Value Added Tax - VAT refunds
From 1 May 2004, with Hungary’s accession to the EU, our domestic laws adopted the provisions of the EU’s so-called Eighth VAT Directive on VAT refund. In accordance with the new regulations, a taxable person settled in an EU member state may ask refund of the VAT charged to and paid by him in another member state.
Upon the recodification of the Eighth Directive in 2008, its number changed to Directive 2008/9/EC and came into force on 1 January 2010.
The new Directive essentially changed the theoretical and practical regulations on tax refund. The changes affected, among others, the date from which the right for refund may be exercised, the place and deadline for filing, and the deadlines for completion and for consideration. An especially important change is that it is mandatory to make filings electronically and that the communication with the Tax Authority must be conducted electronically.
Since 2010, applications may only be filed in an electronic format and with the tax authority competent according to the place of establishment (registered office). Each national tax authority forwards the application to the authorities of the relevant member state which then directly maintain contact with the applicant in an electronic way.
The submission deadline is currently 30 September and a limitation period applies. We mention that the deadline to submit claims for 2009 has been extended to 1 March 2011. An invoice submitted by means of an application which has then been rejected cannot be resubmitted by means of a subsequent application.
In line with the provisions of the so-called Thirteenth Directive, the VAT Act provides a possibility – in accordance with special rules different from the above – for taxable persons established in the Principality of Liechtenstein and in the Swiss Confederation, too, to have VAT charged and paid in Hungary refunded.
WHAT PROBLEMS MAY ARISE IN CONNECTION WITH THE REFUND OF VAT CHARGED ABROAD?
- The supplier’s invoice has improperly issued in terms of format and content
- Not all underlying documents are available which the competent tax authority requests to submit additionally
- No right of deduction can be established with respect to the invoiced service, product
- The certified translation requested by the tax authority has not been prepared by the deadline
- The tax authority does not communicate the information, request or notice in English
HOW CAN OUR TEAM HELP YOU?
In cooperation with our international partner offices
- preliminary examination of the transaction and the invoices
- assistance with the correction of the documentation and invoice (if necessary), prior to the submission of the application
- assistance with communication with the foreign tax authority; direct contact, translation, interpretation, preparation of the response
- assistance concerning legal remedy; direct representation in the case of an appeal and at each level of legal remedy, preparation and support of applications
Being part of the 5th largest consulting network of the world, we maintain close relationship with our partner offices, which enable us to carry out quick consultation and cost efficient cooperation with respect to international transactions.
BDO Magyarország Tanácsadó Kft. has been providing for its Clients assistance in reclaiming VAT charged abroad since Hungary’s accession to the EU in 1 May 2004. Over the past years we provided consultation and assistance for our Clients with respect to the following main transaction types:
- Research and development
- IT and telecommunication
- Contract manufacturing, processing
- Building, projects
- Commercial representation