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Hungarian VAT implications for UK taxpayers

UK companies have no longer been subject to EU VAT laws since 2021; therefore their Hungarian tax liabilities are governed by different rules. How can VAT regulations be interpreted in this new situation and what have taxpayers experienced since Brexit? In our blog post below we have summarised the most important changes from a VAT perspective.

The United Kingdom as a third country

With the end of EU membership from 1 January 2021, the UK has been treated as a 'third country'. 

Therefore, UK resident taxable persons are required to appoint financial representatives under the VAT Act:

  • if they are not established in Hungary for business purposes,  
  • but they are liable to pay tax on their Hungarian transactions. 

What does BREXIT mean for VAT legislation?

After BREXIT, instead of applying the rules on cross-border supplies and movements of goods, the rules on value added tax (VAT) on imports and exports will apply to supplies and movements of goods between the EU and the United Kingdom. 

This means that goods brought into the EU or transported to the UK are under customs supervision and may be subject to customs procedures.  

How is tax paid on EU imports?

  • VAT must be paid to the customs authority at the time of import, 
  • unless the Member State allows the taxable person to include the tax due on import in their periodic VAT return (this is possible in Hungary under certain conditions).

Tax payment on EU export

  • goods are exempt from VAT if they are dispatched or transported to a destination outside the EU
  • the supplier of the exported goods must prove that the goods have left the territory of the EU.

It's all in the details

Since BREXIT, companies doing business with UK partners have had to adapt to a number of changes.  This is particularly true for supplies of goods, as the UK no longer applies the special EU simplifications such as schemes for triangular transactions or customer stock, and foreign VAT may be reclaimed through the third country procedure rather than the EU procedure.

The rules on invoicing have also changed, as the community tax numbers starting with "GB" can no longer be used after leaving the EU; community tax numbers cannot be shown on invoices either, and these transactions must be reported in the '65 VAT return in the lines for third country transactions.  Nor can these items be included in the ‘A60 sales and purchase list. 


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