Understanding Hungarian VAT (ÁFA): The 27% Reality

What is Hungarian VAT (ÁFA) and why is it 27%?

Hungarian VAT, called általános forgalmi adó (general turnover tax) and shortened to ÁFA, has a standard rate of 27%. That is the highest standard VAT rate in the European Union as of 2026 (Tax Foundation). Two reduced rates of 18% and 5% cover specific goods and services, and exports are zero-rated, so 27% is a ceiling rather than a flat charge on everything you buy.

VAT is a consumption tax collected on almost every sale. The business adds it to the price, the customer pays it, and the company forwards it to the tax authority, NAV (NAV). It is not a tax on your profit. Hungary deliberately pairs the lowest corporate income tax in the EU, a flat 9% (PwC Tax Summaries), with the highest VAT, which is why the country markets a 9% advantage while running a 27% sales tax underneath. For the wider business case, see why entrepreneurs choose Hungary.

Which rate applies: 27%, 18% or 5%?

Most goods and services fall under the 27% standard rate. The reduced rates are narrow and set by law, so a business cannot simply choose them (Avalara):

• 18%: certain basic food products such as dairy and bakery goods, plus commercial accommodation services.
• 5%: medicines, medical devices, books, newspapers and selected basic foodstuffs.
• 0%: exports of goods, intra-EU supplies to VAT-registered customers and international transport.

Hungary keeps adjusting which items sit in the reduced brackets, usually to ease food prices, so the exact list is worth checking with NAV or an accountant before you set a price. Applying the wrong rate on an invoice is a reporting error you have to correct later, not a rounding detail.

Do you have to register for VAT in Hungary?

Almost every business that trades in Hungary needs a tax number and sits inside the VAT system by default. The main way to stay out of it is the small business exemption, alanyi adómentesség (subjective VAT exemption), which lets a resident business skip charging VAT while its annual revenue stays under 20 million HUF as of 2026 (Helpers Hungary). That threshold rose from 18 million HUF and is planned to reach 22 million in 2027 and 24 million in 2028.

The exemption is a trade-off: you do not add 27% to your prices, but you also cannot reclaim the VAT you pay on your own costs. It suits service businesses with low input costs and mainly private customers. Setting up a company puts these choices in front of you from day one, so it helps to read how to register a Kft alongside the tax decisions.

Foreign businesses are treated differently. A company that is not established in Hungary has no registration threshold at all: a single taxable sale in the country triggers the duty to register before it happens (Numeral). Companies based outside the EU must also appoint a fiscal representative who becomes jointly liable for the VAT.

How does VAT actually work on your invoices?

VAT flows in two directions. The VAT you add to your sales is output VAT, and the VAT you pay to suppliers is input VAT. Each period you settle the difference with NAV: output minus input. If you buy more than you sell in a period, the balance can become a refund or a carry-forward credit.

A short example makes it concrete. Sell a service for 100,000 HUF net and you add 27,000 HUF of VAT, so the customer pays 127,000 HUF. If you spent 50,000 HUF net on tools that period and paid 13,500 HUF of VAT on them, you owe NAV 27,000 minus 13,500, which is 13,500 HUF. The 27% rate is set by NAV (NAV), and the mechanism is the same one used across the EU.

This is why VAT is called neutral for registered businesses: you collect it and reclaim it, so the real cost lands on the final consumer. It still shapes your cash flow, because you may owe NAV the VAT on an invoice before your own customer has paid you.

Real-time invoicing: what is the Online Számla system?

Hungary runs one of the strictest invoice-reporting regimes in Europe. Every invoice a VAT-registered business issues must be reported electronically to NAV through the Online Számla (Online Invoice) system, in a fixed XML format and essentially in real time. This has been mandatory since 2018 and now covers business-to-business, business-to-consumer and business-to-government sales (Avalara).

Since 2024 NAV has layered a second tool on top called eÁFA (electronic VAT), which uses that reported invoice data to produce a draft, pre-filled VAT return the business reviews and submits (Grant Thornton). In practice this means invoicing software that connects to NAV is not optional, and most founders hand the reporting to a bookkeeper. Our guide to accounting for a Hungarian company explains how that is usually organised.

How often do you file VAT returns?

Filing frequency depends on how much VAT you handle, not on the type of company. As a rule, businesses with a higher annual VAT liability file monthly, mid-sized ones quarterly and the smallest annually (TBCAS):

• Monthly: annual VAT liability above 1,000,000 HUF.
• Quarterly: annual liability between 250,000 HUF and 1,000,000 HUF.
• Annually: annual liability below 250,000 HUF, for very small businesses only.

New companies usually start on monthly or quarterly filing. Whatever the frequency, the deadline is the 20th of the month following the period, and any VAT due is paid the same day. Returns are filed electronically, which needs an identified login through Hungary's online gateway, so it pays to set up your NAV access early.

What about cross-border and intra-EU VAT?

If you sell to businesses in other EU countries, the reverse charge usually applies: you invoice without Hungarian VAT and your business customer accounts for VAT in their own country (Numeral). You still report the sale, and you confirm the customer's EU VAT number before treating a supply this way.

A newer relief is the EU-wide small business scheme. A small company can trade VAT-exempt across borders while its total EU turnover stays under 100,000 EUR, on top of the national threshold (VATupdate). Selling physical goods to private consumers in other EU countries is different again and often runs through the One Stop Shop, so cross-border sellers should map their flows before assuming one rule covers everything.

What does 27% VAT mean for your budget?

For a business selling to other VAT-registered companies, the 27% is largely a pass-through: your clients reclaim it, so it does not sit on your margin. For anyone selling to consumers the picture changes, because the tax is baked into the shelf price. A product listed at 1,270 HUF already contains 270 HUF of VAT, and the high rate can quietly squeeze what you keep unless it is priced in from the start.

This is also why the small business exemption and the flat-rate regimes matter to solo founders and freelancers. If most of your customers are private individuals, staying under the exemption threshold can be worth more than the VAT you would otherwise reclaim. For the full set of company, accounting and tax decisions, the Starting a Business hub pulls the related guides together.

Frequently asked questions

Is Hungary's 27% VAT really the highest in Europe?

Yes. Hungary's 27% standard VAT rate is the highest standard rate in the European Union as of 2026, ahead of the 25% charged in Denmark, Sweden and Croatia (Tax Foundation). The reduced rates of 18% and 5% soften the burden on food, medicine and books.

Can a small business avoid charging VAT in Hungary?

A resident business can choose the small business exemption (alanyi adómentesség) and not charge VAT while its annual revenue stays below 20 million HUF as of 2026 (Helpers Hungary). The catch is that an exempt business cannot reclaim VAT on its own purchases, so it mainly helps low-cost service providers selling to private customers.

Do foreign companies have to pay Hungarian VAT?

There is no registration threshold for a company that is not established in Hungary. A single taxable sale in the country creates an obligation to register for Hungarian VAT before that sale takes place (Numeral). Businesses based outside the EU must also appoint a Hungarian fiscal representative who shares liability for the VAT.

When are Hungarian VAT returns due?

Monthly filers submit and pay by the 20th of the month after the reporting period (TBCAS). Frequency itself depends on VAT liability: monthly above 1,000,000 HUF a year, quarterly between 250,000 HUF and 1,000,000 HUF, and annually below that. Returns are submitted electronically to NAV.

What is the difference between Hungary's 9% tax and 27% VAT?

They are two separate taxes. The 9% is corporate income tax, charged on a company's profit and the lowest such rate in the EU (PwC Tax Summaries). The 27% is VAT, added to sales and ultimately paid by the customer rather than the company (Tax Foundation). A profitable Hungarian company can genuinely pay 9% on its profit while still collecting 27% VAT on what it sells.