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EY Tax News Flash
New obligation will come to track online retailers,
platforms selling to Hungary
The Hungarian Parliament has recently passed a bill on the amendment of certain tax laws. This contains changes in respect of provisions affecting the e-commerce sector by adopting Council Directive (EU) 2020/284 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers (e.g. banks).
By adopting the above Directive, Hungary will have the appropriate tools to detect and control fraudulent businesses in the area of cross-border e-commerce, i.e. when foreign businesses perform distance sales to private individuals in Hungary.
According to the accepted amendments, from 2024 the Hungarian Tax Authority will have the overview of certain payments made by Hungarian individuals through payment service providers towards non-Hungarian online retailers. The payment service providers will be obliged to keep records of distance sale transactions and provide data in connection with these transactions to the Hungarian Tax Authority on a regular basis.
The explicit aim of this new reporting obligation is to enable the Hungarian tax office to track which companies should register for VAT in Hungary (and to pay Hungarian VAT) due to the fact that their cross-border online sales volume – to Hungarian private individuals – reaches the distance selling threshold.
Based on the above, it is strongly recommended for all businesses engaged in cross-border e-commerce to monitor the magnitude of their sales to Hungarian individuals and to register for VAT in Hungary or alternatively, to settle their VAT liability through the One Stop Shop (OSS) system upon reaching the distance selling threshold. Please note that from 1 July 2021 the distance selling threshold will be reduced to EUR 10,000 within the entire EU (in Hungary it is EUR 35,000 currently). This way significant penalties can be avoided that can be levied for late registration, unpaid VAT and for not fulfilling the VAT and other reporting obligations in Hungary. Businesses have the possibility to remediate unlawful practice they followed through registration with a retroactive effect which is possible in Hungary.