Strict limits on VAT adjustments for closed periods: EU court rules in a Hungarian case

The General Court of the European Union has delivered an important judgment in a Hungarian case (Case T-198/25), clarifying the limits on retrospectively correcting and reclaiming VAT charged in error for periods already closed by a tax audit.

In the underlying case, a Hungarian company had incorrectly charged VAT on deposits for returnable packaging. Although the company received a ministerial opinion in 2015 confirming that the transactions fell outside the scope of VAT and that the invoices and returns could be corrected by self-revision, it did not correct the earlier periods. NAV subsequently audited the company for the period from 2015 to 2017, with the audit becoming final in 2018. Under Hungarian rules, the period thereby became closed by audit and could no longer be amended by self-revision.

The company did not request a repeat audit from NAV to reclaim the VAT paid in error until late 2020. Under domestic legislation, however, a closed period may only be re-examined on the basis of a new fact of which the taxpayer could not previously have been aware through no fault of its own. As the company had known for several years that a correction was possible and had been aware of the invoice details, the tax authority rejected the request. The company challenged that decision in court, arguing that the rejection infringed the principle of fiscal neutrality because the limitation period had not expired and there had been no loss of tax revenue.

The EU court upheld the Hungarian tax authority's position, emphasising the principle of legal certainty. It noted that the company had had more than three years to rectify the errors: it could have submitted corrective invoices through self-revision before the audit began, during the audit, which lasted more than seven months, or when appealing against the final assessment. This was more than a reasonable period in which to exercise its rights, and the large number of invoices requiring correction did not excuse the taxpayer's failure to act.

The principal lesson for Hungarian businesses is that EU principles cannot be used as a safety net to remedy their own administrative delays. Hungarian rules restricting corrections for closed periods to cases involving genuinely new facts that were not previously known are compatible with EU law, even where the general limitation period has not expired and there is no risk of a loss of tax revenue.