Don’t forget, there are less than two weeks left until 30 September, the deadline for any reclaim of foreign VAT. Thanks to this special procedure to be initiated at the Hungarian Tax Authority by submitting an ELEKÁFA form, VAT on an invoice issued by a German hotel with respect to the accommodation of the managing director of a Hungarian company can be reclaimed. Besides EU countries, Switzerland, Liechtenstein and Norway, we can follow similar procedure to reclaim Serbian or Turkish VAT in the future too.
Strict deadlines applied for a reclaim of foreign VAT
In line with EU regulations, Hungarian taxpayers can reclaim the VAT charged in other Member States. The same applies if there is reciprocity in place between Hungary and a third country. At the moment there is reciprocity with the following countries: Swiss Confederation, Principality of Liechtenstein and the Kingdom of Norway. The request must be submitted by 30 September of the year following the reporting year to reclaim VAT from an EU Member State, and it is good to know that no request can be submitted due to failure to comply with this deadline. So for example, if you submit an invoice issued in 2017 on 1 October 2018, or you would now like to submit an invoice issued before 2017, your request will be rejected. Since the procedural rules remained unchanged this year, we recommend our readers check the detailed guidelines on the reclaim procedure we published last year.
One new feature is that according to Act XLI of 2018 on the amendment of certain tax laws and related legislation, the legislator has extended the list of so-called third countries (outside the European Union) with the Republic of Serbia and the Republic of Turkey, and thanks to the reciprocity, Hungary offers taxable persons established in these countries an opportunity to reclaim VAT.
Reciprocity with Serbia and Turkey
For Serbia the rule is applicable from 1 January 2019 (based on the verbal briefing received from the NAV for invoices issued after 31 December 2018), while in the case of Turkey it takes effect on the day after the decision by the Minister for Tax Policy on the receipt of the notification sent by the Republic of Turkey to Hungary regarding tax refunds granted to taxable persons established in Turkey is published in the Hungarian Gazette. The essence behind this complicated sentence is that a few formal steps are still required in relation to Turkish reclaims, so the exact date the rule takes effect has not yet been specified.
The tax refund entitlement of taxable persons established in Turkey for business purposes will be limited to the supply of goods and services as follows:
- fuel and road services purchased for the transport of goods or passengers, products or services used for the operation or maintenance of motor vehicles;
- product or service used to attend an exhibition or fair as an exhibitor.
The tax consultants at WTS Klient Hungary will be happy to assist you if you need assistance in submitting a foreign VAT reclaim request. Our experience shows that the process does not always go smoothly; if a foreign tax authority rejects the reclaim request of a Hungarian company, we will gladly provide expert support via the WTS Global offices located in the relevant countries. Similarly, if a foreign company would like to reclaim Hungarian VAT and receives a decision rejecting their request, we are happy to examine whether it is possible to reclaim the VAT with a well-prepared appeal.