Hungary plans internet services VAT rate reduction

27 July 2016

From 1 January 2017 Hungary plans to lower VAT on internet services from 27% to 18%.

However, the European Commission (EC) has requested that they delay this planned cut as they believe that it is in breach of EU VAT rules as internet services are not listed in Annex II of the VAT Directive. Annex II is a list of supplies that may enjoy a reduced VAT rate.

In the future the EC proposes to let member states have the right to set more reduced VAT rates as part of the proposed VAT Action Plan; however it is not clear yet if and when this will be introduced.