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Important Tax Update – Windfall VAT Reclaim Opportunity in Hungary

Hungary
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There’s a new windfall value-added tax (“VAT”) reclaim opportunity in Hungary based on a recent judgment of the Court of Justice of the European Union (“CJEU”).

As background to this opportunity, it should be noted that marketing authorisation holders or distributors of medicinal products and dietary supplements, the purchase of which (by end-users), is subsidised by Hungarian social security, are required to pay a certain percentage of the social security subsidy in the proportion to the ex-factory price (production price/consumer price). This is mandated by Section 36(1) and Section 40/A(1) of Hungarian Act XCVIII of 2006, which sets forth general provisions on the reliable and economically viable supply of medicinal products and medical equipment, as well as the marketing of medicinal products (“Medicines Thrift Act” or “Gyftv.”). 

The CJEU, in its judgment, found that the abovementioned payment liability of MAHs and distributors should be considered as a discount for VAT purposes. As a consequence, MAHs and distributors are now allowed to reduce their VAT base by payments made as per Section 36(1) and Section 40/A(1) of the Medicines Thrift Act. 

Hungarian VAT legislation did not permit this before the recently published CJEU judgment. Therefore, this judgment creates an excellent opportunity for the relevant market players (including your company) to take advantage of the windfall VAT reclaim in Hungary. Please note that based on Hungarian tax legislation, there is an 180-day deadline from the publication of the CJEU’s judgment to submit the reclaim request to the Hungarian tax authority. 

We suggest further exploring this possibility within your company. Naturally, we would be happy to support you with this and discuss the details of the opportunity in a virtual or face-to-face meeting.

By Miriam Fuchs, and Janos Pasztor, Senior Associates, and Bence Kalman, Associate, Wolf Theiss

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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