The EU’s VAT reform is built on three key pillars.

Pillar 1: E-invoicing and digital reporting

• From 2025: Member States may mandate e-invoicing for domestic transactions.
• From 1 July 2030: E-invoicing will be mandatory for all cross-border B2B (business-to-business) and B2G (business-to-government) transactions, in a standard EU format. Digital reporting will also be mandatory.
• From 2035: Full EU-wide harmonization is expected.

Impact on businesses

Companies must prepare for substantial IT and administrative adjustments, including overhauling their invoicing systems.

Pillar 2: Platform economy

From 1 July 2028: As Pillar 2 of the EU’s VAT reform, platforms offering passenger transport and accommodation services (e.g. Uber, Airbnb) may be considered deemed VAT payers in certain situations.

However, these platforms do not have to pay VAT if the actual service provider provides a valid VAT number and declares that it will account for the VAT itself. The rules primarily target cases where the original provider would not otherwise be subject to VAT.

Member States may postpone the introduction of the rule until 1 January 2030. SMEs can be an exception to this rule.

Other obligations:

• The place of supply of B2C (business-to-consumer) facilitation services from platforms will be where the basic supply takes place.
• Customers who do not provide VAT identification will automatically be treated as non-taxable persons.
• Platforms that facilitate the sale of goods and store goods owned by a third party (e.g. in a warehouse) will be obliged to notify the owner if the goods are transferred to another country.

Impact on businesses

Pillar 2 of the EU’s VAT reform is sector-specific. In particular, it represents a major change for platforms that provide passenger transport and accommodation services. Service providers who offer these services through platforms but are currently not obliged to charge VAT will also be affected. In the future, the obligation to pay VAT may be shifted to the platforms, which could have an impact on prices and revenues.

The “deemed supplier” rule may be applied differently by Member States, which may complicate compliance, in particular when checking the VAT status of suppliers. The definition of short-stay accommodation may also vary from one Member State to another.

Pillar 3: Single VAT registration

• Extension of OSS (from 1 July 2028): Simplified VAT return (OSS) for intra-EU B2C supplies will be extended to new services (e.g., electricity, natural gas, installation contracts, domestic supplies).
• Energy supply (from 1 January 2027): OSS will be extended to energy supplies (e.g., EV charging in another Member State).
• Movement of own goods (from 1 July 2028): There will be a new OSS module for intra-EU movement of own goods – avoiding VAT registration in the country of destination if the goods qualify for full deduction. The new rule will replace the simplification rule for call-off stock which will be abolished at the same time.
• Reverse charge mechanism (B2B): Member States will be obliged to apply reverse charge mechanism where the seller is not but the buyer is VAT registered in the destination country – this will reduce the registration obligation for foreign companies.
• Live streaming and virtual events: As of 1 January 2025, new rules on the place of supply for B2C will apply, following the rules for electronic services.

The original EU’s VAT reform proposal included a country of destination taxation for margin supplies (e.g. works of art), but this has been removed from the final text.

Impact on businesses

Although the new rules in Pillar 3 of the EU’s VAT reform reduce the need for foreign VAT administrations, they do not eliminate them completely. A non-established vendor, for example, will still have to register in the Member State from which they carry out an intra-Community supply.

The failing to register can lead to cash flow disadvantages, as input VAT can only be reclaimed through a foreign VAT refund procedure. Companies should consider whether to maintain their existing registrations or take advantage of the new simplifications.

Why is it important to plan now?

Although many regulatory changes will not come into force for years, the developments required by the EU’s VAT reform – such as e-invoicing and real-time reporting – will require major financial and technological overhauls. This affects not only accounting, but also legal, tax and IT.

Key actions for businesses to take now include:

• Designing e-invoicing and digital reporting systems
• Reviewing the contractual protection of platforms to transfer VAT risks
• Thorough checks on the status and location of customers
• Conduct liability and risk analysis to avoid penalties

Not all Member States waiting for ViDA deadlines

Several Member States – such as Hungary, Germany, Belgium, Poland, Spain or France – are not waiting for the EU’s VAT reform to come into force as planned, but are already introducing or planning to introduce mandatory e-invoicing and reporting in certain areas. It is therefore advisable to monitor national regulatory changes in the short term to allow businesses to react in time.

What to expect in the coming years?

The EU’s VAT reform is reshaping EU VAT legislation to meet the expectations of the digital age. The new rules will affect not only e-commerce but almost all businesses.

Preparation cannot be delayed: it is worth starting now to review business processes, improve IT systems and assess the legal environment so that businesses do not risk future fines, delays or disruption to their operations.

The VAT experts at WTS Klient Hungary drawing on decades of professional experience can effectively support their clients not only with Hungarian but also international VAT regulation. Do not hesitate to contact us if your company is engaged in international or intra-EU transactions, and you have questions about what changes you need to prepare for under the EU’s VAT reform.

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1. Where did the transaction take place?

The deadline for reclaiming foreign VAT applies mainly to VAT charged in European Union countries, because this is essentially what can be reclaimed if the VAT on the service or product is deductible under the laws of that country.

However, Hungary has reciprocity agreements with several non-EU countries, which also allow us to reclaim value-added tax charged in Norway, Liechtenstein, Switzerland, Turkey, Serbia and in the United Kingdom.

2. What conditions must be met?

The main point is that the Hungarian company should not engage in any business transaction in the given foreign country that would result in a permanent establishment in that country. Since in this case, it may be necessary to establish a business presence in the foreign country, even in the form of a tax establishment, a branch or a subsidiary. This always depends on the local tax regime and legal system. This would mean that the given company would have to reclaim the VAT charged in the foreign country in a local VAT return.

3. Most typical transactions

Reclaims can be submitted for all foreign transactions where the Hungarian company received a local VAT invoice, i.e. the place of performance for VAT purposes was the foreign country. This can be the purchase of a product in a given country, if the product was not subsequently sold or transferred to another country, or used in any business transaction in that country. The tax may also be linked to services used abroad by a posted employee (taxi, accommodation, possibly meals, fuel).

4. Deadline for reclaiming foreign VAT and relevant period

The deadline for reclaiming foreign VAT in the case of European Union countries is 30 September (for countries with reciprocity arrangements, the deadlines may differ), and there is no right of redress. Invoices for 2022 can be submitted to the authority in 2023, and the reclaim period cannot be shorter than three months or longer than one year.

5. How and where to submit

Reclaims by Hungarian companies must be sent to the Hungarian tax authority electronically using the ELEKÁFA form (a separate application for each country). For an annual application, the amount requested must be at least 50 euros.

Generally speaking, the Hungarian tax authority will forward the application electronically to the tax authority of the country concerned, which will then assess the merits of the application. If you exercise your right to reclaim based on a reciprocity arrangement, reclaim requests should be sent directly to the tax authority of the foreign country.

The tax authority in the country of the reclaim will issue a decision within four months of the deadline for reclaiming foreign VAT, and communication between the foreign tax authority and the Hungarian company is now entirely electronic. The tax authority may request additional documents and information no more than twice in this procedure (copies of invoices do not usually have to be attached to the original application).

+1: What have I got to lose?

In short: nothing. If the claim is unfounded, the tax is not refunded. There is no penalty for an incorrect application. However, there may be a risk if the Hungarian company is involved in a transaction in which the tax authority determines – based on the invoices and declarations it receives – that the company should register as a taxable entity in the foreign country and file a tax return. In this case though, the tax may also become refundable in the foreign tax return.

If you need help in managing the procedure and meeting the deadline for reclaiming foreign VAT, please do not hesitate to contact us. Our tax department will be happy to help you with submitting your applications.

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Abolition of mandatory VAT registration for selected groups

In order to reduce administrative burden, effective from 1 January 2023, the VAT Act of Slovakia defines selected groups of taxable persons who have the possibility to decide whether or not to register for VAT after the turnover exceeds EUR 49,790. These are primarily taxable persons who exclusively provide financial and insurance services or rent out real estate with exemption. These taxable persons also have the option to request cancellation of tax registration or withdraw their registration request. In defined cases, these taxable persons are not required to submit a separate tax return in case of not fulfilling the registration obligation.

Furthermore, the cases of assessment of late payment interest, which is related to the amount of tax on the importation of goods, have been harmonised with the cases of assessment of late payment interest related to customs debt.

New obligation for customers

In accordance with the rule of tax deduction on the customer´s side, a new provision is added to the VAT Act of Slovakia. It introduces the customer’s obligation to correct the deducted tax to the extent of the unpaid liability in the tax period, in which 100 days have passed since its due date.

The amendment to the VAT Act of Slovakia also includes the possibility of correcting the tax base on the side of the supplier in the event that the customer does not pay him the whole or in part for the supply of goods or services, and his receivable becomes unenforceable for the purposes of the VAT Act. The amendment further regulates and specifies the definition of unenforceable receivable. According to the new definition, this is such a receivable that has been due for 150 days.

New exemptions from VAT

In connection with the COVID-19 pandemic, the supply of goods or services to the European Commission, agencies and similar bodies that will be transported to another Member State for the purpose of providing them free of charge is exempt from tax. Also the acquisition of goods from another Member State for the same purpose by the European Commission, agency and similar body is exempt from tax.

From 2023, the method of determining the amount of the correction of deducted tax in the case of theft of small tangible property purchased for a purpose other than resale is established. In such a case, the legal fiction of assessing this property as if it were mandatorily depreciated property, is applied.

Furthermore, the amendment to the VAT Act of Slovakia introduces the obligation for the legal successor to continue adjusting the deducted tax even for movable investment property.

New deadlines and procedures

The amendment to the VAT Act of Slovakia also provides a united time period for the registration of a taxable person, together with the time period during which a taxable person who has not fulfilled the registration obligation or has submitted an application for registration late, is considered to be a taxpayer. This period is framed to 21 days.

The amendment also relieves the foreign taxpayer from the need to submit a nil tax return if he only carried out a supply of goods within the triangulation simplification under VAT ID assigned within the territory of the country.

At the same time, a special deadline has been introduced for paying the tax in the event that the person does not have a personal account number of the taxpayer at the time of acquiring a new means of transport from another Member State. The new deadline for paying the tax is 7 days from the date of delivery of the notification on the assignment of such an account.

The last significant innovation is the adjusted procedure of the Financial Administration in case of not submitting an application for tax registration, or its late filing. In the event that the result of a special tax return is an excessive deduction, the Financial Administration will not automatically check its eligibility through a tax audit, but may choose a different procedure, such as e.g. preliminary tax inspection.

If you want to know more about the latest amendment to the VAT Act of Slovakia or other tax issues in the country, we recommend you visit the website of Mandat Consulting, k.s. and contact the local WTS experts in Slovakia.

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What is the point of reclaiming foreign VAT?  

Reclaiming foreign VAT happens when taxpayers established in Hungary do not receive a VAT-free invoice on services used abroad and goods purchased abroad in certain cases, but one that includes the local VAT (e.g. VAT on accommodation, food, taxi fares, tool costs). In such cases, Hungarian taxpayers may reclaim the foreign VAT included on the invoice (to the extent the supply of goods or services was used for the purpose of their taxable business activities). However, this foreign VAT is not reclaimed in the Hungarian VAT return, but by filing a separate application.

For which countries is it possible to reclaim local VAT? 

Hungarian taxpayers can apply (on a reciprocal basis) for a refund of the above-mentioned local VAT charged in the following countries, in addition to the Member States of the European Union: Norway, Switzerland, Liechtenstein, Serbia, Turkey and, following Brexit, the United Kingdom.

Where should applications be submitted, and by when?

It is important to note that while applications for VAT refunds from EU Member States must be submitted electronically to the Hungarian tax authority (on form “ELEKAFA” – separate application required per country), which forwards them to the competent tax authority of the refund country, applications made on the basis of reciprocity must be submitted directly to the competent tax authority of the country concerned, according to the rules of that country.

The deadline for submitting applications for refunds from EU Member States is 30 September of the year following the refund period.

The deadline may differ from 30 September for refunds from countries outside the EU.

What conditions must Hungarian taxpayers comply with when reclaiming VAT from EU Member States?

The basic condition for a refund is that the taxable person must not have a registered seat or permanent establishment during the refund period from where its economic transactions are carried out in the Member State of the refund. In the absence of a registered seat and permanent establishment, the taxable person must not have their residence or habitual abode in the territory of the Member State of the refund during the refund period.

Another condition is that during the refund period (apart from a few transactions), the taxpayer must not have supplied any goods or services that are deemed provided in the territory of the Member State where the refund is requested.

Useful information on applications 

Council Directive 2008/9/EC contains provisions on the reclaiming of foreign VAT charged in the Member States of the European Union. Thus, among other things, this directive provides for the content of applications too.

The provisions of the above directive have been transposed into national law by the Member States, but the local rules on applications and the documents to be attached may differ from one Member State to another (not all Member States require a copy of the invoice to be attached if the tax base is equal to or higher than EUR 1,000, or its value in the national currency). It is therefore advisable to check the local rules in the Member State of the refund before submitting your application.

The refund period specified in the applications must not exceed one calendar year, and must not normally be less than three months. These applications also come with minimum refund amounts. The refund amount cannot be less than EUR 50 for an annual application, and EUR 400 for a three-month application.

Adjudication of applications 

Applications submitted to the tax authority of the Member State where the entity is established are forwarded by the tax authority to the tax authority in the Member State of the refund, which sends an electronic response to the applicant confirming the acceptance of the application.

The tax authority in the Member State of the refund then normally has four months to examine the application and make a decision. If additional information or documents are needed to make a decision, the tax authority will ask for them from the applicant by means of a rectification request. The deadline for this is one month, which generally cannot be extended. The tax authority may request additional documents and information twice, in which case it must adopt its decision on the request within eight months of the date the tax authority receives it. The applicant must be paid the accepted amount within ten working days.

We will be happy to assist you with reclaiming foreign VAT and with subsequent procedures in the case of both domestic and foreign refund requests, and we will gladly provide further information regarding the detailed rules as well.

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