It is a known fact that proper
driving requires a driving license as well, and we know that there are multiple
kinds of licenses. The situation is similar on the roads of taxation. Almost
everybody is using these roads, therefore it is important that everybody has a
license. Driving without a license on
the roads of taxation is not only prohibited but – due to the expected
sanctions and other consequences – extremely costly as well. Owing to their
nearly 30-year history, the Hungarian tax identification number and tax number
are already being used by the parties concerned with sufficient practice. The VAT registration number is the entry
ticket – namely its VAT identification number – of the single value added tax (VAT)
Important rules on the mandatory
use of the VAT identification number are specified not only in the Hungarian
tax laws (Rules of Taxation Act, VAT Act) but also in Council Implementing
Regulation (EU) No 282/2011 amended by Council Implementing Regulation (EU) No
1042/2013. The latter law is a
legislation directly applicable in the Member States. Experience shows that the
legislation is very complicated, and it is unreasonably detailed, meticulous in
a lot of respects. For this reason, after
almost 15 years since the accession to the EU, the application of these legal
provisions still cannot be considered to be applied seamlessly. It is no accident that certain provisions are
given final interpretation in the Court of Justice of the European Union as the
conclusion of the legal dispute of the obligors and their tax authorities.
Without aiming to give an exhaustive list, for the purpose of drawing attention to the matter, we summarized cases where Hungarian undertakings as VAT subjects may appear in the EC market only if they have VAT registration numbers. We tried to draw the attention to some traffic signs, crossroads and dangerous situations.
VAT registration number
The VAT registration number is mandatory in
course of trading of goods, (sales, purchase), provision of services, use of
services in transactions realized with the community taxable person of another
The taxable persons with special legal status are also obliged to use the VAT registration number in respect of their transactions falling within trading of goods with the combined value of 10,000 EUR, upon exceeding the threshold. In this respect, a person with special legal status is e.g. a taxable person exempt exclusively from VAT, or the taxable person pursuing agricultural activity, or simplified enterprise tax subjects. In course of the calculation of the threshold, the new transport facilities and the turnover of goods subject to excise tax are disregarded.
Some key procedural and specific rules
Both the seller and the buyer of
any trading of goods are required to have VAT identification numbers. It is verified that the goods leave the
territory of Hungary and arrive at another Member State as the final
The sale is a tax-free
transaction with tax deduction, therefore the seller issues an invoice not
including taxes, and the seller may deduct the VAT content of all of its costs
related to the sale.
The seller shall verify that the
goods had left the territory of Hungary. The verification may be e.g. CMR,
journey form, tachograph data, Hungarian State Railways (MÁV) or other waybill,
warehousing certificates, weigh-ins, the certificates of refuelling in the
target country, bank documents, etc.
Special rules apply to the sale
of new and used Transport facilities.
In case of intra-community
acquisitions, if both the seller and the buyer have VAT registration numbers,
then according to the Hungarian rules, the buyer will charge and claim the tax
payable and deductible in respect of the transaction in the same tax return.
However, the tax deduction is not automatic, the buyer may deduct only those
VAT amounts which the buyer could deduct in case of acquisitions in Hungary as
As a general rule, providing
services is possible only with VAT registration number as well. In case of any
intra-community service provided to the taxable person, the tax liability shall
be borne by the client.
For example, if a Hungarian
taxpayer pursues car repair works in Germany, then the Hungarian taxpayer shall
issue the invoice without tax, and the tax shall be charged and declared by the
German taxpayer according to the German rules.
In case of services provided to
non-taxpayers, the party providing the services is the one liable for tax,
according to the rules of its own country.
The exceptions are specified by
the act. For example, in case of leasing of movables, the tax liability is
adjusted to the country of economic establishment of the lessor; to the country
where the real estate is located in case of services related to real estate,
and to the place of actual realization in case of several other services, with
taking into several other requirements as well.
In case of transport services, the determination of the places of
set-off and delivery are relevant.
In case of contract work, if e.g.
the Hungarian taxable person performs work on the material provided by the
client in Hungary, and if the product produced in this manner is removed from
the country, then tax exempt service provision is realized.
If the taxable person not only
sells but also installs the product subject to installation or assembly, then
the entire transaction will be taxed as sale of goods, in the country where the
goods were installed or assembled. If the seller has no tax number in the
country where the installation or assembly occurred, then the tax shall be paid
by the purchasing party through self-taxation.
In case of cultural, artistic,
scientific, educational, entertainment and sport services, the organization of
exhibitions, fairs and shows, as well as the services incidental thereto, the
tax shall be paid according to the rules of the Member State of the party using
In case of intellectual property
rights, advertisement, consulting, bank and insurance services, as well as
temporary agency work, the service provision is taxed in the Member State where
the service is realized.
Finally, it is a technical but still important
question that with the help of the VIES system, you may check easily whether
your European Union business partner has a European Union VAT registration
number, which authorizes your business partner to pursue lawful business
activities with taxable persons established in other Member States of the EU.