Hungary applies the highest standard VAT rate in the European Union at 27%, which has remained unchanged for many years. However, for certain categories of goods and services considered essential, Hungary has progressively applied reduced rates — and internet access is one of the clearest examples of how that policy has evolved.

When Hungary first reduced the VAT rate on internet access services, the change attracted attention at EU level. The initial reduction — from 27% to 18%, announced as part of Hungary’s 2017 Budget — was controversial at the time, as internet access services were not included in Annex III of the EU VAT Directive, which sets out the categories of goods and services eligible for reduced VAT rates. Despite informal pressure from the European Commission to hold off, Hungary proceeded with the change.

The policy has since moved further. Internet access services in Hungary are now subject to a reduced VAT rate of 5%, placing them in the same category as essential goods such as milk, poultry, eggs, medicines, and books. This reflects Hungary’s view that affordable internet access carries a social and economic importance comparable to basic necessities.

The earlier legal tension at EU level has also been substantially resolved. EU VAT Directive reforms — particularly changes adopted since 2022 — have broadened the scope of Annex III, giving Member States considerably more flexibility to apply reduced rates to a wider range of goods and services, including digital services and internet access. Hungary’s position, once seen as a unilateral departure from EU rules, is now firmly within the permitted framework.

For businesses supplying internet access or related telecommunications services in Hungary, the applicable VAT rate is therefore 5%, not the standard 27%. As always, the precise scope of which services qualify for the reduced rate should be verified with a VAT specialist, as the boundaries between telecommunications services, broadcasting services, and electronically supplied services can affect the applicable rate.

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