European Court rules against Hungary on VAT exempt export deadline

Fri 3rd Jan 2014

The highest court of appeal for European Union legal matters, the European Court of Justice (ECJ), has ruled that Hungary must change is rules on the loss of VAT exemption for exports.

Hungarian VAT export exemption within 90 day rule

Currently, exporters of goods from Hungary must ensure the goods leave Hungary within 90 days to fully qualify for an exemption from VAT.  In the case under review, the exporters failed to meet this deadline, so was issued with an assessment for the Hungarian 27% VAT, plus a late penalty and interest charge.

The case was referred to the ECJ which found against the Hungarian Tax Office.  It found that such a deadline contravened the EU VAT Directive and that Hungary must revise its tax code.

In general, companies must collect and retain full paperwork to demonstrate that goods have departed the country to ensure that they are entitled to the EU VAT exemption.