- Eligibility and Structure: VAT grouping is available to all industries in Hungary. Companies that qualify as related parties and have a fixed establishment in Hungary can opt for VAT grouping. Under this system, the group members are treated as a single taxable person for VAT purposes, meaning that supplies between group members are exempt from VAT, while supplies to third parties remain subject to VAT.
- Joint VAT Returns: Members of a VAT group must file joint VAT returns with the Hungarian tax authority. This simplifies compliance by allowing the group to manage VAT obligations collectively rather than individually.
- Membership and Liabilities: Related companies can choose not to join the VAT group, but if they opt out (becoming non-members), they must accept certain liabilities. If a non-member refuses these liabilities, the VAT group cannot be formed. All members of the VAT group are jointly and severally liable for VAT debts and penalties incurred during the existence of the group.
- Duration of VAT Group: There is no minimum duration for a VAT group; it continues to exist until a member withdraws from the group, provided that all relevant conditions are met continuously.
- Holding Companies and Cost-Sharing Exemption: Pure holding companies can be members of a VAT group if they are established in Hungary and related to the group. Additionally, Hungary has implemented the VAT cost-sharing exemption per EU Directive, allowing certain support services among group members to be exempt from VAT, although this exemption has seen limited practical application due to the Ministry of Finance’s informal stance against its use.
Source EY Worldwide VAT, GST and Sales Tax Guide 2024
See also
