There are different rules in the VAT Act for the provision of services and separately for the supply of goods. If you do business in Hungary, you should be aware of this.
What are product sales?
Product sales are when we acquire a tangible product, good, semi-finished or finished product, either for use in our own business or for resale.
The orientation of the sale will be the basis of our investigation, because it does matter whether the goods are in Hungary or in the EU, or in the 3rd country, because it will be taxable accordingly or not. We also examine to whom we sell, to a taxable person, i.e. a business, or to a non-taxable person, i.e. an individual.
If you trade with goods, it can be interesting for you, so keep read on.
Where is the supply of goods taxable?
The basic rule is that the product is taxed where the place of performance is. And the place of performance is simply grasped where the goods start their journey physically.
Below you can see how the taxation develops according to the local orientation and the customer:
I. In Hungary
In case of domestic supply of goods, the product is subject to 27% VAT.
II. Within the European Union
- Sales to a taxable person: Community sales by taxable entities (i.e. companies) with a valid Community tax number in the Member State of departure are exempt. If the partner company does not have a valid EU registration VAT number, sales are subject to 27% VAT.
Good advice: Before selling a product, make sure whether the partner company has a valid EU registration VAT number or not.
- Sales to a private individual: in case of a supply of goods to a private individual, the VAT rate is taxed according to the place of performance. Domestically, at a VAT rate of 27%, in a Member State you must register to the tax authorities of the given Member State and request a separate tax number.
Important information: client invoices must be issued with the foreign tax number and the foreign tax must be declared in that country. To do this, you will need an accountant in that Member State to submit your company’s VAT returns.
III. Outside the EU (in a third country)
- Sales to a taxable person: according to the Hungarian law, the supply of goods in a third country is a tax-free export of goods outside the territorial scope of the VAT if the taxable person starts the product from the Member State of departure and arranges for the product to reach the buyer / end user, and can justify this.
- Sales to private individuals: generally, with 27% VAT, but as a general rule, supplies of goods are taxed according to the place of performance. If VAT exists in the buyer’s country, the taxpayer must register in that country and request a separate tax number. Client invoices must be issued with the foreign tax number and the foreign tax must be declared in that country. To do this, you will need an accountant in that country to submit your business’s VAT returns.
The product may be transported in-house and by an authorized carrier.
It can take place by road; in which case it is mandatory to register each road and cargo through the EKÁER system within Hungary and the EU. The transport documents must be attached to each invoice and sent to the accountant. Together, these are the basic documents for the sales of the product driven.
Furthermore, transport can take place not only by road but also by air and water. The movement of the product in this way must also be documented with transport documents.
We would like to draw the attention of our dear customers to the fact of leaving the EU and entering the 3rd country must also be proved by transport documents, which substantiates the possibility to issue an export product invoice tax-free to our 3rd country taxable customer.