VAT Basics for VAT-Liable Sole Proprietors

The basic mechanism

As a VAT-registered taxpayer, you settle the difference between the VAT you charge, and collect from your customers, and the input VAT charged to you on your own purchases. If the VAT you charge exceeds what you can deduct, you pay the difference (the "payable tax"); if the deductible part is higher, you can carry the difference forward, or reclaim it under certain conditions.

That's the key difference from VAT exemption: as an exempt proprietor, you don't charge VAT on sales, but you also can't deduct VAT on purchases; as a VAT-registered proprietor, you settle both sides.

VAT rates

The general VAT rate is 27% of the taxable amount. Reduced rates of 5% and 18%, and a 0% rate, apply only to the products and services explicitly listed in the law's annexes, defined by customs tariff code or statistical classification. Typical reduced-rate items include most groceries, books, medicine, some healthcare products, district heating, and commercial accommodation services.

The deduction right: what can you deduct?

You can only deduct VAT on a purchase if it's tied to your VAT-liable business activity and you hold a compliant invoice for it. The law explicitly excludes or restricts the deduction right for some expense types, typically VAT on buying a passenger car (see the vehicle costs article for more), and some catering and residential-property-related purchases.

Cash-basis accounting as an optional simplification

If your annual, VAT-excluded revenue doesn't exceed HUF 125,000,000, you can choose cash-basis VAT accounting (pénzforgalmi elszámolás): under this method, payable VAT is established when the customer actually pays, not when the invoice is issued, and you can only deduct input VAT once you've actually paid the invoice for the purchase yourself. This favors proprietors dealing with slow-paying customers, since you don't have to front the VAT before the revenue actually arrives. You must report the choice to NAV, and mark invoices with the "pénzforgalmi elszámolás" (cash-basis accounting) notice.

When do you file monthly, quarterly, or annually?

VAT filing frequency (monthly, quarterly, or annual) is determined by the size of your settled VAT and a few other factors; see the tax filing deadlines article for the details and exact dates.

Invoicing and online data reporting

For invoicing rules and NAV Online Számla data reporting, plus the soon-to-be-mandatory e-nyugta receipt data reporting, see the invoicing requirements article and the cash registers and e-nyugta article.

EU purchases: when do you need a Community VAT number?

If you use a service from a taxpayer established in another EU member state, for example advertising services or subscription software from a company registered elsewhere in the EU, or you acquire or sell goods across borders, you need a Community VAT number (közösségi adószám) before carrying out the first such transaction. It's your regular Hungarian tax number's international variant, prefixed with "HU"; you report the need for one to NAV.

Reverse charge: when you use a foreign service

Under the general place-of-supply rule for business-to-business (B2B) services, a service is taxed where the customer is established. That means if you use a service from a taxpayer established in another member state, for example an advertising platform registered elsewhere in the EU, the place of supply is Hungary, and you, as the Hungarian recipient, must establish and pay Hungarian VAT yourself, under the reverse-charge mechanism, even if the foreign supplier didn't charge VAT on it. A reverse-charged purchase shows up in your regular VAT return as both a payable and, if you're otherwise entitled to deduct, a deductible item at the same time, so in most cases it involves no actual cash flow, just filing and record-keeping.

Importantly, this rule applies to VAT-exempt sole proprietors and KATA taxpayers too: there's no exception for them on reverse-charged cross-border purchases, so they also need a Community VAT number and must declare and pay the reverse-charged VAT, even if their other activity is otherwise VAT-exempt.

The recapitulative statement

A taxpayer with a Community VAT number must also file a separate recapitulative statement (összesítő nyilatkozat), on form 'A60, alongside the regular VAT return, for every period with intra-Community trade: it lists the tax numbers of your counterparts in other member states and the transaction amounts. Its filing frequency generally follows your VAT return's frequency, but if your quarterly, VAT-excluded intra-Community sales or purchases combined exceed EUR 50,000, you must switch to monthly filing. A taxpayer with a Community VAT number also can't be an annual VAT filer: at minimum, quarterly VAT returns are required too.

Intra-Community acquisition of goods

If you buy goods from a seller established and VAT-registered in another member state, and the goods consequently arrive in Hungary, that's an intra-Community acquisition of goods: similar to reverse charge on services, you must establish and declare the VAT yourself, regardless of whether the seller charged VAT in their own country. There's no minimum threshold below which a normally VAT-registered taxpayer is exempt from this rule.

Third countries: trading outside the EU

The sections above cover trade within the EU. Trading with a third country, one outside the EU, for example the United States, the United Kingdom, or Switzerland, follows different rules.

Exporting goods to a third country

If you sell goods to a buyer established in a third country, and the goods actually leave the EU, the sale qualifies as VAT-exempt export of goods. The exemption requires customs proof that the goods left the EU, within 90 days of the transaction; if that only happens later, but within 360 days, you can reclaim the VAT you charged in the meantime, once you hold the corrected, exempt invoice and the customs exit proof, in the return covering the period when you receive them, not by amending the earlier return. If the goods still haven't left after 360 days, the exemption is lost for good, and the invoice is subject to the otherwise applicable VAT rate.

Importing goods from a third country

If you bring in goods from a third country, import VAT is normally assessed by the customs authority at customs clearance, regardless of the goods' value: there's no minimum threshold below which an import is VAT-exempt. You can deduct the import VAT you paid in your regular VAT return, if the goods relate to your VAT-liable activity. With reliable-taxpayer status and a customs authority permit, import VAT can instead be self-assessed without paying it at customs clearance, but that simplification isn't available to most sole proprietors just starting out.

Supplying services to a third-country business client

If you supply a B2B service to a business established outside the EU, the general place-of-supply rule puts the place of supply in the customer's country, so the transaction is outside the scope of the VAT Act: you don't charge Hungarian VAT, and instead mark the invoice as outside the Act's territorial scope. Such a transaction also doesn't appear on the recapitulative statement, which only collects intra-Community trade. (The foreign income article covers the same rule from the supplying side.)

Using a service from a third-country supplier

The other way around, if you use a B2B service from a supplier established in a third country, for example a non-EU software company or a foreign contractor, the general place-of-supply rule puts the place of supply at your own establishment, i.e. Hungary. Just like with an EU purchase, you must establish and pay Hungarian VAT yourself under the reverse-charge mechanism, even if the supplier didn't charge VAT; you need a Community VAT number for this too, since NAV's registration also covers third-country, general-rule service transactions, not only EU ones. This applies whether you're a VAT-exempt or a VAT-registered sole proprietor.

This article is for general information only, does not constitute tax advice. Source: the VAT Act, 2007. évi CXXVII. törvény (net.jogtar.hu), and NAV information booklets no. 14, "Hasznos tudnivalók kezdő áfaalanyoknak" (2026. 01. 22.) and no. 29, "Az általános szabályok szerint adózó áfaalanyok közösségi ügyletei" (2026. 01. 26.).

Last updated: July 31, 2026.