Hungary challenged on internet VAT

Thu 21st Jul 2016

The European Commission has requested that Hungary delays its planned cut in VAT on internet services.

The EC believes the planned January 2017 reduction from 27% to 18% VAT is in breach of the EU VAT Directive. In particular, internet service connections are not included in Annex II of the Directive which lists supplies which may enjoy a reduced VAT rate.

In the longer term, the EC does wish to grant member states the right to set more reduced VAT rates as part of the proposed VAT Action Plan. It is not clear yet when this will happen.  If may be that a relaxation comes before the EC significantly progresses court proceedings against Hungary.