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Summary 343 posts

Five cases where VAT is payable abroad

A number of Hungarian businesses are involved in international trade, including intra-Community supplies of goods, import of goods from third parties or supplies of services abroad. For cross-border transactions, a key aspect that should be examined is whether there is a requirement to register for VAT abroad and whether any VAT liability arises abroad. In this blog entry we present five cases where companies are required to pay VAT abroad in connection with cross-border transactions.

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When is a holding structure the right choice?

The majority of small and medium-sized enterprises are destined to face an increasing number of challenges as they grow in size. A carefully developed holding structure offers asset protection and tax optimisation benefits and is suitable for simplifying corporate governance processes. What is a holding company, and what are the benefits of a holding structure? Who should establish a holding company, and when? The key facts of holding structures are summarised in this post.

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EPR fee: double administrative burden for companies – the registration deadline is approaching

The extended producer responsibility (EPR) scheme, which is to be launched in July 2023, will bring greater changes to entities\' lives than many people expect today, but at the same time with the deadline approaching there is less time to prepare. While there are still many unclear issues, it is certain that the new EPR will place a significant additional administrative burden on a lot of companies subject to the fee, as the obligation to pay the environmental product charge will not be abolished.

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VAT implications of the “Buy Now, Pay Later” arrangement

Recently, the so-called BNPL service, which stands for \"Buy Now, Pay Later\", has become increasingly popular. Although digitalisation and COVID-19 have accelerated the spread of this interest-free, deferred or instalment payment facility, the Hungarian Tax Authority has not yet developed a uniform practice on the correct VAT treatment of BNPL services. Please note that the VAT treatment of BNPL services can vary under Hungarian legislation, so it is important to be familiar with the rules.

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VAT risks of assembly or installation related to construction projects and capacity extensions

Many of our clients, mainly in the manufacturing and construction industries, face tax difficulties when they supply products or services to their customers involving assembly or installation work related to greenfield investments or expansion of manufacturing capacity. The VAT treatment of these transactions may be quite complex. One main reason for this is that based on the contractual or business context various types of transactions are conducted with different VAT implications.

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Decree containing detailed transfer pricing rules issued

The decree containing the detailed rules for transfer pricing has been issued without substantial changes*, the draft version of which and the scope of the future transfer pricing reporting obligation were previously presented in our blog. Starting from 2023, taxpayers will be subject to a new reporting obligation regarding their transfer pricing reports, as information on related-party transactions will need to be included as a new element in corporate income tax returns as well. In addition to this new administrative obligation, the threshold for preparing reports has also changed. The most important changes and tasks for companies following the entry into force of the final transfer pricing decree are presented below.

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The new form of VAT filing – eVAT M2M XML

The eVAT M2M system will become an increasingly common solution for VAT filing processes in the future. Although the eVAT M2M system offers many advantages for taxpayers and tax authorities, its implementation also poses challenges for both parties and expert support may be needed. If properly prepared and managed, eVAT communication will enable companies to meet their tax obligations more efficiently and easily. The Hungarian Tax Authority plans to start the test run in autumn 2023 and to go live in the first half of 2024.

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Permanent establishment for tax purposes

In our latest blog post on the specifics of permanent establishments, we have collected what foreign businesses should pay attention to from a tax perspective if they carry out permanent work in Hungary at fixed sites. The existence of a permanent establishment may require the establishment of a branch office or may give rise to VAT and/or corporate income tax liabilities. We will explain in detail what is meant by the so-called permanent establishment risk and what is meant by the concept of a fixed establishment for VAT purposes.

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Electronic invoicing: new rules and requirements from 2024

The digital age and the rapid expansion of e-commerce have brought about changes in taxation and invoicing as well. In December 2022, the European Commission proposed amendments to the VAT Directive as part of the \"VAT in the Digital Age\" initiative. Changes include significant amendments to invoicing rules, some of which could enter into force in 2024. Later on, e-invoicing would become mandatory for all businesses for transactions within the EU.

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