Hungarian VAT regimes (ÁFA)
Hungarian VAT (általános forgalmi adó, ÁFA) is governed by Act CXXVII of 2007 (2007. évi CXXVII. törvény). With a 27% standard rate, Hungary holds the record for the highest standard VAT rate in the European Union. The landscape is completed by two reduced rates (18%, 5%), a simplified regime for small businesses (KATA), and a sectoral reverse charge mechanism.
Hungarian VAT rates
| Code | Rate | Scope | ÁFA article |
|---|---|---|---|
| STANDARD | 27% | General case — goods and services not listed elsewhere | art. 82 §1 |
| REDUCED-18 | 18% | UHT milk, certain dairy, pork meat, beef, hospitality, on-site dining | art. 82 §2 + Annex 3 chapter I |
| REDUCED-5 | 5% | Paper books, e-books, press, medicines, district heating, fresh milk, Internet access, certain artworks | art. 82 §3 + Annex 3 chapter II |
| AAM | 0% | Reverse charge — VAT due by recipient | art. 142 |
| TAM | 0% | Exempt intra-EU B2B supply (with deduction) | art. 89-90 |
| EAM | 0% | Exempt non-EU export | art. 98-101 |
| NAM | n/a | Out of VAT scope — non-taxable transaction | art. 6-9 |
| ATK | n/a | Exemption without right (medical, education) | art. 85-87 |
The 18% rate — food, hospitality
The 18% rate covers a narrow historical scope, completed in 2017 by a major extension to on-site dining:
- UHT (long-life) milk and dairy products: cream, yogurt, fresh cheese, butter. To be distinguished from fresh pasteurized milk (5%).
- Pork and beef meat. Since 1 January 2017, rate reduction to support the sector. Poultry meat remains at 27%.
- Hospitality. Tourist accommodation (hotels, pensions, guesthouses). Does not include breakfast if billed separately.
- On-site dining. Since 1 January 2017 — previously 27%. Applies only to on-site consumption (helyben fogyasztás), not takeaway or delivery.
- Cosmetic dental services, certain health services not covered by social insurance.
The 5% rate — books, medicines, fresh milk
The 5% rate covers high-social-value goods and services, with several notable extensions in recent years:
- Paper books. Any bound, paperback or electronic book (e-book) since 2020 — alignment with directive 2018/1713/EU.
- Press. Dailies, weeklies, magazines (paper and digital).
- Medicines. Medicines registered with OGYÉI (Hungarian Medicines Agency). Cosmetics remain at 27%.
- District heating (távhő). Heat distribution via urban networks. Historical drop from 27% to 5% in 2014.
- Fresh milk. Fresh pasteurized milk (as opposed to UHT milk at 18%). Since 2017.
- Residential Internet access. Since 1 January 2017. Includes fiber and ADSL. Mobile remains at 27%.
- Takeaway dining (delivery). Prepared dishes for takeaway or home delivery (distance sales), since 2018 under product classification conditions.
- Artworks. Sale by the artist themselves or by an approved gallery (alignment with directive 2006/112/EC art. 103).
KATA / kisadózó — simplified small business regime
The KATA scheme (Kisadózó vállalkozások tételes adója — itemized tax for small businesses) is a separate Hungarian fiscal regime, complementary to ÁFA, designed for small businesses and sole proprietors:
- Monthly flat rate. 50,000 HUF/month (~€125) for a full-time kisadózó, 25,000 HUF for part-time. Covers income tax, social contributions, health contribution.
- Annual threshold. 18 million HUF (~€45K) in 2022, 18M HUF maintained since. Exceeding = exit from regime + 40% tax on excess.
- 2022 restrictions. Major reform of 1 September 2022 — exclusion of KATA in B2B relationships (except taxi). Highly contested restriction. Subject to constitutional appeal (AB) in 2023, adjustments in 2024.
- Interaction with ÁFA. A kisadózó can cumulatively be VAT-registered if turnover > 12M HUF (VAT franchise threshold). Below that, VAT exemption is possible (alanyi adómentesség).
- RTIR. Invoices issued by a kisadózó are subject to RTIR Online Számla since 2020 (with simplified procedures).
Reverse charge (fordított adózás) art. 142
Article 142 of the ÁFA Act provides a VAT reverse charge mechanism for certain fraud-prone sectors. The recipient becomes liable for VAT; the issuer does not charge VAT:
- Construction and public works (BTP). Construction, renovation, demolition works between Hungarian taxable persons. Historical anti-fraud measure since 2008.
- Waste and scrap metals. Ferrous and non-ferrous metals, recyclable waste. Scope expanded in 2015.
- Certain agricultural products. Cereals (wheat, corn, barley, rye, oats), oilseeds. Anti-fraud measure since 2012.
- Livestock. Sale of live animals and wholesale meat between taxable persons (since 2015).
- CO2 emissions. Quotas and certificates (ETS), in accordance with directive 2010/23/EU.
- Posted workers and labor. Staff provision (kölcsönzött munkavállaló) since 2015.
Other regimes — AAM, NAM, EU OSS
- AAM (Alanyi Adómentes). VAT franchise for taxable persons below the 12M HUF/year threshold. No VAT collected, no deduction right.
- TAM (Tárgyi Adómentes). Objective exemption without deduction right (medical, education). Covers university training, hospital care, etc.
- NAM (Nem Adóköteles). Out of VAT scope — non-taxable transaction (internal transfers, donations without consideration).
- EU OSS. Hungary applies the One-Stop-Shop scheme for intra-EU B2C distance sales since 1 July 2021 (directive 2017/2455/EU). The Hungarian OSS is integrated with RTIR Online Számla — quarterly declaration distinct from the monthly bevallás.
- IOSS. Import One-Stop-Shop for non-EU e-commerce sales < €150, operated via NAV in Hungary. IOSS number starting with IM.
- Travel agency regime. Margin on travel services (utazási iroda), art. 206-210 ÁFA.
- Second-hand goods margin scheme. For art, antiques, used vehicles, art. 211-233 ÁFA.
Common pitfalls
- Confusing codes AAM, TAM, NAM. AAM = outgoing reverse charge (art. 142), TAM = objective exemption without right, NAM = out of scope. Confusing them triggers Schematron rejections or cascading VAT adjustments.
- Applying the 18% rate to takeaway. On-site dining is at 18%; takeaway and home delivery are at 5% since 2018. Frequent confusion at mixed-restaurant cash registers.
- Misclassifying books vs magazines. Books (paper and e-books) at 5%, but magazines and newspapers also at 5% since 2017. Before 2017, certain periodicals were at 27% — check the product catalog update date.
- Omitting fordított adózás mention. A reverse charge invoice without the explicit mention is legally invalid for the recipient (who cannot self-assess). Issuer penalty + loss of deduction right for recipient.
- Uncontrolled KATA-VAT cumulation. A kisadózó exceeding 12M HUF must register for VAT mid-year. The regime switch triggers retroactive RTIR obligations often forgotten.