Hungary | Introduces 50% Flat Rate on Input VAT Deduction for Leasing Passenger Cars from 2019

On 8th October 2018, Council Implementing Decision 2018/1493 was published authorising Hungary to introduce a special measure effective as of 1st January 2019, whereby the right to input VAT deductions for the leasing of passenger cars used for both business and personal use may be applied at a 50% flat rate.

At present, taxable persons in Hungary may deduct VAT on the leasing of passenger cars to the extent that the car is used for business purposes. Since having to demonstrate the proportion of car activity devoted to personal use can be both inaccurate and burdensome, Hungary made a request to the Commission for the option to apply an input VAT deduction flat rate of 50%.

This simplification measure will apply to the leasing of passenger cars designed for the transport of no more than nine people and with a gross vehicle weight not exceeding five tons.  Vehicles which have been designed to be used for business purposes are excluded from the right to apply the flat rate.  These include vehicles designed for the transport of goods, vehicles that serve special purposes like fire engines and crane trucks, vehicles designed for the transport of at least ten people, tractors and trailers.

The new rule is due to expire on 31st December 2021.