This is the second post about VAT registration in Hungary, discussing the issues of foreign companies.
Why To Register To VAT?
A foreign company might need local VAT registration for two reasons:
- Generating sales revenue with VAT payable: in this case, the registration is compulsory to fulfil the obligations of VAT payment.
- Receiving invoices with VAT refundable: it is worth if the refundable VAT is significant, and the deal is profitable at the end of the day. There is a process to refund VAT eventually, without registration as well.
Registration of EU companies
If a foreign company is resided in the EU or at least has a business site in the EU, the registration is easier. We have to attach to the application the certificate of tax residence, an extract from the registry, and the personal data of the representing person. The registration takes 15 days, and the company receives a tax number. The tax number can be applied with retrospective date if the activity started before the application.
Registration of third country companies
If the foreign company has no business activity in the EU, the VAT registration is rather complicated. These companies need a tax representative in Hungary, who is also liable for the tax payments, jointly with the company. The tax representatives must meet additional requirements in terms of equity or bank guarantee, and separate bank account for each client. All these documents and the agreement for tax representation are to be attached to the application. This kind of service is usually more expensive than that for EU companies.
Unfortunately, with the BREXIT, the British companies became third country companies in 2021. Even if they got a VAT number earlier, they have to renew it under the new circumstances, except if they have a business entity with the EU.
Once a company has a tax number for VAT, it must fulfil the connected obligations such as monthly or quarterly tax declarations, even if they show zero amounts.
For further information, please contact us.