From 1 July 2021, the rules of e-commerce will change at EU level, which had to be taken over to the Hungarian tax system as well.
VAT regulation for e-commerce includes:
- distance selling
- electronically provided services
- imports of low-value goods.
Among other things, the concept of distance selling will be expanded in the legislation coming into force in the second half of the year. It will include:
- the distance selling of products within the EU, and
- the distance selling of products from outside the EU.
Other key features of distance selling are that:
- it can only be the sale of products (provision of services not) (there are a few exceptions, e.g. this system cannot be used for the sale of new means of transport, second-hand goods and works of art)
- the seller is a taxable person within the EU
- and the customer is not a taxable person (it can be a private individual or an organization or company that is not subject to the VAT law).
The thresholds previously applicable to distance selling will also change. Until the first half of 2021, up to a threshold of EUR 35,000 per Member State, it was not necessary to register in the Member State (with VAT registration) in which the taxpayer sold their products to non-taxable customers.
From 1 July 2021, this threshold will be reduced to EUR 10,000 and the value of the products sold in all Member States will be considered together.
After registering in a Member State (VAT registration), the taxpayer must apply the VAT rate of that Member State and prepare and file their tax return and pay the VAT in accordance with the rules of that Member State.
It is easy to see that the annual amount of EUR 10,000 is very easy to reach, so taxpayers would have significant additional administration burden if they had to register in each Member State and manage their taxation accordingly.
The OCC VAT scheme (OSS)
The One-Stop-Shop scheme (OSS) aims to simplify tax compliance. The essence of this scheme is that instead of registering in each Member State, VAT obligations to be fulfilled in each Member State can be entered electronically in one scheme, for which it is enough to register in the OSS scheme of the Hungarian tax authority. Based on the information received, the Hungarian tax authority forwards the corresponding amounts to the tax authorities of the competent Member States.
The use of the OSS scheme is optional. However, if it is not used, the taxpayer is required to register in the competent Member State.
The OSS scheme now introduced will replace the MOSS (Mini-One-Stop-Shop) scheme, which has been used since 2015 and was previously available for remote services.
This will be expanded from July for:
- distance selling within the EU,
- services supplied to nontaxpayers established in another EU Member State, and
- IOSS special scheme for the distance selling of import goods (excluding excise goods) valued at less than EUR 150.
From 1 April 2021, the data of those who had used the MOSS scheme (remote service providers) were automatically transferred to the extended MOSS scheme, but they had to complete their data until 15 June 2021.
Online platforms are also taxed
The changes will also affect online platforms (portals, webshops, online marketplaces, etc.) where:
- taxable persons sell products from outside the EU to non-taxable customers, or
- non-EU taxable persons sell EU products to non-taxable persons via an online platform.
The reason why the online platforms were also included in the scope of taxation is that it was difficult for the Hungarian tax authority to make taxpayers from third countries pay tax.
Under the new rule, the tax liability will be passed on to online platforms. That is, selling will be artificially divided into two (into 2 fictional sales).
- A third country taxable person (seller) issues an invoice to an online platform (customer) – no tax liability is incurred on this transaction.
- The online platform (seller) issues an invoice to the final customer (customer) with the VAT rate valid in the customer’s Member State).