Debt assumption for VAT
Based on the Section 36 of Act on Taxation (Act XCII of 2003), a tax debt may be assumed by another person from the original taxable person. In that case there is a change in the taxable person, however, such action will not affect the legal title of the tax authority’s claim. It is important to note that the debt assumption can only be enforced for existing tax obligations (or part of it). The assumption of the debt becomes valid with the approval of the tax authority. The tax office refuses to approve the request if the payment of the tax obligation is not ensured by the ‘new debtor’.
The tax authority may contribute to the assumption of the fulfillment of the tax debt only if the originally liable taxpayer guaranties the debt. On the basis of this guarantee the tax liability is executable from the originally liable taxpayer without issuing a separate decision on it, if the debt is not paid by the ‘new debtor’ by the due date.
You may consider the possibility of a detailed debt assumption when, for example, the parties involved in a one-time transaction do not want to / cannot finance a large amount of VAT. In that case, the person liable for the tax has to issue his invoice with VAT, but after the approval of the debt assumption by the tax authority, no VAT payment obligation will be incurred on the transaction. The recipient of the invoice reimburses the net purchase price to the vendor, validates the tax deduction in the VAT declarations and requests its crediting to his tax account. The overpayment on the tax account is used by the tax authority to settle the VAT payable assumed from the original debtor.
If you are interested in the above procedure, BDO Hungary Tax Advisory Team is at your disposal.
