Movement of goods

Transition period

During the transition period after the date of withdrawal (until 31st of December 2020) the United Kingdom will be treated as a Member State of the EU for the application of VAT rules. In the case of movement of goods this means that goods supplied to the UK and goods acquired from the UK will be treated according to the rules of intra-Community supply of goods and intra-Community acquisition of goods, together with the rights and obligations attached to this (i.e. recapitulative statement). Where the dispatch or transport of the goods from the UK to any other Member State (e.g. Hungary), or vice versa, started before the end of the transition period and ended thereafter, those transactions must be treated according to the rules for the intra-Community supply and intra-Community acquisition of goods.
A taxable person’s rights and obligations with regard to the transactions mentioned in the previous paragraph, and transactions between the UK and a Member State (e.g. Hungary) with a cross-border element that take place before the end of the transition period, will continue to apply for 5 years from the end of the transition period (31 December 2020.

Treatment of supply and acquisition of goods after 31 December 2020

To the supply of goods to United Kingdom rules on exportation, to the acquisition of goods from United Kingdom rules on importation should be applied with the exception of Northern Ireland after 31st of December 2020. 
For goods placed under call of stock arrangement the following will be applicable. In case the goods are transported from the United Kingdom and are placed under the call of stock arrangement in Hungary before 1st of January 2021, the call of the goods from the stock (intended acquirer takes ownership of the goods) should be treated according to the rules on the Intra-Community acquisition. In case the goods transported from United Kingdom and placed under the call of stock arrangement before 1st of January 2021 are transported back to United Kingdom, the rules on exportation should be applied.

In case the goods are transported from Hungary and placed under call of stock arrangement in United Kingdom before 1st of January 2021, the supply of the goods from the stock should be treated as an Intra-Community supply of goods. In case the goods transported from Hungary and placed under the call of stock arrangement in United Kingdom before 1st of January 2021 are transported back to Hungary, this should be treated according to the rules on importation. However the importation can be exempted as a reimportation of goods.

Protocol on Ireland/Northern Ireland

Northern Ireland enjoys a special VAT status after the end of the transition period according to the Withdrawal Agreement. This period lasts for 4 years after the end of the transition period, and it could be renewed. The special status entails that in Northern Ireland and to Northern Ireland the union VAT rules are applicable after 31st of December 2020, meaning that Northern Ireland is treated for VAT purposes as a Member State. However there is no such distinction in case of services. For services United Kingdom is to be treated uniformly as a third country.

According to above mentioned the supply of goods from Hungary to Northern Ireland is to be treated as an Intra-Community supply of goods or Intra-Community distance sales of goods, the acquisition of goods from Northern Ireland is to be treated as an Intra-Community acquisition of goods or as an Intra-Community distance sale of goods. Taxable persons established in Northern Ireland can use the One Stop Shop System as from 1st of July 2021 for accounting VAT on the distance sales of goods supplied to consumers in the EU. Taxable persons established in Hungary can use as well the One Stops Shop System as of 1st of July 2021 to account for VAT on the distance sales of goods supplied to consumers in Northern Ireland. 

Treatment of services after 31 December 2020

In case of services supplied in relation to United Kingdom union rules can and should be applied for the services supplied before the end of the transition period. This means that the supplies of services for which VAT became chargeable before 1st January 2021 should be included in the recapitulative statement or in the OSS. Fort the supply of services after this deadline United Kingdom as a whole is to be treated as third country.
The place of supply of services is not influenced by the fact whether the supplier or the costumer is not established in the EU. However there is a difference in administrating the VAT on services. In case the taxable person acquiring the services is established in the EU (general place of supply), the supply should be included in the recapitulative statement, and the status of the customer should be verified with a VAT ID number. In case the taxable person acquiring the services is established in a third country, there is no such obligation and different rules are applicable to the verification of his status as a taxable person.    

There is a change in the way the VAT obligation should be fulfilled in case of supply of telecommunication, broadcasting and electronic services (TBE services) to non-taxable persons. Where the non-taxable person acquiring the TBE services is established in the EU, the VAT can be accounted for by using the OSS, in case the customer is established outside the EU OSS cannot be applied. Thus taxable person established in Hungary supplying TBE services to non-taxable persons residing in United Kingdom, should pay the VAT on those services directly to the UK Treasury for services supplied after 31st of December 2020. This goes similarly for further services for which OSS could be applied in case the place of supply is in the EU.    

VAT refund for non-established taxable persons

Transition period

Taxable persons not established in the Member State of consumption but established in the EU are entitled to the refund of VAT incurred on their purchases in the Member State of consumption according to Council Directive 2008/9/EC. According to this Directive, taxable persons can submit the application for the refund of the VAT until the 30th of September of the year following the refund period. Based on the Withdrawal Agreement, the application for the refund of VAT incurred in the UK by domestic taxable persons or in Hungary by UK taxable persons for the year 2020 can be submitted until March 31 of 2021.

Period after 31st of December 2020

Without reciprocity agreement on VAT reimbursement between United Kingdom and Hungary there won’t be a possibility to claim input VAT charged in the respective State with the exception of Northern Ireland. Taxable persons established in Northern Ireland can claim the reimbursement of VAT charged in respect of supply of goods in any MS of EU according to the union rules. Similarly taxable persons established in Hungary can claim reimbursement of VAT charged in respect of supply of goods in Northern Ireland.  

One Stop Shop System

The One Stop Shop System (OSS) is for the submission of VAT returns and the payment of VAT for telecommunication, broadcasting and electronic services (TBE services) supplied to non-taxable persons by taxable persons not established in the Member State of consumption. In the OSS, the VAT returns and payments must be submitted and paid to the Member State of establishment of the taxable person. Where there is a need for corrections of the VAT returns submitted via the OSS, this can be done at the Member State of establishment (MSE) up to 3 years from the deadline for the submission of the original return (after this deadline the corrections need to be done directly at the Member State of consumption). However, according to the Withdrawal Agreement the correction of the VAT returns submitted in the UK as a MSE, and VAT returns submitted in a Member State as a MSE with regard to the UK for the supply of services before the transition period, can be submitted at the latest until 31st of December 2021 in the MSE.