Even the OSS does not exempt distance sellers from tax registration in Hungary

In its recent official resolution the Hungarian Tax Authority (henceforth: “HTA”) confirmed the conclusion of our previous blog post: if a non-Hungarian company sells its products to the territory of Hungary, assuming that the conditions are met, VAT can be declared through the OSS system, but due to certain other tax types it shall register itself from tax perspective in Hungary.

In the HTA’s view, the tax liability cannot be reduced to the obligation of filing tax returns and paying taxes. If a taxpayer, who is otherwise not obliged to pay tax, is not required to file a VAT return and a VAT advance in Hungary, this does not affect the taxpayer’s obligation to register itself for tax purposes. From this point of view, there is no difference between the taxpayers, whose obligations in this respect are itemized in the Hungarian Taxation Act.

The HTA also stated that the Hungarian environmental product fee obligation is determined by the tax number used in the given transaction: if a foreign (i.e. non-Hungarian) company does not legally have a Hungarian tax number or does not use it, no product fee obligation arises. However, a Hungarian tax number may be required for the company to register itself in Hungary.

Similar to the environmental product fee, if a foreign company – which does not have a branch in Hungary – sells its products within Hungary, it will incur a Hungarian tax liability under the Hungarian Retail Tax Act and the foreign company will become subject to the retail tax.

This is independent of the fact that a foreign company fulfils its VAT liability after its sales activities in Hungary, in another country or through the OSS system, as the Hungarian Retail Tax Act determines the concept of tax liability independently of the Hungarian VAT Act.

In the light of the above, although it is possible to use OSS in distance selling in Hungary, the taxpayers concerned must also consider other related tax liabilities. This requires the “revival” of the old tax number in the case of taxpayers who have abolished their Hungarian tax number precisely because of the OSS, while more thorough tax and business planning is required in the case of new entrants.

The ABT Treuhand Group will continue to be available to all its current and future clients in their Hungarian tax matters to fully comply with the applicable Hungarian tax rules.