Hungary VAT invoices, reverse charge and Mini One Stop Shop

There have been a range of changes to the Hungarian VAT regime over the past month as it continues to move into line with the EU VAT Directive.

From 1 January 2015, the domestic reverse charge is to be introduced on the sale of iron and steel, requiring the seller to nil VAT and the customer to account for both the sales and the purchase VAT. This is being introduced to help reduce the huge amount of VAT fraud believed to be going on in Hungary presently. It is part of the European Commission’s VAT Quick Reaction Mechanism introduced last year to enable member state to introduce domestic reverse charge within 30 days of notifying the EC.

Many services and goods are already provided on the reverse charge basis in Hungary due to VAT fraud problems, including construction and carbon gas.

Hungary has long been at odds with the EU VAT Directive on Invoicing in that it requires VAT registered businesses to produce their sales invoices only through a strictly limited number of software packages. Generally these are Hungarian packages. Under an update on these rules coming into force in October 2014, VAT registered businesses must provide a range of details on the package being provided to the tax office. This includes non-resident VAT Hungarian registered businesses

The Hungarian VAT Act has been modified to allow for a change in the place of supply rules for the EU B2C supply of electronic and broadcast services including: downloadable music and video; subscriptions to online dating, gaming or news websites; e-books; telecoms; and broadcasting. From 1 January 2015, Hungarian services providers will have to charge the VAT rate of the country of residence of their customers, and then pay this collected VAT through a new Hungarian portal. The Hungarian tax authorities will be responsible for allocating the VAT to other member states.