Hungary Imposes Tougher VAT Penalties and Extends VAT Benefits for 2025

December 24, 2024

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Non-compliance with VAT rules and regulations mostly leads to financial burdens and costs. From 2025, these costs will become even higher and more expensive in Hungary as new, stricter penalties take effect. However, these are not the only changes that will become effective in 2025.

Impact on Taxable Persons

Taxable persons who do not comply with VAT rules and regulations, such as filing a VAT return, will have to pay an increased default penalty from January 1, 2025. The penalty will increase from HUF 500,000 to HUF 1,000,000 (around EUR 2,500). This penalty will also apply to non-compliance with the obligation to keep documents properly.

Additionally, if a taxable person fails to file an EU Recapitulative Statement, also known as the EU Sales List (ESL), the penalty could be multiplied for each invoice not reported.

Furthermore, default penalties for taxable persons who fail to issue and report invoices will be HUF 2,000,000 (around EUR 4,800), double the current amount.

In addition to new penalties, the reduced VAT rate of 5% on the sale of new residential properties has been extended for two additional years until December 31, 2026.

Furthermore, VAT deduction rules through customs representatives will be further strengthened, the supply of gas by a taxable person through the natural gas system connected in the territory of the EU will also be subject to reverse charge, and personal tax exemption will become available for international transactions and distance sales.

Conclusion

Businesses and individuals engaging in activities subject to VAT rules must pay close attention to compliance with VAT regulations, as new penalties are harsher. Failing to meet requirements and obligations could result in financial and administrative burdens, which could be especially harmful for small and medium enterprises.

Moreover, with some new rules in place and the extension of previously enforced regulations, taxable persons should determine if and to which extent they impact their businesses or if they can benefit from them.

Source: Taxand

What are the new penalties for VAT non-compliance in Hungary?

From January 1, 2025, penalties for VAT non-compliance will double, with fines up to HUF 2,000,000 (around €4,800) for failing to issue or report invoices.

How does the penalty for failing to file a VAT return change?

The penalty for failing to file a VAT return will increase from HUF 500,000 to HUF 1,000,000 (approximately €2,500).

Are there new rules for the EU Sales List (ESL) in Hungary?

Yes, stricter penalties will apply to each unreported invoice in the ESL, potentially resulting in multiplied fines.

Will the reduced VAT rate on new residential properties continue?

Yes, the 5% reduced VAT rate on new residential properties has been extended until December 31, 2026.

What is the new rule for VAT deductions via customs representatives?

VAT deduction rules through customs representatives will be tightened to ensure compliance with EU VAT regulations.

How do the new reverse charge rules affect gas supply transactions?

Supplies of gas through the EU-connected natural gas system will now be subject to the reverse charge mechanism.

Hungary

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