The european judicial practice regarding the vat deduction right and its impact on the hungarian practice

• Author: Zoltan Nagy, Roland Zilahi
• Position: Professor, Phd, habil., Faculty of Law, University of Miskolc, Miskolc, Hungary
• Pages: 68-76

LESIJ NO. XXVI, VOL. 1/2019

THE EUROPEAN JUDICIAL PRACTICE REGARDING THE VAT DEDUCTION

RIGHT AND ITS IMPACT ON THE HUNGARIAN PRACTICE

Zoltan NAGY

Roland ZILAHI

Abstract

The purpose of the below study is to compare the European judicial pra ctice with the Hungarian

practice in terms of VAT deduction right. In the meantime, the study gave us the oppor tunity to get to

know the complex requirements of VAT deduction right. In addition, we were also able to assess

whether the Hungaria n VAT Act is in line with the community legislation.

Keywords: Value added tax, deduction right, Eur opean judicial practice, ta x fraud, Hunga rian

VAT.

Introduction

The valuОăaННОНătaбă(‘VAT’)ăТsăoПtОnă

МallОНă asă tСОă‘quОО năo ПătaбОs ’ăаСТМСă namОă

has several reasons. One of the most

important reasons is that VAT provides the

largest amount (appr. 1/3) of tax to the

Hungarian budget comparing to other taxes.1

From an economical point o f view, a tax

may be considered as good if it meets the

following three requirements: (1) it is fair

and square, (2) the direct cost of tax

administration is relatively low and (3) it

hardly i mpacts on the b ehaviour of private

individuals and busine sses. However, the

 Professor, Phd, habil., Faculty of Law, University of Miskolc, Miskolc, Hungary, (e-mail: jogdrnz@uni-

miskolc.hu), Ferenc Mádl Institute of Comparative Law, Budapest (e-mail: zilahiroli@gmail.com).

 Indirect tax consultant, Deloitte Co.Ltd., Budapest, Hungary.

1https://www.portfolio.hu/gazdasag/adozas/kell-e-nekunk-ez-az-afa.192931.html Lentner Csaba:.Az

adórendszer és a közpénzügyek egyes elméleti, jogszabályi és gyakorlati összefüggései. Európai Jog: Európai

Jogakadémia Folyóirata, 18. évf. 5. szám, p. 30-36.ăCsrös,ăGabrТОlla:ăTaбăsвstОmăТnăHunРarвăanНăТtsăМСanРОsăНuОă

to the crisis – pioneer or hazardous method of sectoral taxation? In: Marcin Burzec–Pawel Smolen (eds.): Tax

authorities in the Visegrad Group countires. Common experience after accession to the European Union.

Wydawnictwo KUL, Lublin, 2016. p. 103–105.

2 Ercsey Zs. Az általános forgalmi adóról, Jura Kiadó, Budapest 2012, p. 73. Lentner Csaba : The New Hungarian

Public Finance System – in a Historical, Institutional and Scientific Context. Public Finace Quaterly, Vol. 60. no. 4.

p. 447-461. Zoltán Nagy-Beáta Gergely-Balázs Katona: Problems Relating to Tax Avoidance and Possible Solutions

ТnătСОăEuropОanăUnТon’săanНăHunРarТană’săRОРulatТon,ăCurОntulăJurТНТМăББI.ănoă3.(7Ő),ă2018.ă

completion of these requirements in case of

VAT is argued nowadays. Indirect taxes are

generally fair and square thus taxable

persons have the right to decide how much

they spend of their income and consequently

how much tax they pay. The direct cost of

tax administration is also considered as low

in case of VAT.2

After joining the European Union

(‘EU’)ă taбatТonă bОМamОă onОă oПă tСОă mostă

important and interesting fields. W ithin

taxation, VAT has an esp ecially important

role thus the citizens of the EU meet this type

of tax every da yand the rate of the

Hungarian VAT is very hi gh which means