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New year, new challenges in terms of the frequency of VAT declarations
16 March 2016
Each new year is a difficult start for enterprises. They have not yet overcome the difficulties of closing the year, and now need to focus on the frequency of VAT declarations as a task for the new year, which has been given very little attention so far. This is why this article is dedicated to the VAT declaration at the beginning of the year and its frequency during the year.
Review of the frequency of VAT declarations at the beginning of the year
The frequency of VAT declarations, effective from the beginning of the year, is determined by the annualised VAT balance, i.e., the balance between the payable and deductible VAT two years prior to the current year.
1. If the balance is positive (i.e., the payable VAT is higher than the deductible VAT) and exceeds HUF 1 million, then from January 2016 monthly VAT declarations must be submitted.
2. If the balance is less than HUF 1 million but higher than HUF 250,000, then quarterly VAT declarations must be submitted.
3. If the balance (whether negative or positive) is lower than HUF 250,000 and the company does not have a Community tax number, then an annual VAT declaration must be submitted in 2016.
In order to learn the frequency at which VAT declarations must be filed from January 2016, the balances of the 2014 VAT declarations throughout the year must be added up. It is important information for the calculation of the frequency at the beginning of the year that each self-revision must be included in the annual balance.
Let us take a specific example at calculating the frequency at the beginning of the year. The company in our example was obliged to submit quarterly declarations in 2014.
1. Aggregated VAT balance for 2014 Q1: HUF 200,000 (+)
2. Aggregated VAT balance for 2014 Q2: HUF 300,000 (+)
3. Aggregated VAT balance for 2014 Q3: HUF 600,000 (+)
4. Aggregated VAT balance for 2014 Q4: HUF 200,000 (-)
The annual aggregated VAT balance for 2014 is HUF 900,000 (+), and therefore from January 2016 the company must submit quarterly VAT declarations.
Let us see how the above example changes if a self-revision was submitted for 2014 Q1, as a result of which the payable VAT would increase by HUF 200,000. By including the self-revision, the VAT balance also changes:
as a result of the self-inspection, the VAT balance for 2014 Q1 is HUF 400,000 (+).
Thus the annual balance in 2014 will be HUF 1,100,000 (+).
As the annual balance is positive and, as a result of the self-revision, is greater than HUF 1 million, from January 2016 the company must submit VAT declarations monthly.
Interim change of frequency
Although the frequency of VAT declarations must be defined at the beginning of the year, you must constantly pay attention to it during the year as well because, pursuant to the law, the frequency may also be changed during the year if the interim balance of the deductible and payable VAT:
- reaches HUF 250,000, in which case the frequency of declarations will change from annual to quarterly declarations,
- is positive and reaches HUF 1 million, in which case the frequency of declarations will change from quarterly to monthly declarations.
It is important, however, that, contrary to the calculation of frequency at the beginning of the year, the modifications caused by self-revisions do not need to be taken into account during the calculation of the interim frequency.
Application for more frequent VAT declarations
Businesses that must file annual or quarterly VAT declarations according to the above rules on frequency may apply to the Tax Authority requesting more frequent declarations. If e.g., a business is in a reclaiming position and would like to move forward the disbursement of the VAT or ease administration, it should consider requesting more frequent VAT settlement. The application is assessed by the Tax Authority and, if the company complies with the requirements of the law, it approves the requested frequency until the end of the particular year.
Deadlines
According to the main rule, the deadline of submitting the declaration is the 20th day of the month following the reporting month. As an example, businesses filing monthly declarations must submit their declaration for January by 20 February.
However, in the case of quarterly and annual declarations, the deadlines for declarations shall be as follows:
- for quarterly declarations, the deadline of submitting the declaration is the 20th day of the month that follows the quarter. Consequently, the deadline for the VAT declaration for the first quarter is 20 April.
- For businesses obliged to submit annual declarations must always file their declaration by 25 February of the subsequent year.
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