BUDAPEST: Hungary has gone ahead with plans to cut the value-added tax rate on internet access services to five percent. The move comes despite the fact that the measure could be in breach of EU law, given that such services are not included in Annex III of the EU VAT Directive, which sets out a restrictive list of those goods and services that may be subject to a VAT reduced rate.
The change to Hungary’s value-added tax regime in this respect was announced in Hungary’s 2017 Budget, in which Hungary announced that it would cut the VAT rate on such services to 18 percent from 27 percent. Despite unofficial calls from the EU tax commissioner Pierre
Moscovici for Hungary to hold off on the changes, the country has proceeded regardless.