Foreign business entities that are not registered or established in Hungary (i.e. they do not have a registered office or any other fixed establishment, and do not carry out business activity in Hungary) may still pay Hungarian VAT on goods or services purchased in Hungary. Since they cannot deduct this input VAT through regular VAT returns (as domestic or registered persons do), they have to reclaim it via a special procedure governed primarily by Directive 2008/9/EC (and, in some cases, under the so-called 13th Directive for recognised third-country businesses). This process is commonly referred to as the Hungarian VAT refund for non-established taxable persons.

The September amendment to the KATA Act has fundamentally restricted this form of taxation. According to current estimates, only 100,000 of the 460,000 KATA-paying entrepreneurs will continue to be able to stay in the system, the rest will be squeezed out. Meanwhile, the amendment affects not only those subject to KATA, but also those who employ them. Below is a hand-picked selection of these effects.

More and more people are earning money online as bloggers, vloggers or influencers. Through social media, you can reach millions with a well-targeted message, and this can result in a substantial income. These incomes are subject to tax – but it’s important to think about how to pay it.

Recently, the tax authority’s audit practices have changed appreciably. While until recently, tax audits were mostly launched as fully standalone procedures, today the tax authority (NAV) is increasingly initiating criminal proceedings alongside its tax audits. This is particularly the case in bogus-invoice deals affecting VAT, as well as in excise-duty and certain customs matters. But what’s behind this?

While dozens of programmers, engineers and hairdressers continue to opt for KATA [the fixed-rate tax for enterprises categorised as “small taxpayers”] in Hungary, the tax is increasingly coming under fire from all sides. Apparently, the Hungarian Tax Authority (NAV) is stepping up its investigations into businesses who employ KATA payers, and at the same time rumours are also flying about a planned KATA tightening.

During a posting, the employee is bitten by a tick. He throws his back out while loading. He gets sunburnt while working outside. A common feature of these cases is that they are all accidents at work. Yet, if the employer does not pay attention to these, he can find himself at a serious disadvantage.

A recently released NAV guidance gives a list of those signs that could indicate that a security firm is involved in VAT fraud. The list will certainly help companies that accept invoices from such security firms, but it’s still a pity that the guidance wasn’t issued ten years earlier.

Since January this year, it’s been more difficult than ever to litigate in Hungary. Courts have been rejecting countless petitions, filed by even the most experienced lawyers, citing professional inaccuracies or formal errors. The stringent policy is likely to prompt parties with grievances to use alternative forums for the settlement of disputes.