EFFECTIVE FROM 1 JANUARY 2020, IT IS POSSIBLE TO RECLAIM THE VAT PAID ON BAD DEBTS

Many Hungarian companies have been faced with an unfair situation when one of their customers failed to pay, and they had to account for not only the net value of the goods or services, but until 2019, the supplier also had to pay the amount of the VAT. This was because the earlier Hungarian rules – in contrast with the EU Directive – excluded the possibility of the supplier of such goods or services reclaiming the VAT.

From 2020, these rules change fundamentally, and it is now possible to get a refund for the VAT of bad debts, provided that certain conditions specified by the law are satisfied. At the same time, the possibility is still narrower than what would be allowed by the Directive. The set of conditions prescribed – on which the Hungarian legislators could decide freely, as this is left to the Member States – is rather strict. The reason for this is likely to be inherent in the negative effects on the budget.

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