Who are eligible for tax exemption?

Foreign travellers are eligible for tax exemption. A foreign traveller is a natural person who

• is not a national of any Member State of the European Community, and has no right of permanent residence in any Member State of the European Community, or
• is a national of a Member State of the European Community, however, his permanent address is outside the Community.

When are purchases by foreign travellers tax exempt?

Foreign travellers are tax exempt if the goods purchased by them belong to their personal luggage. A further condition is that the total value of the goods purchased by a foreign traveller, , exceeds EUR 175 including VAT in the national currency. The foreign traveller is obliged to document his legal status,  with the help of a valid travel document or some other legally acceptable form of personal identification document recognised by the Republic of Hungary –i.e. that he is not a national of any Member State of the European Community, and has no right of permanent residence in any Member State of the European Community, or alternatively that he is a national of a Member State of the European Community, however, his permanent address is outside the European Community.

A fundamental condition of tax exemption is that the foreign traveller transports the purchased goods to the territory of a third country within 90 days of the date of purchase with proof of exportation endorsed by the Customs Office by affixing its seal on a form prescribed by the State Tax Authority for this particular purpose (hereinafter referred to as “VAT reclaim form”).

If all of the above conditions are met, the foreign traveller is eligible for tax exemption.

Assertion of tax exemption

Tax exemption may be asserted in two ways.

• Upon purchase, the vendor / seller issues an invoice including VAT to the foreign traveller and completes a VAT reclaim form, the first two copies of which he hands over to the foreign traveller, and keeps the third for his own records. After the transportation of the goods to a third country, the foreign traveller brings / sends the vendor the first copy of the VAT reclaim form endorsed and stamped by the customs office along with the original invoice received at the transaction. If the foreign traveller has sent the vendor the first copy of the VAT reclaim  form endorsed and has had it stamped by the Customs Office, the vendor refunds to the foreign traveller the VAT charged to him, provided that the foreign traveller has provided evidence of his legal status to the vendor, the total value of the purchased goods, including VAT, exceeds EUR 175 and the transportation of the purchased goods has taken place within 90 days following the date of the purchase of such goods.
• Notwithstanding the above, the vendor may sell the goods net of VAT to the foreign traveller. If such is the case, the foreign traveller must provide evidence to the vendor, by sending the vendor the first copy of the VAT reclaim form endorsed and stamped, that he has transported the goods to the territory of a third country within 90 days.

Documents to be issued upon purchase

A printed form called “Tax reclaim form for foreign traveller” prescribed by APEH for this particular purpose is available at specialised form - stationery shops, at vendors’ or at the premises of entrepreneurs validating tax refund, and a guide to the completion of the form is downloadable from our Hungarian website. The vendor at the place of purchase must complete this form. Certain commercial units anticipating purchases by foreigners usually keep such printed forms in stock and place them at clients’ disposal. With the prior consent of APEH, pre-printed forms other than the one above can also be used as a tax refund form. The following must be indicated on such “VAT reclaim form for foreign traveller”:

• name, address and tax number of the vendor effecting the sale,
• name and address of the foreign traveller (buyer) and the number of his/her travel document,
• number of the invoice made out on the sale of goods,
• total invoiced amount on the sale of goods, including VAT,
• a place for signature and print of seal in proof of exportation to be endorsed by the Customs Office at the place of exit from the territory of the European Community.

The vendor must hand over two (original) copies of the completed VAT reclaim form to the foreign traveller. The separate lines / titles of the form must be printed in at least four languages (Hungarian, English, German and Russian), and must be filled out in Hungarian.

The VAT reclaim form must be completed by the vendor on the basis of the data indicated on the invoice or the simplified invoice evidencing the purchase. One VAT reclaim form may contain the data of only one invoice. In order to validate the tax exemption, the foreign traveller must have, in addition to the VAT reclaim form, the original invoice or simplified invoice issued at purchase, which the traveller receives from the vendor

Range of goods in regard of which the foreign traveller is entitled to tax exemption

Tax exemption covers all goods that a foreign traveller transports or dispatches as personal belongings or luggage. Tax exemption can be asserted only in regard of invoices where the total invoiced amount inclusive of VAT exceeds EUR 175. It is not the price of each item of goods that should exceed the above amount. It suffices if the total invoiced amount on the purchased goods, inclusive of VAT, indicated on the same invoice exceeds this amount.

Conversion to HUF is performed at the official exchange rate published by the National Bank of Hungary being in force on 1 May 2004, and the amount resulting must be rounded – according to the relevant mathematical rules of rounding – to units of HUF 1,000.

The deadline for and the means of transporting the goods abroad (to a third country) so that tax exemption can be asserted

Tax exemption can be asserted if the foreign traveller transports abroad the product purchased in Hungary within 90 days following the date of purchase, and the competent Customs Office on the territory where the foreign traveller leaves the territory of the European Community verifies the fact of the exportation by endorsing the tax reclaim form while the relevant invoice or simplified invoice is presented. The Customs Office may endorse the tax return form only when the goods leave the country. Subsequent endorsement is possible only if verification failed upon the transportation of goods abroad for reasons imputable to the Customs Office.

The Hungarian Customs Office does not endorse the tax reclaim form, if the traveller fails to present the goods.

Nor does the Customs Office endorse the tax return form if the identification data indicated on the invoice evidencing the purchase and those on the tax reclaim form are not identical with the identification data of the foreign traveller.

The Hungarian Customs Office keeps one copy of the endorsed tax return form. In a customs clearance procedure more than one tax reclaim form can be endorsed.

Manner of the assertion of tax exemption as part of tax reclaim

Unless the vendor makes out an invoice exclusive of VAT, tax exemption can be implemented in the form of a tax reclaim procedure. The foreign traveller may request the vendor selling him/her the product to make the tax refund. The first copy of the original VAT reclaim form endorsed by the competent Customs Office and the original invoice issued by the vendor must be presented to the vendor; furthermore, the foreign traveller must, by presenting an appropriate travel document, provide evidence that s/he is entitled to tax exemption under this legal title.

The foreign traveller may  give authorisation in writing that another person can act on his/her behalf in asserting the tax exemption.

The foreign traveller is entitled to the tax refund in HUF. The refunded tax must be paid in cash. The foreign traveller, however, may agree with the vendor on a currency other than HUF and a means of payment other than cash.

The foreign traveller should take into account that if the vendor decides to sell the product net of VAT, by doing so he/she assumes risks. The foreign traveller must, in this case as well, return the original VAT reclaim form endorsed by the competent Customs Office and the original invoice to the vendor. (The reason for this is that the vendor may treat the sale to the foreign traveller as finally tax exempt only in possession of the above documents. Unless the foreign traveller provides the vendor the above documents, he/she is not entitled to tax exemption. As a result, the VAT that has not been charged to the foreign traveller is realised as loss by the vendor.) The vendor must make sure that the invoice granting entitlement to tax refund is not suitable for repeated use by furnishing it with the sentence “VAT refunded”. If the foreign traveller so requests, the vendor must return him/her the invoice made unsuitable for repeated use.

Foreign entrepreneurs, i.e. taxable persons registered in countries other than Hungary, are entitled, in the case of purchases made in the interest of their activities, to tax exemption or VAT refund under a different legal title, to which different rules of procedure apply. A different type of tax exemption pertains to the staff of diplomatic missions and consular posts and their family members living in the same household.