Foreign-owned online stores are causing more and more troubles, not only for local online retailers, but also because their existence raises many questions on the regulatory side. A good example of this is Timo, who was not known to many people in Hungary last fall, but since then, a large number of local households have come into close contact with the small and large orange packages.
What's wrong with online stores?
Based on publicly available data, Timos Transactions is a company registered in Ireland, At Whaleco Technology Co., Ltd It is achieved through, which acts as an intermediary between customers and Hungarian producers. This also indicates that
Some links are missing from the usual trade chain, which in itself can cause a tax loss for the Hungarian state, as taxes owed by intermediary actors are not paid.
This is of course good for customers, because they can save on fees and taxes that accumulate at various stages of trade, but the additional VAT payments generated by merchants who have dropped out are missing from the budget.
This puts Hungarian and other European manufacturers and traders at a competitive disadvantage. For the budget, companies registered in Hungary are clearly the best, because they are the ones that can be subject to all relevant taxes almost without exception.
András Szadai, tax partner of WTS Klient, pointed this out to Index. He explained: They pay corporate tax and business tax on their income, and the taxes paid by their employees also contribute to the budget. The expert stressed, on the other hand, that it is not possible to rely on these revenues for a foreign company for online trading.
How is VAT paid and declared?
In order to make it easier for Member States to collect taxes owed by non-EU online merchants on products sold in the EU, the VAT regulations relating to e-commerce were amended in 2021.
The essence of this amendment is that the scope of application of the so-called One Stop Shop (OSS) system has been expanded, and the Import One Stop Shop (IOSS) system has been introduced, which is a simplified value-added tax system for low-value shipments from countries outside the Union. European provides treatment.
- The aim of the system is to simplify electronic commerce and make tax processes more transparent, as well as reduce tax fraud and level the playing field.
- The new regulations also cover taxes on low-value import shipments. With its introduction, the previous discount was abolished, as import shipments worth less than €22 were previously exempt from VAT. However, customs-exempt status for shipments worth less than €150 remained in place.
- The use of the OSS/IOSS system is voluntary, but it provides significant administrative convenience for companies, for example, companies do not need to register in the client's Member State.
- In addition to IOSS, there is also the so-called “special arrangement” (special arrangement), on the basis of which post offices and postal companies pay VAT under a simplified procedure.
In this case, the farmer who brings the parcel into the country collects VAT from the recipient and pays it to the state. Those who choose IOSS and those who choose Special Regulations also submit a payable VAT return electronically once a month.
What about other taxes?
Although foreign online stores may not pay corporation tax, in some cases they may still be subject to other taxes.
If a foreign company carries out retail activities and sells the product directly to its customers in the country, i.e. not through a branch, it may become subject to retail tax. This also applies to transport companies and companies operating in the field of online commerce
Andras Zaday said. He stated that the retail tax rate is currently zero and amounts to HUF 500 million, but in the case of large Hungarian sales, this value can easily be exceeded. Companies that paid retail tax had to pay additional profits tax.
In addition, the issue of green taxes may also arise in relation to product sales in Hungary by parcel delivery companies and e-commerce companies. In Hungary, depending on the product range, it is necessary to pay an Environmental Protection Product Duty or an Extended Producer Responsibility EPR fee for products sold in Hungary that usually have a negative impact on our environment (e.g. packaging and electronic products, batteries, batteries, oils, tires , textile products, etc.), and here they become waste.
These green taxes can impose a significant tax burden on online stores and greatly increase the administrative burden.
It is therefore clear that online stores can make a strong contribution to the local budget, but their long-term impact on the economy is not yet known.
What can NAV do?
According to the tax expert, the fact that those companies that do not have a presence in Hungary, but sell to Hungarian private clients, are generally not registered with the National Tax and Customs Administration (NAV) could be a problem. That is, they do not run the cash registers from their issued invoices – even if they contain them Hungarian value added tax – They do not have to submit data to the Tax Authority.
That's why Andras Zaday thinks Usual inspection tools and investigation of tax deficiency in NAV In their case They can operate on a limited basis, and tax authorities must discover missing, unpaid taxes using other creative methods.
(Cover photo: Jakub Purzycki/NoorPhoto/Getty Images)
