This is the first of two posts about VAT registration in Hungary. This article highlights basic aspects of VAT registration of Hungarian companies.
Registration of new companies
The VAT registration is part of the incorporation process, it is not necessary to take any additional steps before of after the incorporation. The lawyer dealing with the incorporation sends a form to the tax authority (NAV) with the basic data including the VAT information of the new company. NAV creates the tax number of the company in a few days and informs the court of registry as well. The tax number has a general rule in Hungary: all the taxes and contributions are paid with this number, and it identifies the company at every tax authority, even in the social security system.
The tax number
The Hungarian tax number consists of three parts in this form: xxxxxxxx-y-zz.
- The first 8 digits are a serial number;
- The ninth digit defines the VAT status: 1 is a VAT-free company, 2 is a normal VAT paying company, 4 and 5 are group taxpayers;
- The last digits show where the company belongs within NAV: a territorial directorate or any of the special boards.
VAT or VAT-free?
All the companies are registered at NAV, but not all of them are subject to VAT. As long as a company's annual revenue is below HUF 12 million (EUR 33,000), it can be out of the scope of VAT. It means that the sales invoices are without VAT, and the reclaim of purchasing VAT is not possible. It is the company's decision whether to use this option or not. If the annual revenue exceeds the limit during the year, the sales above the limit must be subject to VAT.
VAT-free companies do not have to file VAT returns, except if they have intra-community deals, see below.
EU tax number
Every company can have an EU VAT number for the application of intra-community trade and business regulations. It can be applied for right at the incorporation or anytime later, and it is generated within a few days. The Hungarian EU VAT number is HUxxxxxxxx, meaning HU for Hungary and the first 8 digits of the tax number of the company. Although it is generated automatically, the company must officially have it before issuing VAT-free invoices to other EU countries. This VAT number can be checked via VIES system on the internet.
The EU VAT number is important also for the VAT-free companies, because intra-community trade is not connected to the local VAT-free status. However, the EU trade volume also counts when we check the yearly revenue of the company regarding the VAT-free status.
The next post will be about the VAT registration of foreign companies in Hungary.