1. The current situation
According to the Hungarian regulations so far, if your company's invoice containing VAT has not been paid and the debt recovery has not delivered results, the claim had to be recorded as a loss together with the VAT paid, meaning that the Tax Authority kept the VAT regardless if the invoice was paid or not.
After the European Court of Justice has ruled in several judgments that VAT on uncollectible claims shall be refunded to the taxpayer, due to the recent domestic changes to tax legislation adopted in July, from 1 January 2020, it will be possible to recover the VAT of uncollectible claims in Hungary as well.
2. When can you recover the VAT from 2020?
First condition: the uncollectible claim
In relation to the new opportunity, the concept of uncollectible claim is found in the VAT Act, according to which a claim is considered irrecoverable if
You can see that VAT is only recoverable concerning a claim that the creditor has previously attempted to recover through enforcement or liquidation.
Once the claim has passed the above filter, the following conditions must also be met to be eligible for the VAT refund:
3. How to get the refund
If all the above are met, you can request the account of your uncollectible claim when you file your VAT declaration. The Tax Authority will not refund VAT at the time of settlement, but the actual tax base of the company will be reduced by the amount of the accounted uncollectible claim. Thus, it is a subsequent possibility to compensate your VAT previously paid.
4. Settlement of older claims
It is important that only claims in case of which the performance of the transaction took place after 31 December 2015 are eligible for the above refund, that excludes refund for many otherwise eligible claims.
The changes effective from January 2020 will provide a great opportunity for the conscious companies, since in case of proper administration, at least the paid VAT will be recoverably in case of buried claims, which is not a negligible result. If you would like to take advantage of this opportunity, we recommend that you use a legal expert during the debt recovery process.
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