Do you have a webshop with Hungarian customers?

You may have these tax liabilities in Hungary

Recently, there has been a tendency in the Hungarian legislation to impose taxes on entities not otherwise established in the country that perform cross-border sales from abroad to Hungary. As a result, many foreign sellers (typically online platforms) are facing Hungarian tax liabilities even if they do not have a company, branch or representative office in Hungary. This also means that, although businesses can enjoy the benefits provided by the one-stop shop (OSS) system in VAT, they must register in Hungary in order to fulfill other tax obligations. The Hungarian Tax Authority is also keeping a close eye on foreign online shops: a special operational department has been set up within the tax authority to carry out targeted inspections of online sellers, based on a preliminary risk analysis and data from courier services. The tax inspections are carried out in international cooperation.

What tax obligations may arise?

1. Extended producer responsibility (EPR)

Companies that sell goods from abroad to households or other consumers within the framework of electronic commerce services (based on online orders) became obliged to pay EPR fee as of 1st July 2023 for each product and packaging they sell.

Due to the EPR obligation, it is necessary to register with the MOHU (MOL Hulladékmanagement Zrt.) and the waste management authority.

Failure to register may result in a waste management fine, and the waste management authority may also suspend the marketing of the so-called circular products. A company who violates the EPR rules may be fined up to HUF 100 million during a calendar year, furthermore it cannot even receive support specified by law or government decree for 2 years.

2. Environmental Product Charge (EPC)

The environmental product fee should be calculated more or less for the product ranges and packaging covered by the EPR in connection with cross-border distance sales, similarly to the EPR. Given that the EPR fee can be deducted from the EPC fee, there is no effective payment obligation, but the product fee must still be properly administered (it must be determined and declared, etc.)

In order to pay the product fee, a domestic tax number is required, so it must be registered with the Hungarian tax authority in order to fulfill the respective tax obligations.

3. Public health product tax (NETA)

The public health product tax, or popularly known as the so-called "chip tax" is payable on certain foods that are particularly harmful to health (e.g. soft drinks, energy drinks, salty snacks, alcoholic beverages and sugary preparations, etc.). Product tax must be paid by the person who sells the taxable product domestically for the first time or by the purchaser who uses the taxable product to produce his own product domestically.

According to the law and the position of the Hungarian Tax Authority, the NETA obligation also applies to foreign webshops without Hungarian tax number, who are performing cross-border sales of taxable products to Hungary.

However, NETA can only be completed if you have a Hungarian tax number, which minimally involves registering with the tax office in Hungary. In addition to administrative burdens and possible difficulties, this also implies a tax liability in Hungary for these companies, the failure of which can result in heavy fines.

4. Retail tax

If the sales revenue of the distance selling company exceeds HUF 500 million, it also triggers a retail tax liability in Hungary. In this regard, you must prepare an annual report, and according to the general rule, the tax advance payment obligation must be fulfilled in two equal installments per year, by the 20th day of the seventh and tenth month of the tax year.

How could we assist you?

• VGD Hungary examines whether your company/webshop is obliged to pay the above listed taxes,
• Preparation and submission of the registration request - retrospectively, if necessary,
• If necessary, we provide assistance in the establishment of a business company or branch,
• VGD Hungary calculates the tax(es) and prepares the supporting analysis,
• In the case of non-EU companies that do not have a permanent establishment in the EU, we provide a financial representation service in order to fulfil their taxable transactions in Hungary,
• We are at your disposal for any problems that may arise.

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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.