Who can be a fiscal representative in Hungary?
Under the statutory provisions, fiscal representatives may still only be private limited companies (kft., rt., zrt.) with no tax debt recorded by the tax authority.
Additionally, from 1 January 2025, the company’s registered capital must meet the HUF 150 million threshold for all entities acting as fiscal representatives.
This also applies to companies that had already been registered by the tax authority as fiscal representatives when the threshold of HUF 150 million was introduced earlier and held the then minimum registered capital of HUF 50 million. The legislation allows fiscal representatives to substitute the registered capital requirement with a bank guarantee issued exclusively in their name.
Although the HUF 150 million figure may seem like a significant increase, considering that the regulation dates back to 2004, the amount is not unreasonable.
Taking only the inflation that has occurred in the meantime into account, the HUF 150 million threshold can be considered justified. According to the transitional provisions of the Tax Administration Act, the HUF 150 million threshold will take effect for already registered fiscal representatives as of 1 January 2025.
Therefore, it is strongly recommended that such companies raise their registered capital to meet the statutory level if they have not yet done so.
Fiscal representative – what is the risk if they fail to raise capital?
Failure to meet the new HUF 150 million threshold, effective from 2025, may lead to the undesirable situation where the tax authority removes a previously registered fiscal representative, even one within the corporate group, from its records. It may then happen that if a new fiscal representative complying with statutory requirements is not appointed for the companies represented by the removed fiscal representative, the Hungarian tax numbers of the affected foreign businesses may be jeopardized.
Since companies established outside the European Union are required to appoint a Hungarian fiscal representative for their domestic transactions, even those with fiscal representatives within their corporate group are now compelled to act. The deduction of the VAT content of invoices issued for activities carried out without a Hungarian tax number or with an invalid one is likely to result in a tax penalty, so this behaviour should be avoided not only for reasons of legality but also for financial implications.
Many foreign businesses operate in Hungary without local establishment, as so-called tax-registered taxpayers, often generating substantial turnover. Consequently, the potential loss of a Hungarian tax number poses significant business risks.
The general rules of fiscal representation remain unchanged
Act CLI of 2017 on Tax Administration continues to provide that any non-resident company engaged in economic activities in Hungary without being required to establish a resident business entity may satisfy its Hungarian tax liabilities through a fiscal representative. The VAT Act stipulates that if a taxpayer subject to VAT is established outside the EU for economic purposes, appointing a fiscal representative is mandatory.
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The other rules of fiscal representation, beyond the capital requirement, remain unchanged. These include joint and several liability, the exclusive exercise of rights related to tax obligations, and compliance with filing requirements. For this reason, it is crucial to carefully consider which foreign company’s fiscal representation a representative is willing to undertake. In cases where the tasks and risks associated with fiscal representation are currently not managed by a specialized tax advisory firm, it may be worth considering a change. Appointing a fiscal representative independent of the corporate group not only frees up registered capital within the group and eliminates the need for capital increase but also brings the benefit of professional expertise in handling fiscal representation.
