Expected changes in the Hungarian VAT reclaiming practice

Expected changes in the Hungarian VAT reclaiming practice

Hungary
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On the basis of current practice of the Hungarian tax authority, Hungarian taxpayers are not always able to recover value added tax they pay even the Court of Justice of the European Union had stated the possibility of VAT reclaiming.

This is the case for example, when the seller charged VAT, although he would not have needed to do so (i.e. the buyer paid the VAT improperly to the seller and the seller paid VAT unnecessarily to the tax authority). The relating decision of the Court of Justice in a Hungarian case stated that, contrary to the current Hungarian practice, the buyer may reclaim the VAT directly, without attempting to recover the amount from the seller.

The Court of Justice declared the same in similar situations, for example, the VAT can be reclaimed by the customer even if a contractor not performing under an agreement and refusing paying back the advance paid by the customer, or when a claim becoming irrecoverable but the party has performed his obligation derived from the agreement (also paying the VAT). According to the Court of Justice, in such cases, VAT neutrality can only be ensured if the right of reclaiming the VAT is not denied from the customer/beneficiary, and the current practise of the Hungarian tax authority must be changed.

By Eszter Kamocsay-Berta, Managing Partner, KCG Partners Law Firm