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Hungary Amends VAT Reverse Charge for Staffing Services — Orbitax Tax News & Alerts

On 1 April 2021, amendments to Hungary's VAT law will enter into force regarding the application of the VAT reverse charge for staffing (employee leasing) services. Previously applied in Hungary in relation to staffing services more broadly, the scope of staffing services subject to VAT reverse charge will be limited to supplies of staffing services in relation to certain construction works with effect from 1 April. In particular, this includes supplies of staff in relation to the transfer of a building or structure that is to be registered in the real estate register, and in relation to construction and other installation works for the creation, extension, conversion, and other alteration of real estate.

The reason for the more limited scope is because the European Commission denied Hungary's request to extend the application of the reverse charge more broadly in a decision issued in December 2020. The extension was denied because, in the Commission's view, Hungary has been successful in addressing VAT fraud in the staffing sector in general through other measures and, therefore, the application of the reverse charge more broadly is no longer justified.