Hungary - new date of supply rules for periodically supplied transactions
According to the new draft legislation submitted to the parliament the so-called “30 days rule” of periodic invoicing proposed earlier would change to the “60 days rule”, if the draft is accepted.
From 1 January 2016, the date of supply of periodically supplied transactions (e.g. rental, various monthly, quarterly or annual fees, periodic monthly invoice) will not be determined based on the due date of payment (as before). Under the new main rule, the last day of the period concerned by the settlement or the payment will be the date of supply. The VAT act exempts two cases from this main rule:
- If both the due date of payment and the date of the invoice or receipt issued on the settlement are before the last day of the settlement period, the date of supply of the transaction will be the date of issuing of the invoice or receipt.
- If the due date of payment is after the last day of the settlement period, the date of supply will be the due date of payment. However, if the due date of payment falls more than 60 days after the last date of the period (and not 30 days as proposed before),then the tax date will be the 60th day following the last day of the period (and not the 30th day as proposed before).
In practical terms the vast majority of businesses will encounter the following three scenarios of periodic supplies:
- invoiced upfront (more specifically invoiced with the payment deadline before the end of the period and invoiced before that date) – tax point is the date of the issue of invoice, in essence the tax point is brought forward comparing to 2015 rules.
- invoiced with less than 60 days payment deadline (counting from the last day of the period) – tax point is the due date of the payment, in essence no change to 2015 rules
- invoiced with 60 or more days payment deadline (counting from the last day of the period) – tax point is the 60th day from the end of the period, in essence the tax point is brought forward comparing to 2015 rules.
The new rules may impact the cash flow position of businesses supplying goods or services on periodic basis – this is because the tax point will be brought forward comparing to 2015 rules. Taxpayers are advised to review their current contractual arrangements and ERP settings to ensure compliance with the new Hungarian VAT rules.
Other miscellaneous changes
- Entities where the Hungarian State has the majority stake are not deemed to be related for VAT purposes. Similar rule will be introduced for entities where the local municipality has the majority stake.
- The obligation to issue invoice on the supply of zero-rated international air passenger transport will be abolished (instead a receipt or other similar document should be issued). However tax invoice should be issued if the customer explicitly requests for it.