International VAT developments continue to create important preparation tasks for Hungarian businesses in the final quarter of 2026. Germany is preparing to introduce AI-assisted tax audits, new EU rules could simplify VAT registrations across multiple countries, and a recent EU court judgment highlights the VAT risks associated with business transfers. Meanwhile, California is set to introduce significant changes to the taxation of digital services from 2027.
In this installment of our international VAT and indirect tax blog series, we summarise the key developments that could affect Hungarian businesses’ cross-border operations, transactions and group structures.
Digital VAT audits: AI and pre-populated returns in Europe
In July 2026, Germany announced a new action plan to strengthen tax audits, with a particular focus on artificial intelligence (AI), centralised tax databases and improvements to VAT data reporting. Under the plans, linking data from different authorities and analysing it using AI will enable suspicious transaction patterns and VAT fraud to be identified more quickly.
Other European countries are also continuing to digitalise VAT returns. Portugal, for example, will change the structure and data requirements of its VAT returns from July 2027. These developments reflect a wider European trend towards tax authorities making greater use of the transaction data available to them from businesses.
Why do digital VAT audits matter for Hungarian businesses?
The digitalisation of VAT returns in Hungary is also approaching a significant milestone. According to a statement issued by the Hungarian Tax and Customs Administration (NAV) on 15 October 2026, mandatory adoption of Hungary’s eVAT system could follow a more gradual timetable than previously planned. Under the proposal, the largest businesses would be the first to move to the system during 2027, followed by most VAT filers, including SMEs, from 1 January 2028.
Preparation therefore increasingly depends on the quality of data in invoicing and ERP systems, and on consistency between VAT analytics and reported data.
The quality of a VAT return may already be determined when a transaction is recorded and an invoice is issued. If the data or VAT treatment is incorrect at these stages, automation may carry those errors through the process.
Business transfers and VAT: New EU Court judgment on input VAT deduction
The judgment delivered by the General Court of the European Union on 2 September 2026 in A&P Deco (T-397/25) has once again highlighted the significant tax implications of VAT treatment in business transfers.
The central issue was the VAT consequences of a business transferring its economic activity while retaining the property required for its operations and leasing it to the transferee under a VAT exemption.
Under the judgment, this arrangement requires the transferor to adjust input VAT previously deducted in relation to the property, even if the transferee continues to use the property for taxable activities.
What VAT risks could this create in an M&A transaction?
When applying the transfer of a going concern (TOGC) rules, the assets transferred, the arrangements for using the property and the circumstances in which the economic activity continues may all be decisive.
This is particularly relevant to M&A transactions, business disposals, carve-outs and intra-group reorganisations.
VAT risks should therefore be assessed when the transaction is being structured, as well as when the contract is finalised or invoices are issued. Incorrect VAT classification can have a significant impact on costs and cash flow. In sale-and-leaseback-type structures, for example, the potential VAT adjustment should be calculated at the transaction planning stage.
ViDA and Single VAT Registration: Simplifying EU VAT registrations
One of the key objectives of the European Union’s VAT in the Digital Age (ViDA) reform package is to reduce the need for VAT registrations in multiple Member States for certain cross-border transactions.
As part of the reform’s Single VAT Registration (SVR) component, the European Commission adopted new implementing rules in July 2026 affecting the One Stop Shop (OSS), the Import One Stop Shop (IOSS) and transfers of own goods.
The changes will be introduced in two stages:
- From 1 January 2027, certain registration and operational rules for the OSS and IOSS schemes will change.
- From 1 July 2028, the main SVR measures will take effect, including the extension of the OSS and the introduction of the new Transfer of Own Goods (TOOG) scheme.
Which Hungarian businesses could benefit from the ViDA Reform?
The changes may primarily affect Hungarian businesses that hold stock in several EU Member States, sell through online shops, transfer their own goods between Member States or maintain VAT registrations in multiple countries.
For certain operating models, the reform could reduce foreign VAT registrations and the associated administration, although it will not automatically remove all local tax obligations.
To prepare for the 2028 changes, businesses should consider reviewing their current VAT registration structures and the treatment of stock movements within the EU.
California sales Tax Changes in 2027: New Rules Affecting SaaS
From 1 January 2027, California will significantly extend the scope of sales and use tax to digital products, including standard software and Software-as-a-Service (SaaS) solutions.
Under the new rules, prewritten software may be taxable in certain circumstances even where it is supplied electronically or through remote access rather than on a physical medium. Different rules and exemptions may apply to custom-developed software and certain other digital services.
The changes are also relevant to Hungarian technology businesses selling into the US market. Alongside the economic nexus rules covered in our previous quarterly update, the tax classification of the digital product or service supplied may become a determining factor.
What Should Hungarian SaaS Businesses Selling to US Customers Review?
Businesses with customers in California should review the sales tax classification of their services, how they determine customer location, and their contractual and invoicing processes.
The specific tax collection and registration obligations may depend on the business’s US presence, sales volumes and the applicable rules.
The changes may be particularly relevant to Hungarian software developers and SaaS companies selling directly into the US market, including those without a physical presence there.
What do international VAT developments mean for Hungarian businesses?
International indirect tax developments in 2026 demonstrate that managing VAT risks is increasingly linked to corporate data quality, transaction structuring and international sales models.
Through our international network, we continuously monitor indirect tax developments and practical experience across jurisdictions. If you would like to assess whether these developments affect your business operations, RSM Hungary’s experts are ready to assist.
Frequently Asked Questions About International VAT Developments in Q4 2026
When Could eVAT Become Mandatory in Hungary?
Under NAV’s proposal announced on 15 October 2026, the largest businesses would be the first required to adopt Hungary’s eVAT system during 2027. Most VAT filers, including SMEs, would then be required to switch from 1 January 2028. The final timetable remains subject to legislative confirmation.
When Will ViDA Simplify Foreign VAT Registrations?
The main Single VAT Registration measures will take effect on 1 July 2028. Subject to certain conditions, they could reduce the number of VAT registrations required across multiple EU Member States.
Does a Hungarian SaaS Company Have to Pay Sales Tax in California?
From 1 January 2027, sales of standard software and SaaS solutions may fall within the scope of sales tax in California. The specific tax liability depends on the classification of the service, customer location, sales volumes and any applicable exemptions.
