The European Court of Justice (ECJ) found Hungary to be
in breach of EU law by applying the reverse charge mechanism
retroactively to staff supplies.
According to the VAT directive, Member States may provide that
the recipient of staff supply is liable for the payment of VAT.
This constitutes a derogation from the general rule which holds the
supplier liable for payment. Therefore, its application by a Member
State is subject to the authorization of the Council granted on the
initiative of that Member State.
Since 1 January 2015, staff supplies in Hungary are subject to
the reverse charge mechanism. Hungary requested authorization from
the Council to apply this derogation with a retroactive date. The
respective decision of the Council was notified to the Hungarian
Government on 11 December 2015. The ECJ (C-434/17) had to deal with
the question whether EU law prohibits the retroactive application
of the reverse charge system.
