Hungary: Supreme Court Confirms VAT Refund on Bad Debts
Hungarian taxpayers have received long-awaited clarity: the Supreme Court of Hungary has confirmed that VAT paid on bad debts is refundable, following recent decisions by the European Court of Justice (ECJ).
While the ECJ had already opened the door in its Di Mauro and Porr rulings, Hungarian companies were still required to pursue domestic litigation to enforce this right. The recent Hungarian decisions now solidify that VAT recovery is possible — and create a clear legal pathway for taxpayers in similar positions.
⚖️ Background: What Did the ECJ Say?
In the Di Mauro and Porr cases, the ECJ established that under the EU VAT Directive, a taxpayer is not obliged to pay VAT on an amount that they have not actually received. This applies particularly to bad debts — invoices that have been issued and taxed, but remain unpaid.
While these rulings offered hope to many taxpayers, each EU Member State must still implement or interpret these judgments within their own legal system.
🇭🇺 Hungary’s Position Until Now
Despite the ECJ’s decisions, Hungary lacked a clear domestic procedure for reclaiming VAT on bad debts. Taxpayers had to initiate individual lawsuits, often at great expense and uncertainty, to recover VAT already paid on unpaid invoices.
This ambiguity caused frustration for businesses facing losses, especially during periods of economic instability.
🧾 The Supreme Court’s Recent Verdict
In its first such decisions, the Hungarian Supreme Court ruled in favour of taxpayers who had pursued VAT refunds on bad debts, confirming that Hungary must apply the principles of the ECJ’s rulings.
This creates an important precedent — one that may lead to:
Greater consistency in future tax authority practice
Streamlined procedures for similar VAT refund claims
Potential opportunity windows for recovering VAT on historical bad debts
📌 What Taxpayers Should Consider
Review past cases involving unpaid invoices and VAT
Assess eligibility for refund under the ECJ and Hungarian rulings
Consider seeking professional support for making or defending claims
This shift brings Hungary closer to aligning its VAT regime with EU principles — and offers real financial relief to businesses navigating cashflow challenges.
