Reporting obligations of digital platform operators (DAC7) in Hungary

From 1 January 2023, digital platform operators will be subject to a reporting obligation, reflecting the latest amendment to the European Union's DAC Directive (DAC7), which aims 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 through digital platforms. Details of the new rules are set out in our newsletter. 

On 4 November 2022, Act XXXIX of 2022 amending Act XXXVII of 2013 on Certain Rules of International Administrative Cooperation in Relation to Taxes and Other Public Charges was promulgated. In addition to the introduction of data reporting by companies operating digital platforms, the Amending Act also contains other amendments introduced by the DAC7 Directive concerning cooperation between tax authorities of the Member States (e.g. joint tax audits, exchange of information on request, spontaneous and automatic exchange of information, and protection of tax data).

The main provisions related to the data reporting of digital platform operators are detailed below.

Which platform operators are subject to data reporting?

A digital platform is any software (including websites and parts thereof) and applications (including mobile applications) accessible to users that allow sellers to contact other users for the purpose of directly or indirectly performing a relevant activity (personal services, rental of real estate, sale of goods, rental of means of transport) for them. This includes any arrangement for the collection and payment of the consideration for the activities concerned.

A digital platform operator is an entity (legal person or legal arrangement, in particular a company, business partnership, trust fund or foundation) that contracts with vendors to make the platform or part of the platform available to vendors.

In Hungary, data must be provided by digital platform operators who:

1. are tax residents in Hungary, or - if they are not tax residents in any Member State –

1. are incorporated under Hungarian law; or
2. their place of business is in Hungary; or
3. have a permanent establishment in Hungary.

2. If they do not meet any of the above conditions, they should be subject to the reporting obligation if they enable a relevant activity to be carried out on the platform by sellers who are subject to the above reporting obligation or who generate income by renting out real estate in Hungary.

Digital platform operators will have to notify the tax authorities of this status for the first time within 45 days of the entry into force (1 January 2023) of this amendment. New operators will have 15 days after the commencement of their related activities. The following information should be provided:

1. name;
2. mailing and electronic address;
3. tax ID;
4. country of their tax residency.

Which platform operators are out of the scope of the reporting obligation or are exempted?

Digital platform operators registered or having their place of business in non-EU countries which have signed automatic data exchange agreements with all EU Member States for the data covered by this reporting are not subject to the reporting obligation. 

A digital platform operator which is otherwise in the scope of the reporting obligation should be exempted from it if it can prove that the same information has been reported by another digital platform operator liable to the reporting obligation. The exemption must be applied for annually on the basis of detailed exemption rules to be laid down in a government decree.

A reporting platform operator should be exempted from the obligation to report information if it can prove that the same information has been reported by another reporting platform operator. Exemption must be applied for annually on the basis of detailed exemption rules to be laid down in a government decree.

Whose data should be reported?

The information is provided for individuals or legal entities ("sellers") who or which:

• were registered on the platform and engaged in the relevant activity at any time during the reporting period, and
• have actually carried out the relevant activity during the reporting period, or have been paid or credited with consideration for the relevant activity during the reporting period, and
• are residents in a Member State or rent immovable property situated in a Member State.

Data on the sellers should not be reported who/which:

• are a public body, or
• are a legal entity whose shares are regularly traded on a regulated market or which are affiliates of such a legal entity, or
• are a legal entity to which the digital platform operator has enabled more than 2,000 real estate transactions during the reporting period, or
• to which the digital platform operator has enabled less than 30 sales of goods during the reporting period and the total amount of the consideration paid or credited did not exceed EUR 2,000.

Which data should be reported and what is the deadline?

Digital platform operators liable to the reporting obligation are required to provide data of sellers to the tax authority until 31 January of the year following the calendar year. The data to be provided are as follows:

1. name, address and date of birth of the sellers;
2. personal tax ID number (or, in the lack of that the place of birth), company tax ID number;
3. bank account number;
4. for legal entities: the company registration number, the Member State of the permanent establishment through which the relevant activity is carried out;
5. tax residency;
6. amounts paid or received quarterly, paid fees, commissions, taxes and the number of relevant activities;
7. in addition, digital platforms dealing with real estate rentals should report the address, the cadastral ID number of the real estate, the type of the real estate and the number of rental days.

Digital platform operators must keep the data for 10 years.

New data reporting income category: royalties

As a novelty of the DAC7 Directive, in addition to the existing income categories (income from employment, directors’ remuneration, income from life insurance products, pensions, income from real estate), the scope of automatic exchange of information extends to the income from royalties, which has also been incorporated into Hungarian law by the present amendment. The reason for this is that intellectual property income is becoming even more uncontrollable due to digitalisation, while at the same time providing more and more scope for shifting of tax base and tax evasion.

Penalties

In the event that the digital platform operator breaches the above notification and reporting obligations (fails to do so, or submits false or incomplete reports), the tax authority may impose a default fine of up to HUF 2 million on them.

The tax authority may carry out a joint audit with the tax authorities of other Member States in order to verify the accuracy or completeness of the data provided by the digital platform operator.

In order to ensure that data reporting is carried out in compliance with the new rules, VGD Hungary is at the disposal of its clients to assist them in the correct interpretation of the legal provisions and to support them in fulfilling their reporting obligations.

Nov 8, 2022

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

This newsletter provides general information and does not constitute tax advice.