, but the procedure may not exceed 8 months.

As can be seen, reclaiming foreign VAT is by no means a routine task even in the life of an average business. Difficulties may arise from the fact that the deadline is of forfeiture nature, that the relevant background rules must be precisely known (which in some cases means knowledge of the national regulations of the foreign country concerned), and also from the fact that the procedure is not conducted in Hungarian.

Our tax experts with international background are at your disposal to support you and your company in this procedure full of pitfalls!

This newsletter was prepared based on the information available at the date of publication and for general informational purposes only; it does not constitute personalised tax advice and does not substitute it in any respect.