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2021 VAT Changes in Hungary: E-commerce Package and More

2021 VAT Changes in Hungary: E-commerce Package and More

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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

KCG Partners at a Glance

KCG Partners is a Hungarian business law firm providing a comprehensive range of legal services to international and local clients seeking local knowledge and global perspective. The firm comprises business-minded lawyers with sector-specific expertise, creating value for clients by applying a problem-solving approach and delivering innovative solutions.

The firm has a wealth of knowledge in corporate law, M&A, projects and construction, energy, real estate, tax, employment, litigation, privacy and forensics, securitization, estate planning and capital markets.

To address clients’ regional and international concerns, the firm maintains active working relationships with other outstanding independent law firms in Central and Eastern Europe, whilst senior counsel Mr. Blaise Pásztory brings over 40 years’ of US capital market and fund management experience.

KCG Partners Law Firm is the result of the teamwork of passionate and talented lawyers guided by the same principles and sharing the same values: 

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