If you are a freelancer providing products and services to clients in Hungary, you must register and comply with Hungarian VAT laws. As Hungary is a part of the European Union’s single market economy, it follows many of the EU’s VAT policies, which can often override the local Hungarian legislation. For instance, the European simplification VAT regime replaced simplification measures for call-off-stock agreements set up by the Hungarian government.
The Hungarian government charges a standard VAT rate of 27%, with additional reduced rates of 18% and 5% to be charged based on the type of products and services you sell. The Hungarian VAT is administered by the Ministry for National Economy and The National Tax and Customs Authority.
Hungarian VAT rules can be confusing to keep up with, so we have prepared a structured guide with everything you need to know about the system. Let’s get started!
So, what are the different VAT rates in Hungary? Freelancers need to apply the correct VAT rates based on the types of goods and services they provide:
There is no threshold for VAT registration in Hungary; however, you should meet one or more of the following criteria to be liable for registration:
The threshold for expat freelancers who are distance selling to taxable clients in Hungary is €35,000 per year, so if your annual sales revenue exceeds this, you must register for VAT. Additionally, if you are an expat freelancer, you can use non-resident VAT trading without forming a local company in Hungary. You can also back-date a registration. However, for foreign freelancers, note that all necessary documents should be in Hungarian.
As a freelancer in Hungary, you must prepare the following documents for submission to apply for VAT registration:
You must then submit these documents to the local tax authorities. The registration should be complete within 30 days of commencement of economic activities. You will receive your VAT number in 1-2 days. Note that you have to record VAT related transactions and report VAT every quarter, from the effective date of registration (i.e. the day you applied).
Alternatively, you can also register for VAT in Hungary through the Mini One-Stop Shop. This system is optional but advantageous if you are a freelancer operating in multiple EU countries. Through Mini One-Stop Shop (MOSS), you can coordinate to pay all your VAT from different EU countries in a single system under the Union Scheme. Click here to learn more.
Lastly, you can hire an accountant (or agency) to handle your VAT returns and dealings with the Hungarian Tax Administration. Xolo provides services like Xolo Go and Xolo Leap, which help with precisely this and any other VAT concerns you may have.
Registering for VAT is only the first part of the process. After the effective date of your registration, you need to:
Moreover, you need to follow detailed guidelines specifying the process to record and process your transactions. Every transaction must follow:
In order to be fully VAT compliant, you need to:
You can only charge VAT on products that you are selling or about to sell. If you have already sent out or received a product, you cannot charge or claim VAT on it.
Freelancers are usually required to file their VAT returns quarterly. However, if your annual turnover in the previous year or before exceeds HUF 1 million, you must file VAT monthly.
If you submit a VAT return late, you may have to pay a fine of up to HUF 500,000 plus the late payment interest. Even if you file the return but fail to make the payment, you are charged a late payment interest fee.
Systems like VAT MOSS can be helpful to maintain financial records as they are stored in the MOSS portal. Generally speaking, you need to store your clear and complete financial documents for up to ten years in either physical or electronic format.
Here is a list of documents you should maintain:
Xolo can help you stay 100% VAT compliant and never miss out on any steps! We automatically generate, send, and store all your invoices digitally, so you won’t have to worry about misplacing them over the next decade.
How Xolo Can Help?
The tax registration process can be tricky at times, but we hope this guide has helped clear your doubts! If you’re still confused about the different schemes and numbers, and paperwork, Xolo offers a range of solutions that handle all the hassle while you focus on your core competencies.
With Xolo Go, you can easily freelance and invoice your clients, even without a registered company or LLC.
Simply put, we do the hefty work for you so that you can enjoy the freedom of freelancing. So connect with us immediately, and we’ll help you get your one-person business up and running in Hungary in no time!