Data reporting and tax obligations of
foreign webshops and digital platforms in Hungary (2024)
From 1 January 2024, payment service providers are required to report cross-border payments on a quarterly basis. The reporting obligation makes it more difficult for fraudulent online shops that have not yet fulfilled their tax obligations in the destination countries with higher VAT rates (e.g. Hungary) when they exceed the €10,000 threshold. As a consequence, products offered by foreign online shops are now available at higher prices. Foreign online shops are also being closely monitored by the Tax Authority, i.e. the activities of sellers on websites and portals have been identified as high-risk activities in the audit plan of the HTA for the 2023 tax year.
The Tax Authority receives data from payment service providers and digital platform operators on the sales activities of online shops.
I. Reporting obligations for payment service providers from 1 January 2024
From this year, payment service providers (e.g. banks) are obliged to provide data on cross-border payments to the HTA, due to the dynamic growth of cross-border electronic commerce, which justifies the introduction of new tax investigation tools. The reporting obligation therefore provides the Tax Authority with an additional tool to monitor the fulfilment of VAT payments on cross-border e-commerce transactions, which was not possible before, since the Tax Authority did not have all the necessary information.
Under the legislation, from 2024 the HTA is able to estimate with a relatively high accuracy the amount of VAT, retail tax, environmental product charge, EPR, etc. that online shops will have to pay.
II. Reporting obligations for digital platforms (DAC7)
As of 1 January 2023, platform providers are be required to provide data, in line with the amendment of the European Union's DAC Directive (i.e. DAC7), in order to enable the Tax Authority to accurately determine and verify the gross income earned in Hungary by individuals and legal entities from commercial activities carried out by individuals and legal entities through digital platforms.
III. What tax liabilities may arise for digital platforms?
Recently, there has been a trend in Hungarian legal practice to impose taxes on businesses that are not otherwise established in the country, but that make cross-border sales from abroad to Hungary. As a result, many foreign sellers (typically online platforms) face Hungarian tax liabilities even if they do not have a company, branch or representative office in Hungary. This also means that, although businesses can take advantage of the one-stop shop (i.e. OSS) system for VAT, they must register in Hungary to fulfil other tax obligations (i.e. financial transaction tax, public health product tax, EPR, EPC, retail tax etc.).
- Value added tax (VAT)
Online distance sellers within the Community would be required to pay VAT under the rules of the destination country, whereby they would have to register for VAT in each Member State to which their supplies are performed. However, in order to reduce the administrative burden, it is recommended to use the one-stop shop system, whereby it would be sufficient to register and declare all national VAT in one Member State, given that the payable VAT would be calculated between Member States' tax authorities.
From July 2021, concerned ones already have noticed a significant change in the rules, as the sales threshold above which the webshop operator is obliged to opt for taxation in the country of destination has been reduced from €35,000 to €10,000. The threshold must be determined by aggregating the sales.
- Extended producer responsibility (EPR)
From 1 July 2023, companies that sell goods from abroad to the domestic market as part of e-commerce services have to pay an EPR fee for certain products and packaging sold.
- Environmental Product Charge (EPC)
The environmental product charge should be calculated on the products and packaging covered by the EPR rules for cross-border distance sales, similar to the EPR rules. Given that the EPR fee is deductible from the product charge, there is no effective payment obligation, but the product charge still needs to be properly administered (assessed and declared, etc.)
- Public health product tax (in Hungarian: NETA)
A public health product tax is levied on certain foods that are highly harmful to health (e.g. soft drinks, energy drinks, salty snacks, alcoholic drinks and sugary drinks, etc.). The tax is payable by the first domestic supplier of a taxable product or by the person acquiring the taxable product who uses it for own domestic production.
- Retail sales tax
If the turnover of a distance selling company exceeds HUF 500 million, it will also become liable to pay retail sales tax in Hungary. In this context, it must prepare an annual report and, as a general rule, the advance tax payment obligation must be paid in two equal instalments per year, by the 20th day of the 7th and the 10th month of the tax year.
Should you have any questions regarding our newsletter,
please do not hesitate to contact our tax experts.
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This newsletter provides general information and does not constitute tax advice.
