Cancellation of accommodation reservations and VAT: new guideline from the Hungarian tax authority and practical steps for accommodation providers

This Client Alert is available in both English and Hungarian.

At the beginning of autumn, when the summer season ends and tourism remains buoyant, it is particularly important for accommodation providers to be aware of the tax implications of cancellations.

In this Client Alert, Senior Associate János Pásztor and Associates Bence Kálmán and Bálint Apáthy examine the VAT implications of cancellations in the accommodation sector, as clarified by the National Tax and Customs Administration of Hungary (“NTCA”) in guideline No. 2025/7.

The National Tax and Customs Administration of Hungary (“NTCA”) has interpreted the VAT treatment of cancellations of reservations for accommodation services and the absence of guests in guideline No. 2025/7, published on 3 September 2025, with the aim of bringing Hungarian practice in line with the case law of the European Union.

The guideline distinguishes between three typical cases that may require different VAT treatment:

Express cancellation – when the guest clearly indicates that they do not wish to use the accommodation service.

• If the guest cancels their booking based on the right of withdrawal, there is no VAT liability on the amount received in advance – originally accounted for as a VAT-able advance payment – no service is actually provided. This applies regardless of whether the accommodation provider retains the entire amount received (even if it equals the full service fee), only a part of it or if the cancellation entails a subsequent payment obligation. In such cases, the invoice issued for the advance payment must be cancelled, as no service was provided.
• If the accommodation provider retains the amount previously paid by the guest (e.g., a deposit) but provides a voucher of equal value for future use of the accommodation’s services, this must be treated for VAT purposes as if the advance payment had been refunded and the guest had purchased a voucher from the refunded amount. Consequently, no VAT liability arises on the advance payment in this case either and the VAT treatment of the voucher depends on whether it qualifies as a single-purpose or multi-purpose voucher under the VAT Act.

No-show – when the guest does not show up and, but does not indicate their intention to cancel in advance.

• If the guest does not indicate in advance that they will cancel their accommodation service, but simply does not show up, the amount previously paid by them as a deposit or advance payment is treated as consideration for the service for VAT purposes – provided the accommodation provider continues to offer the right to use the service.
• According to the guideline, it must be assessed on the basis of the accommodation provider’s general terms and conditions whether the right to use the service remains in the event of the guest’s absence. If the accommodation provider does not undertake to do so, the amount previously paid by the guest does not constitute consideration for the service for VAT purposes.

Cancellation option provided for a surcharge – when the guest pays a fee that allows them to cancel the reservation beyond the standard cancellation terms

From a VAT perspective, this fee is considered consideration for the provision of services, provided that:

• it is payable in all cases, regardless of whether the guest exercises the right of withdrawal;
• it is non-refundable; and
• it is not included in the base price of the accommodation service.

The service provided in consideration of the fee is subject to VAT at a rate of 27%.

What can accommodation providers do now?

In light of the new interpretation published by the NTCA, accommodation providers should review their contractual framework for bookings and their VAT treatment practices, with particular regard to the handling of advance payments, cancellation fees and vouchers.

Wolf Theiss is available to assist in identifying tax risks, strengthening documentation and ensuring that practices are in line with VAT legislation.