Varga Mihály, Minister of Finance submitted the autumn tax changes package to the Hungarian Parliament, including the proposed changes for VAT in 2021. The draft contains detailed implementing rules for the EU e-commerce package and related administrative requirements, as well as several additional changes to the Hungarian VAT Act, as follows:
Modernising VAT for cross-border e-commerce
As the next step of adapting to the e-commerce, Mini One Stop Shop (MOSS) concept will be turned into a VAT One Stop Shop (OSS) and extended to three main fields:
- non-Union scheme for supplies of telecommunications, broadcasting and electronic services by taxable persons not established in the EU will be extended to all types of cross-border services to final consumers (B2C) in the EU;
- Union scheme will also apply to all types of B2C intra-EU supplies of services well as to intra-EU distance sales of goods (and certain related domestic sales by e-marketplaces);
- import scheme will be created covering distance sales of goods imported from non-EU to customers in the EU up to an item value of EUR 150, and the exemption up to EUR 22 is demolished.
Additionally, businesses operating electronic interfaces such as marketplaces or platforms will, in certain situations, be deemed for VAT purposes as intermediaries: to be the supplier of goods sold to customers in the EU by companies using the marketplace or platform. Consequently, they will be subject to VAT reporting and payment obligation on those sales.
The extension of the MOSS and the special provisions concerning the obligations of electronic interfaces will enter into force on 1 July 2021, but the registration should be available as of 1 April 2021.
Hungarian features
- VAT return to be drafted by the tax authority from July 2021 – based on the data provided by the taxpayers via online invoice data reporting, the tax authority will prepare a draft VAT return on behalf of each taxpayer in Hungary. The draft should be available earliest at the 12th of the month following the VAT period, it will only contain the payable and deductible amounts and will be still subject to active participation (changes/modifications) by the taxpayer, especially with regard to the right of deduction.
- Bad debt relief will be extended to sales to final customers (B2C) as well if general criteria are met.
- Invoicing exemption – the current regulation makes the exemption from invoicing in the case of transactions performed for non-taxpayers partly conditional upon the payment method (by listing the payment methods that assume the simultaneous presence of sellers and buyers). Given that there has been significant development of e-commerce, payment and invoicing methods, these condition is abolished as of 2021. Furthermore, taxpayers complying with the OSS system might also be exempted from issuing an invoice (unless the customer requests an invoice).
- Temporary employment agency services will be no longer subject to domestic reverse charge unless related to building or construction services.
By Balint Zsoldos, Head of Tax, KCG Partners Law Firm
