The Hungarian VAT system is one of the strictest in Europe – both in terms of rates and formal requirements. If you plan to operate in Hungary or are already selling in this market, it is important to know what VAT applies in Hungary, the rates for specific goods, and how local regulations work.
The Highest VAT Rate in the EU
The standard VAT rate in Hungary is 27%, the highest in the European Union. It applies to all goods and services not subject to exemptions. For many Polish entrepreneurs, this may be surprising – especially compared to Poland’s 23% rate.
In addition to the standard rate, there are two reduced rates:
18%, primarily applied to selected food products and beverages.
5%, covering, among others, medicines, printed books, selected hospitality services, hotel services, and certain online services.
Hungarian VAT is therefore not only high but also relatively complex – it is essential to verify the correct category for each product or service.
When Must You Register for VAT in Hungary?
VAT registration rules in Hungary differ depending on whether you are a local business, an EU company, or a non-EU entity. If your business is based outside Hungary but your goods or services reach Hungarian customers, you may be required to register for VAT from the first transaction.
For Hungarian companies, there is a VAT exemption threshold of HUF 18 million per year (approximately PLN 200,000). If your turnover does not exceed this limit, you can sell without registering as a VAT taxpayer – although this does not apply to all industries. For example, intra-community trade, sales via marketplaces, and digital services follow different rules.
Foreign companies without a Hungarian establishment generally must register immediately. In many cases, a tax representative is required to represent your company before the Hungarian tax authorities.
How Do Invoicing and VAT Declarations Work?
Hungary is known for its strict invoicing rules. Invoices must be issued on time, include specific information, and comply with the prescribed format. Real-time electronic reporting – known as online invoice reporting – is also mandatory. This means that each invoice must be submitted to the Hungarian tax authority almost immediately after issuance.
VAT returns are usually submitted monthly. Smaller companies may use quarterly filings, but the system offers limited flexibility – delays are quickly detected and penalized. If you plan long-term sales in Hungary, it is advisable to have a local tax advisor.
Hungarian VAT and Cross-Border Sales
If you sell goods from Poland to customers in Hungary, it is important to determine whether the sale qualifies as an intra-community supply of goods (ICD) or as sales from a local warehouse. In the latter case, you will likely need to register for VAT in Hungary and account for local tax. Similarly, e-commerce sales using warehouses such as Amazon, Allegro, or other fulfillment platforms often require local registration.
Since 2021, the OSS (One Stop Shop) procedure is available, but even then, turnover thresholds must be monitored and the correct rate applied for each country.
Beyond Rates – What Else Matters?
Many entrepreneurs focus solely on the question: “What is the VAT rate in Hungary?” This is important but insufficient. Formal obligations, such as correct invoicing, registration procedures, return deadlines, tax representation, and the language of communication with authorities, are crucial. Hungary does not tolerate errors – the NAV (Hungarian tax authority) is known for rigorous audits.
A 27% rate does not necessarily mean that this is the final cost – if you are entitled to deduct VAT, you can reclaim part of your expenses. However, this requires transparent bookkeeping, proper documentation, and compliance with local rules.
When Is VAT Not Applicable?
Certain activities are completely exempt from VAT in Hungary, including education, medical services, social care, insurance, and rental of residential properties. Note: this exemption means you cannot deduct VAT on purchases.
For exports outside the EU, a 0% VAT rate may apply if the transaction meets export formalities. International transport and certain supply chain services may also qualify for the zero rate, but eligibility depends on the specifics.
Is It Worth Doing Business in Hungary?
Despite the high VAT rate, Hungary is an attractive market – particularly for e-commerce, medical, construction, or food industries. A high VAT rate does not automatically mean higher costs – especially if your clients are businesses and VAT is not a net expense for them. Problems arise only if local procedures are not prepared for. If your company plans to enter the Hungarian market, it is best to check registration requirements, determine which VAT rate applies, and organize invoicing from the start. Avoid surprises, as any non-compliance can lead to serious issues.