What are the Different VAT Rates in Hungary?

Published: May 04 2023

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Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services. In Hungary, VAT is called Általános Forgalmi Adó, or ÁFA in short. Hungary is a member of the European Union, and its VAT system is harmonized with the EU VAT rules.

Contents

Standard VAT Rate (27%)
Reduced VAT Rate (18%)
Super Reduced VAT Rate (5%)
VAT Exemptions

Standard VAT Rate (27%)

The standard VAT rate in Hungary is 27%, which is the highest in the European Union. This rate is applicable to most goods and services not specified under the reduced rates. Some examples of goods and services liable to the standard rate include:

Electronics, clothes, and household items
Most transport services and fuel
Alcoholic beverages and tobacco products
Most professional and consultancy services
Most construction work and supplies

Reduced VAT Rate (18%)

Hungary has a reduced VAT rate of 18%, applicable to a limited range of goods and services. This rate is designed to support certain industries and promote social welfare. Examples of goods and services liable to the reduced rate include:

Some foodstuff (e.g., dairy products, cooking oil, and baked goods. Milk, bread, and basic foodstuff mentioned below are exempted from this rate)
Some medical equipment, such as wheelchairs and pacemakers
Some medicines, such as generic or prescription drugs
Certain newspapers and magazines (excluding those with more than 50% of their content for advertising)

Super Reduced VAT Rate (5%)

In addition to the above reduced rate, Hungary also has a super reduced VAT rate of 5%, applicable to specific goods and services. This rate is intended to alleviate the financial burden on certain social goods and promote culture. The list of goods and services subject to the 5% VAT rate includes:

Basic foodstuff (e.g., milk, bread, corn, sugar, and salt)
Books, newspapers, and magazines with less than 50% of their content for advertising (print and digital versions)
Certain pharmaceuticals that are registered and authorized in Hungary (both prescription and non-prescription)
Hotel accommodation and related services
Live music concerts

VAT Exemptions

Some goods and services are VAT exempt in Hungary. This means that VAT is neither charged nor can be reclaimed on these goods and services. Examples of VAT-exempt goods and services include:

Education services provided by recognized institutions
Healthcare services provided by medical professionals or healthcare facilities
Financial and insurance services
Postal services provided by the national postal authority
The lease or rental of residential property (except for holiday apartments)

In conclusion, Hungary has three different VAT rates (27%, 18%, and 5%) to accommodate different types of goods and services. Understanding the different VAT rates and their applicability is essential for businesses to ensure tax compliance and proper accounting.