Hungary: Proposed extension of retail sales tax to online marketplaces

Hungary’s parliament is currently debating Draft Bill T/9724 (Hungarian) that would expand the scope of taxpayers subject to Hungary’s retail sales tax to online marketplaces effective January 1, 2025.

Background

In 2020, Hungary introduced a retail sales tax, a gross receipts tax, applicable on retail sales of goods to consumers in Hungary. Any resident or nonresident person or organization engaged in retail trade activities must pay the retail sales tax.

Retail activities in scope are defined based on the Hungarian activity classification (TEÁOR'08) and covers a broad spectrum of retail activities, including the sale of food, beverages, tobacco, electrical household appliances, telecommunication equipment, books, sports equipment, toys, clothes, furniture, cars, car parts, fuel, medicines, and more.

A sale is classified as non-retail if it occurs between a manufacturer and a wholesaler or reseller, or between a wholesaler and a reseller or retailer, as long as these transactions do not occur through a distribution channel that is open to the public. However, if the distribution channel is accessible to individual customers, then all sales proceeds from that channel are subject to tax, regardless of whether the buyers are businesses, partnerships, or individuals.

The tax base is the net turnover from retail trade activities for the tax year. Different rules apply for various types of taxpayers, including those subject to the Act on Accounting, IFRS, and individual (personal) income tax. For nonresidents the tax base is the consideration, excluding VAT, from the sale of goods supplied domestically.

The retail tax applies progressive rates:

• 0% for annual net sales up to HUF 500 million
• 0.1% for the portion of sales between HUF 500 million and HUF 30 billion
• 0.4% for the portion of sales between HUF 30 billion and HUF 100 billion
• 2.7% for the portion of sales exceeding HUF 100 billion

Proposed amendments

The proposed amendment would extend the scope of taxpayers to include nonresident or resident platform operators that provide an online marketplace for sellers engaged in retail activities.

The definition of online marketplace and online marketplace operator would be the same one as for DAC7 reporting purposes. Therefore a "platform" would include any software, including a website or a part thereof and applications, including mobile applications, accessible by users and allowing sellers to be connected to other users for the purpose of carrying out a relevant activity, directly or indirectly, to such users. It also includes any arrangement for the collection and payment of a consideration in respect of relevant activity. A "platform" would not include software that without any further intervention in carrying out a relevant activity exclusively allows any of the following: (1) processing of payments in relation to relevant activity; (2) users to list or advertise a relevant activity; (3) redirecting or transferring of users to a platform. Moreover, a "platform operator" would mean an entity that contracts with sellers to make available all or part of a platform to such sellers.

Platform operators would be liable for retail sales tax on sales of goods facilitated for retailers and on their own retail activities subject to the tax. Retailers selling through online platforms would no longer be liable for the retail sales tax for the sales performed through online marketplaces. However, retailers would retain a secondary tax liability if the platform operator fails to meet its tax payment obligations, and the tax cannot be collected from them. Moreover, if a platform operator is non-compliant, the tax authority has the power to make the internet interface of the platform operator inaccessible.

Moreover, the proposal would amend the tax base for nonresidents by including domestic and foreign sales in the tax base (currently only Hungarian sales are included in the tax base). However, when computing the tax owed, the tax computed relating to revenues attributed from foreign sales would be deducted from the total tax. Therefore, the tax owed might significantly increase for certain non-resident taxpayers.

KPMG observation

While the bill is currently being debated in parliament, it is likely that the bill will be adopted. Marketplaces facilitating the sale of goods to Hungarian customers may need to review whether the transactions they facilitate qualify as retail activities under the Hungarian retail sales tax and prepare to comply with their new tax obligations. Nonresidents that are already subject to the retail sales tax may need to also carefully review whether the changes to the tax base and tax computation will impact them.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Bela Medvedovszky | belamedvedovszky@kpmg.com