EU commissioner requests delay in internet VAT reduction

EU

EU Commissioner for Economic and Financial Affairs Pierre Moscovici asked the Hungarian government to postpone a reduction of VAT on provision of internet connections, in a letter sent to Hungarian Economy Minister Mihály Varga, state secretary Bence Tuzson told a press conference yesterday.

In early June, the Hungarian Parliament approved reduction of the VAT rate on internet services from 27% to 18% starting January 1, as part of a package of tax changes for next year. 

Moscovici wrote that he supported the governmentʼs intention to foster digitalization, but said current EU rules do not allow the Hungarian government to reduce the VAT on internet subscriptions. He added that the European Commission aims to change the related directive and introduce more flexible regulations, but these changes will materialize later than expected, so he requested a delay in the reduction.

Tuzson said Hungary will fight further for the VAT reduction to take place as planned at the start of 2017. Tamás Deutsch, the Prime Ministerʼs commissioner in charge of the internet, added that Hungary has well-founded arguments for the introduction of the reduced VAT rate as planned. He said he was confident that the Hungarian government can convince Brussels at further talks on the matter. 

The Commission said that internet subscriptions are not listed among products and services that could have a preferential VAT rate in a supplement to the EU VAT directive, Deutsch said. Tuzson said that the EUʼs sanction for ignoring the request could be an infringement procedure. 

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