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Companies may apply separately for VAT refunds resulting from European Court ruling

Issues

Hungarian companies eligible for VAT refunds under a European Court of Justice ruling may apply separately for the payments by October 20 under a bill submitted to Parliament by National Economy Minister György Matolcsy.

Companies may also ask for the payments in their usual applications for VAT returns. Hungary's tax office must transfer the refunds within 30 days of receiving the application, or within 45 days for refunds over HUF 1m.

The state must refund about HUF 250 billion to companies because the European Court of Justice found Hungarian VAT rules were incompatible with European Union law.

The European Commission said in March 2010 that it would refer the VAT regulation to the European Court after Hungary's government failed to take timely action to modify it.

Hungary's VAT legislation grants taxable persons the option to choose between carrying forward their excess VAT (which results from deductible VAT exceeding payable VAT in a tax period) to the next tax period, or immediately claiming a refund for it.

However, the reimbursement of excess VAT cannot be claimed on the basis of input VAT charged on a purchase that has not yet been paid for by the taxable person. As a result, taxable persons whose tax returns consistently show "excesses", are de facto obliged to carry forward the excess input VAT into the following tax period, the European Commission said.

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