The European Commission on Thursday said it decided to refer a case concerning Hungary’s VAT legislation to the Court of Justice after the country failed to take timely action to change the law.
The Hungarian VAT legislation grants taxable persons the option to choose between carrying forward their excess VAT (which results from deductible VAT exceeding payable VAT in a tax period) to the next tax period, or immediately claiming a refund for it. However, the reimbursement of excess VAT cannot be claimed on the basis of input VAT charged on a purchase that has not yet been paid for by the taxable person. As a result, taxable persons whose tax returns consistently show “excesses”, are de facto obliged to carry forward the excess input VAT into the following tax period, the Commission said.
The regime infringes that part of the VAT Directive which states that where for a given tax period, the amount of deductions exceeds the amount of VAT due, member states may either make a refund or allow the carry over of the excess VAT forward to the following period, under the conditions which they shall determine, the Commission said.