Companies now have more opportunities than ever to lawfully reduce their tax burdens and improve liquidity – even retroactively. In this article, we present a selection of favourable tax options that can help businesses pay less tax or claim refunds from the Hungarian Tax Authority (NAV).
High costs for group employee transport? Time to reclaim VAT!
Businesses that organise employee commuting using company-owned or rented buses across multiple locations should reconsider their VAT deduction practices. Previously, VAT on transport provided for commuting purposes was not deductible. However, due to a recent ruling by the Court of Justice of the European Union, NAV has revised its position: if the place of work is difficult or inadequately accessible by public transport – for instance, in the case of industrial parks, factory sites or remote facilities – VAT on group transport may now be deductible, potentially retroactively for up to five years, subject to proper documentation and justification.
Branches can now provide tax-free accommodation for employees
One of the key changes in the 2025 summer tax package is that branches can now offer tax-free accommodation for workers. Until now, due to their special legal status, branches were excluded from both the personal income tax (PIT) exemption and the corporate tax base reduction. In some cases, municipalities even levied tourism taxes on employee accommodation. The new legislation eliminates this discriminatory treatment, extending PIT exemption and corporate tax benefits for worker housing to branches as well – generating significant cost savings and liquidity benefits for employers.
VAT refunds on uncollectible receivables – mind the procedure!
VAT refunds on bad debts can provide a major liquidity boost. However, the success of such claim’s hinges on the method of enforcement, which in turn depends on whether the receivable is time-barred. If the claim has expired, VAT may still be reclaimed through a special application – a slower but low-risk method. If it is still within the limitation period, the taxpayer may file a self-revision to adjust the original VAT liability, potentially speeding up the refund process – although this approach carries a risk of penalties for incorrect claims.
The VAT refund process for bad debts is highly formalised and must meet strict legal conditions. Even if a claim does not qualify as legally uncollectible, but the supplier has not received payment, VAT may still be recovered. The VAT Act provides for such special refund options. Moreover, special VAT refunds may apply not only to output but also to input VAT – for instance, if the parties mistakenly applied standard taxation instead of reverse charge and the buyer is unable to recover the amount from the supplier, it may be claimed directly from NAV.
New R&D tax credit – favourable changes in tax base reduction
As of 2024, a new direct R&D tax credit is available for companies engaged in research and development. Businesses may choose to continue applying the existing corporate tax base reduction, or switch to the new scheme, which allows for a credit against corporate income tax – even up to 100%. The two systems are mutually exclusive, and opting into the new scheme commits the company for five years.
Eligible costs include direct R&D expenses (wages, utilities, materials, equipment usage, patents), and under certain conditions, external services. If the full amount of the credit cannot be utilised through the tax return, NAV may refund the remaining balance.
Additionally, for businesses applying the “old-type” tax base reduction, the upper threshold of deductible R&D costs incurred jointly with universities, the Hungarian Academy of Sciences or other recognised research institutions will be raised from HUF 50 million to HUF 150 million.
KIVA thresholds: more companies may qualify
Under current plans, major changes to the small business tax (KIVA) regime may take effect from 2026. These include a doubling of revenue thresholds and a significant increase in the maximum headcount permitted under the scheme. As a result, a broader range of companies could become eligible for KIVA, supporting its wider adoption in Hungary. It is worth noting that KIVA is particularly advantageous for businesses with a high wage bill or those in a growth phase with planned investments – if your company fits this profile, it is recommended to monitor developments closely.
Group VAT registration: still a smart move for affiliates
Group VAT registration remains a beneficial option for related companies, allowing them to act as a single taxable person before the tax authority. This eliminates VAT liabilities on intra-group transactions, delivering substantial liquidity and administrative savings.
Webshops: switch to destination-based VAT for cross-border sales
Hungarian online retailers selling regularly to private individuals abroad should consider switching to destination-based VAT rules, which may offer more favourable taxation and should be applied as early as possible.
Indirect customs representation – tightened rules from 2025!
For businesses involved in international trade, import VAT can be a major liquidity drain, particularly for those lacking an import self-assessment licence. Fortunately, there is a legitimate way to ease this burden.
If an importing company does not hold such a licence, it may appoint an indirect customs representative who does. This solution is especially beneficial from a liquidity perspective, as it allows the importer to avoid pre-financing VAT on imports. However, the legal conditions for this arrangement have been significantly tightened from this year onward.
In our article on cash flow tips, we present favourable tax opportunities to help improve your company’s liquidity. If you have any questions regarding the topics discussed, the experts of WTS Klient Hungary is always ready to assist you with professional support.
This article provides general information and does not constitute advice.
