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Important Tax Update – Windfall VAT Reclaim Opportunity in 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

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa, and Asia Pacific. This positions us to help clients with their legal needs around the world.

With more than 60 lawyers, including 14 partners, and a staff of over 140, DLA Piper Hungary is one of the largest international law firms operating in Hungary. What makes us stand out is that we offer not only legal services but also tax and business advisory support in a fully integrated manner. We maximize synergies between legal, tax, and business advisory services to offer a unique service for our clients, particularly in regulated industries such as energy, infrastructure, life sciences, banking, and telecommunications.

We are a true full-service firm, providing our private and public sector clients with advice on all aspects of their business. This includes transaction-related advice, people and employment, commercial dealings, litigation, information technology, media and communications, intellectual property, insurance, tax, real estate, and restructuring plans.

DLA Piper Hungary has received numerous professional awards and is consistently ranked among the top law firms in Hungary by international rankings. We are ranked #1 by Mergermarket among the law firms active in Hungary based on the volume of M&A deals handled between 2005 and 2024.

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