Revenue cap increased for VAT free business operation in Hungary

As of January 1, 2025, the revenue cap for VAT exemption is increased to HUF 18 million in Hungary. This is great news to small businesses, since price increases of the last few years would have otherwise forced them to become VAT subjects. This, in turn, would have increased their administrative costs unproportionately.

Revenue cap on VAT free business operation

Until December 31, 2024, the VAT free revenue cap was HUF 12 million (ca. EUR 29,000) / year
As of January 1, 2025, the VAT free revenue cap is HUF 18 million (ca. EUR 44,000) / year

In Hungary, many small businesses and especially freelancers operate VAT free. This means that they are not VAT subjects, they do not add VAT to their invoices, and they do not need to worry about any administrative tasks related to VAT. This way they can provide their services to their customers at lower prices.

Being exempt from VAT, however, is available only if your yearly revenue remains below a certain threshold. This threshold is defined by law, and it is increased every few years to keep up with inflation. The last raise happened back in 2019, when the revenue cap was increased from yearly HUF 8 million to yearly HUF 12 million, so another raise has been due for some time.

Staying VAT exempt in Hungary

Now thanks to the latest raise to HUF 18 million, many small businesses and freelancers can breathe a little easier. The new revenue cap allows them to increase their prices and maintain their livelihood without losing the privileges of being VAT exempt.

They do not have to submit monthly or quarterly VAT reports
Their accounting costs will not increase to cover the additional administrative tasks
They do not have to review all their contracts to make sure they account for VAT
Freelancers do not need a separate bank account for their business revenues

VAT exemption in the EU

The new VAT free revenue cap is still in line with EU standards and the regulation published last year that make it possible for EU based businesses to operate VAT free in other EU member states as well, provided that their yearly revenue stays below the limit defined by their country of seat, or below EUR 100,000 (whichever is lower). Since the HUF 18 million limit is still way below the EU limit, there is no conflict in this case.

Returning to the VAT free status in 2025

The new regulation even considers businesses whose revenue was above the HUF 12 million limit in 2024, which automatically made them VAT subjects. If the revenue of these businesses remained below the new HUF 18 million revenue cap and they expect their revenue to stay like that in 2025, they can return to VAT free operation starting from 2025.

This is a great relief, considering that normally, businesses are required to remain VAT subjects for at least the 2 following years. Unfortunately, the waiting period is waived only in the case of businesses that had a revenue between HUF 12 and 18 million in 2024; 2023 cases are not considered.

Businesses like this will be required to make a declaration that they want to return to VAT free operation by February 28, 2025.

Retroactive introduction of the new revenue cap

Even though the new regulation is now in force as of January 1, 2025, it was published only on January 25. As a result, if you are running a business that was originally forced to become a VAT subject, but now you would like to reclaim your VAT exempt status, all the incoming and outgoing invoices for 2025 must be reviewed (and probably canceled and reissued).

Ask your Hungarian accountant for their guidance in this matter.

Helpers Finance at your service

Helpers Finance focuses on working with small and medium-sized businesses, assisting both VAT subject and VAT exempt businesses. If you are already our client, make sure to contact your English-speaking accountant to see if you need to do anything related to the raising of the revenue cap for VAT free operation. If you are not yet our client, feel free to reach out and ask about your options.

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