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Hungary's Internet VAT Cut In The Balance

by Ulrika Lomas, Tax-News.com, Brussels

25 July 2016


Hungary's plan to reduce value-added tax on internet access could be derailed due to opposition to the move from the European Commission.

Hungary's 2017 Budget, approved by Parliament last month, includes a measure cutting VAT on internet access from the standard rate of 27 percent to Hungary's intermediate rate of 18 percent from January 1, 2017.

However, according to local media reports, European Commissioner for Taxation Pierre Moscovici has written to the Hungarian Government reminding it that internet access is not currently listed among the services to which reduced VAT rates can be applied.

The list of goods and services to which reduced rates of VAT may be applied are listed in Annex III of Council Directive 2006/112/EC. This excludes services supplied electronically.

Moscovici reportedly asked Hungary to delay the measure while the EU continues to review the role of reduced VAT rates and how they may be applied.

However, comments made by senior figures in the Hungarian Government in the wake of these reports suggest that Hungary plans to implement the VAT cut next year as planned. This raises the prospect that the Commission could launch infringement proceedings against Hungary, which could ultimately lead to it be taken to the European Court of Justice.

TAGS: VAT rates | tax | European Commission | Hungary | VAT legislation | internet | legislation | services | Europe | Tax

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