One of the most common practical questions we receive from our clients concerns the correct accounting and VAT treatment of advance payments. While advance payments are widely used in business practice, Hungarian accounting and VAT rules require careful handling, especially when cross-border transactions are involved.
This article provides an up-to-date overview of the Hungarian rules applicable in 2026, with a special focus on the differences between advance payment invoices and proforma invoices.
What Is an Advance Payment from an Accounting Perspective?
When a company receives payment before goods are delivered or services are rendered, the amount received does not qualify as revenue yet. From an accounting point of view, the advance payment is recorded as a liability (customer advance or deferred revenue).
Revenue can only be recognised once the actual delivery of goods or the completion of services has taken place.
Advance Payments from Hungarian Customers
Obligation to Issue an Advance Payment Invoice
If the customer is established in Hungary and the transaction is subject to Hungarian VAT, the supplier must issue an advance payment invoice once the payment is received.
Key characteristics of an advance payment invoice include:
- It is an official VAT invoice
- VAT must be charged if the final transaction will be VAT‑able
- The date the payment is received is shown as the performance date
- The gross amount equals the amount received
In such cases, VAT becomes payable at the time the advance payment is received, not at the time of final delivery.
Advance Payment Invoice vs Proforma Invoice
Hungarian practice clearly distinguishes between advance payment invoices and proforma invoices.
An advance payment invoice is an official accounting and VAT document. If VAT applies, it creates a VAT payment obligation and must be reported in the Hungarian Online Invoice Reporting System.
A proforma invoice, on the other hand, is merely a payment request or commercial notice. It is not regarded as an accounting document under Hungarian law, does not trigger VAT and cannot be booked as an invoice.
While a proforma invoice is often issued before payment, it must be followed by a proper advance payment invoice once the payment is actually received, if invoicing is required.
Advance Payments from Foreign Customers
In cross-border situations, the obligation to issue an advance payment invoice depends on both the nature of the transaction and its VAT treatment.
Advance Payments Related to the Sale of Goods
If the advance payment relates to the sale of goods and the transaction will be VAT‑free in Hungary (for example, an intra‑Community supply or an export), no advance payment invoice needs to be issued for the prepayment.
In these cases, VAT becomes chargeable only upon the actual delivery of the goods.
Advance Payments Related to Services
For services, Hungarian rules are stricter. If an advance payment is received for services to be rendered later, an advance payment invoice must be issued.
This obligation applies even if the service is VAT‑free or subject to the reverse charge mechanism. The invoice must clearly indicate that it concerns an advance payment.
Issuing the Final Invoice
Once the goods are delivered or the services are rendered, a final invoice must be issued. The final invoice shows the full value of the transaction and deducts the amounts already received as advance payments.
The payable amount on the final invoice will therefore be the difference only, which may even be zero. At this point, the full transaction value can be recognised as revenue and the previously recorded advance payment liability is cleared.
It is possible to deduct multiple advance payments or partial payments on a single final invoice.
Advance Payments Made to Suppliers
When a company pays an advance to its supplier, the same logic applies from the opposite perspective. Before delivery, the payment does not qualify as an expense but is recorded as a receivable (advance paid to supplier).
The supplier should issue an advance payment invoice and, after performance, a final invoice with the advance deducted. Only after the final invoice is issued and the goods or services are delivered does the amount become an expense.
Contact us
If you have any questions regarding advance payments, proforma invoices or VAT-related invoicing obligations in Hungary, please contact Leinonen Hungary. Our experts are happy to support you with practical advice, accounting services and full VAT compliance.
