Changes in the Hungarian Reverse Charge on Construction

The Hungarian reverse charge mechanism for construction services applies only to activities subject to official authorization or notification to an authority.

The Hungarian reverse charge mechanism for construction services has significantly changed, impacting on how companies engage in supply within this sector. Effective from January 1, 2023, and further extended as of January 1, 2024, the main update consists of the condition that the construction activity is subject to an official authorization or notification to an authority so that reverse charge may apply.

Overview of Activities Covered

The scope of activities falling under the reverse charge mechanism for construction services includes construction, installation, and various assembly works aimed at the creation, expansion, remodeling, or other alterations to immovable property. Notably, this also concerns processes such as demolition and changes in property use.

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Evolution of Reverse Charge Application

As of 2023, the reverse charge mechanism applies exclusively to construction activities subject to authorization or notification to an authority. This signifies a regulatory alignment ensuring that the reverse charge mechanism is applicable upon the acknowledgment of administrative bodies.

From January 1, 2024, subcontractors have more responsibility. If they are involved in activities requiring authorization related to construction services, they must inform their client. This shifts accountability within the supply chain: normally, the general contractor would have to inform the subcontractors and other service suppliers about this notification being in place, while as of 2024 when the authorization refers to an activity carried out by the subcontractor, the responsibility of informing the rest of service providers involved belongs to such subcontractor. This evolution from a downward to an upward declaration paradigm underscores a shift in accountability dynamics within the supply chain.

The transition to the new requirements for reverse charge mechanism requires a proactive approach from companies engaged in construction and installation services in Hungary. Adapting to the updated reverse charge mechanism is crucial for compliance and industry credibility in Hungary's construction sector.

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