The VAT Directive only sets the objective to be achieved by the Member States; it is up to the Member States to decide how to transpose these objectives into their national law, and therefore it must be examined on a case-by-case basis which legal provisions apply in the Member State where the end consumer is located.
In this memorandum, we have examined Hungarian and German law. D must apply for an EU VAT number in every Member State where the consumer is located, and declare VAT in that Member State accordingly.
If the Consumer Orders Goods to Hungary
For the situation described above, there is a special rule in Sections 29-30 of the Hungarian VAT Act that differs from the general rule and applies when goods are destined for Hungary.
Since the dispatch is made by the Polish manufacturer to non-taxable Hungarian consumers, the VAT due is generally the VAT at the destination of the dispatch, i.e., Hungarian VAT. In this case, D must change their Hungarian VAT ID and fulfill the obligations of VAT declaration and payment in Hungary. However, if certain conditions are met, the tax liability remains in the Member State where the goods are dispatched or the transport begins, i.e., in Poland.
Thresholds and VAT Rates
| Member State | Threshold | VAT Rate |
| Hungary | 35,000 EUR | 27 % |
| Poland | Not applicable | 23 % |
If the threshold is exceeded, Hungarian VAT applies. Below the threshold, Polish VAT can be applied.
Formalities
Article 45a of the Implementing Regulation to the VAT Directive (282/2011/EU) specifies which document the Polish seller must retain in order to treat the first supply between him and D as an exempt intra-Community supply.
This includes the order document issued by the manufacturer or its representative to the parcel service. This document must be presented in case of a tax audit.
Overview of Relevant VAT Rates
| Country | VAT Rate |
| Poland | 23 % |
| Hungary | 27 % |
| Germany | 19 % |
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
___________________________________
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57
Dropshipping Chain Transaction Part 2
The VAT Directive only sets the objective to be achieved by the Member States; it is up to the Member States to decide how to transpose these objectives into their national law, and therefore it must be examined on a case-by-case basis which legal provisions apply in the Member State where the end consumer is located.
In this memorandum, we have examined Hungarian and German law. D must apply for an EU VAT number in every Member State where the consumer is located, and declare VAT in that Member State accordingly.
If the Consumer Orders Goods to Hungary
For the situation described above, there is a special rule in Sections 29-30 of the Hungarian VAT Act that differs from the general rule and applies when goods are destined for Hungary.
Since the dispatch is made by the Polish manufacturer to non-taxable Hungarian consumers, the VAT due is generally the VAT at the destination of the dispatch, i.e., Hungarian VAT. In this case, D must change their Hungarian VAT ID and fulfill the obligations of VAT declaration and payment in Hungary. However, if certain conditions are met, the tax liability remains in the Member State where the goods are dispatched or the transport begins, i.e., in Poland.
Thresholds and VAT Rates
| Member State | Threshold | VAT Rate |
| Hungary | 35,000 EUR | 27 % |
| Poland | Not applicable | 23 % |
If the threshold is exceeded, Hungarian VAT applies. Below the threshold, Polish VAT can be applied.
Formalities
Article 45a of the Implementing Regulation to the VAT Directive (282/2011/EU) specifies which document the Polish seller must retain in order to treat the first supply between him and D as an exempt intra-Community supply.
This includes the order document issued by the manufacturer or its representative to the parcel service. This document must be presented in case of a tax audit.
Overview of Relevant VAT Rates
| Country | VAT Rate |
| Poland | 23 % |
| Hungary | 27 % |
| Germany | 19 % |
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
___________________________________
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57