Proposal for a Council Implementing Decision on authorising Hungary to apply a measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (hereafter ‘the VAT Directive’), the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to apply special measures for derogation from the provisions of that Directive in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.

By letters registered with the Commission on 23 December 2014 and 8 May 2015, Hungary has informed the Commission that they are confronted with fraud schemes in the sector of supply of staff, in particular as regards temporary employment agencies and organisations providing similar services, such as school cooperatives whose members perform work for third parties. Around 1000 companies are registered as temporary employment agencies in Hungary.

This fraud has different forms, such as fictitious supply of services or fake invoices, but the main form of evasion involves the invoicing of supplies followed by the disappearance of the supplier without paying the tax to the tax authorities but leaving the customer in receipt of a valid invoice for VAT deduction. The VAT fraud in this sector in 2014 was calculated by Hungary at around €22,500,000.

Notwithstanding certain control measures that have been introduced (e.g. increased supervision and controls on registration of new companies), Hungary has declared not to be in a position to successfully combat the fraud in this sector. Therefore, they ask to be authorised, in derogation of the general rule of Article 193 of the VAT Directive, to apply to this sector the reverse charge mechanism under which not the supplier but the taxable client accounts for the VAT due on the supply in his VAT return.

EUR-Lex: COM(2015)557: Follow the progress of this proposal through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2015:557:FIN

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