Fiscal representative, VAT agent in Hungary
Companies not established in the European Union, and selling or importing goods, or providing services in Hungary, are required to register themselves as a non-resident VAT-taxpayers. After registration, the Hungarian Tax Authority (NAV) will require the company to appoint a Fiscal Representative. This registered Hungarian company will be the local VAT agent of the foreign company, managing with queries and filing obligations of the foreign company for dealings with the tax authorities. The Fiscal Representative also is jointly and severally liable for the VAT liability of the foreign company. As a result, it is therefore industry practice to require a full bank guarantee in favor of the Fiscal Representative to protect it from losses.
The Fiscal Representative is required by the Hungarian Tax Authority to ensure that:
- the foreign company is properly registered with the local tax office;
- the foreign company is fully compliant with the rules on invoicing, VAT treatment, exchange rates etc.;
- accounting records are maintained to exacting local standards, and that they are readily available for inspection by the tax authorities;
- all VAT and associated filings are correctly prepared and submitted, monthly or quarterly as required by law;
- enquiries and tax inspections from the VAT office are professionally handled.
Practical examples when a Fiscal Representative is relevant
Case study 1: import in the EU via Hungary, with clearance for free circulation in the Community
A US company receives a number of orders placed by companies located in Hungary, Austria, Poland and Germany. It decides to rent a warehouse in Budapest, close to its largest client, and from which is possible to deliver the goods to other European Countries. Goods are shipped in Hungary via the Danube. At delivery, the goods are subject to Customs Clearance, import VAT and duties must be paid to the Tax Authority. Customs clearance in Hungary must be required by the US company. Prior to import into Hungary, the US company must register itself as VAT taxpayer and appoint a Fiscal Representative, that will pay the VAT and will manage the VAT tax return. As the good are sold to Hungarian clients, the Fiscal Representative will prepare VAT tax return on behalf of the US company and will pay the VAT. Once goods are sold to clients located in other European countries, the Fiscal representative will report the intra-community sale of goods in the INTRASTAT system.
Case study 2: export from Hungary with preliminary intra-Community purchase
A US company purchases goods from different suppliers in the EU, but the main supplier is in Hungary. Goods are collected in Budapest. European and Hungarian companies sell the goods under VAT requirements, in this case, the US company must be registered as VAT taxpayer in Hungary. The goods leave Hungary to Turkey after Custom Clearance requested by the US company. There is no VAT to pay, but for the custom process, it is necessary a local VAT identification. The US company must appoint a Fiscal Representative.
Case study 3: performance of services in Hungary
Services performed within the territory of Hungary are subject to VAT. Rules pertaining the „place of supply” are provided by EU VAT directive and local rules. In some cases, the services provided in Hungary must be charged with local VAT, and a registration is required. In this case, a Fiscal Representative must be appointed to manage all VAT tax returns and payments.
VAT Registration is not a permanent establishment for the purposes of income taxation. Performing transactions that may be subject to VAT doesn’t mean that the foreign company has a permanent establishment in Hungary. A permanent establishment is regulated under agreements for avoidance of double taxation signed between Hungary and foreign countries.