What is a community tax number and why is it needed?

If you purchase or sell goods within the European Union, provide services to foreign partners, or use services from EU-based suppliers, you will need a community VAT number. But what exactly is it, when is it mandatory, and how can you apply for it with the Hungarian tax authority? In this blog post, we briefly summarize the key information you need to know.

What is a community VAT number?

A community VAT number is the VAT identification number used by businesses operating within the European Union. It allows transactions between EU member states to be recorded correctly and, where applicable, treated as VAT exempt.

Community VAT numbers begin with a country code indicating the EU member state in which the business is registered. In Hungary, the community VAT number starts with the prefix HU, followed by the domestic tax number of the business, for example: HU12345678
HU12345678

When do you need a community VAT number?

You are required to apply for a community VAT number if your business:

• sells goods to or purchases goods from another EU member state,
• provides services to an EU-based partner or uses services from an EU-based partner,
• participates in a triangulation transaction.

It is important to note that VAT exemption for intra-community transactions can only be applied if both parties have a valid community VAT number.

How can you apply for a community VAT number?

In Hungary, community VAT numbers must be requested from the National Tax and Customs Administration (NAV). Newly established companies can request registration for a community VAT number as part of the tax registration form submitted by their attorney together with the company formation application. Existing companies can apply using the T201T form. 

The application is free of charge, and registration is usually completed within a few working days.

What happens if you do not have a community VAT number?

If you carry out an intra-EU transaction without a community VAT number:

• your partner cannot issue a VAT-exempt invoice,
• the transaction will not qualify as an intra-community supply or acquisition,
• and the tax authority may impose sanctions in the case of incorrect VAT treatment.

In addition, your VAT number will not be available in the VIES system, meaning your partners will not be able to verify it officially.

VIES, the EU VAT number verification system

The VIES (VAT Information Exchange System) allows anyone to verify the validity of an EU VAT number. This check is mandatory if you wish to apply VAT exemption for an intra-community supply. Since all queries are logged by the system, it is strongly recommended to verify your partner’s VAT number before issuing an invoice and to save the result of the check. This documentation may later serve as proof of good faith in case of a tax audit related to VAT exemption. 

You can verify your partner’s community VAT number here:

https://ec.europa.eu/taxation_customs/vies

Additional obligations for intra-community sales or purchases

Your obligations do not end with completing a VAT-exempt sale or purchase. It is essential that your accountant is informed of all intra-community transactions, so be sure to forward the related documents. Based on the invoices, in addition to the VAT return, an A60 report must be submitted, listing each intra-community transaction for the given reporting period. This reporting is not one-sided. Your partner submits a similar report in their own country, and the two reports are matched. If either side fails to report, the tax authorities will raise questions and an audit may follow. To avoid this and to maintain VAT exemption, proper bookkeeping and inclusion of these transactions in VAT returns are essential.