Considerations on COM(2024)543 -

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dossier COM(2024)543 - .
document COM(2024)543
date November 21, 2024
 
(1) In accordance with Article 193 of Directive 2006/112/EC, any taxable person carrying out a taxable supply of goods or services is, as a general rule, liable for the payment of value added tax (‘VAT’) to the tax authorities.

(2) By Council Implementing Decision (EU) 2018/7892, Hungary was authorised to introduce a special measure derogating from Article 193 of Directive 2006/112/EC (‘the special measure’) as regards the person liable for payment of VAT where certain supplies are carried out by a taxable person subject to liquidation or any other proceedings legally establishing its insolvency.

(3) Council Implementing Decision (EU) 2021/1775 of 5 October 20213 extended the authorisation to apply the special measure until 31 December 2024.

(4) By letter of 10 June 2024 (‘the request’), Hungary requested the Commission to further extend the authorisation to apply the special measure until 31 December 2027. Hungary submitted a report, including a review of the special measure, together with the request.

(5) Pursuant to Article 395(2), second subparagraph, of Directive 2006/112/EC, by letters dated 7 August 2024 the Commission transmitted the request to the other Member States. By letter dated 9 August 2024, the Commission notified Hungary that it had all the information necessary to consider the request.

(6) Hungary argues that taxable persons in liquidation or under insolvency procedure often do not pay the VAT due to the tax authorities. At the same time the purchaser, being a taxable person with the right of deduction, can still deduct the VAT incurred, thus negatively impacting the public budget. Hungary has also registered cases of fraud whereby companies in liquidation would issue fictitious invoices to active companies and greatly reduce their payable tax, without the guarantee that the issuer of the invoices would pay the VAT due.

(7) In accordance with Article 199(1), point (g), of Directive 2006/112/EC, Member States may provide that the person liable for the payment of VAT is the taxable person to whom the supply of immovable property sold by a judgment debtor in a compulsory sale procedure is made (‘the reverse charge mechanism’). The special measure allows Hungary to extend the application of the reverse charge mechanism to other supplies by taxable persons under insolvency procedure, namely the supply of capital goods and the supply of other goods or services with an open market value exceeding HUF 100 000.

(8) On the basis of information provided by Hungary, applying the reverse charge mechanism to those types of transactions has effectively simplified tax collection and prevented tax evasion or avoidance. The implementation of the measure has limited losses to public revenues and generated additional budget revenue.

(9) The requested extension should be limited in time, to allow the tax administration time to introduce other conventional measures to tackle the respective problem and to reduce the losses to the public budget, in particular those connected with fraudulent practices, until the special measure expires, thus making a further extension of that measure redundant. A derogation from Article 193 of Directive 2006/112/EC to allow making use of the reverse charge mechanism is only granted exceptionally for specific fraudulent areas and constitutes a means of last resort. Furthermore, Article 199a of Directive 2006/112/EC will remain in force until 31 December 2026. The authorisation to apply the special measure should therefore be extended only until 31 December 2026.

(10) The special measure will have no adverse impact on the Union's own resources accruing from VAT.

(11) Implementing Decision (EU) 2018/789 should therefore be amended accordingly.