The Hungarian tax authority has issued a notice on 10 December 2024 regarding the new Small Enterprises (SME) VAT scheme for small businesses under Council Directive (EU) 2020/285.
The SME will take effect on 1 January 2025. Under the new scheme, a taxable person established in the European Union may – under certain conditions – opt for individual tax exemption in a Member State other than that in which he is established, provided that he is registered exclusively in the Member State of his establishment.
This option is available to taxable persons whose total annual turnover within the EU does not exceed EUR 100,000 and whose annual turnover in a specific Member State remains below that Member State’s established threshold.
In Hungary, this threshold is set at HUF 12 million.
The notice confirms that taxable persons meeting the threshold may opt for exemption in their Member State of establishment, another Member State(s), or both.
Before 1 January 2025, small businesses could only act as non-taxable taxable persons in the Member State where they were established for economic purposes. This meant that they had to register and fulfil VAT obligations in every Member State other than their place of establishment where they sold products or provided services, for example, by submitting a VAT return and paying VAT.
