As of 1st July, 2018, all invoices issued between Hungarian taxpayers with a VAT content exceeding HUF 100,000 (Hungarian Forint) must be reported in real time to the tax authority.
The draft legislation and the technical requirements have already been published by the Ministry for National Economy/tax authority. However, the final regulation cannot be presented until April 2018 at the earliest, as the draft must be approved by the European Union Commission in a notification procedure.
Based on the draft legislation already published, the main rules are the following:
Who is affected by these rules?
• Hungarian VAT payers that issue invoices to another Hungarian taxpayer with a VAT amount exceeding HUF 100,000 (approx. EUR 320) are subject to the real time invoicing obligation. Further to this, when such invoices require correction, the correction/cancellation must also be reported.
• Businesses established outside Hungary but registered for VAT in Hungary are also affected by these rules.
• Only invoices issued to Hungarian taxpayers are affected, i.e. invoices to foreign taxpayers or to private persons are exempt.
• Invoices without VAT (e.g. domestic reverse charge transactions, VAT exempt sales) are also not affected.
What does real time reporting mean in practice?
• The invoices must be issued using qualified invoicing software that is capable of online communication with the tax authority in a pre-defined way. The technical specification details of which data on the invoices need to be reported, in the pre-described format (xml), the technical specification and the format requirements have already been published by the tax authority.
• The online reporting must be done immediately the invoice is issued.
• Data must be transmitted automatically by the invoicing program without any human intervention. The reporting obligation is only fulfilled if the tax authority system confirms that the data reported are correct.
• Invoices issued manually also need to be reported, through the website of the tax authority. The relevant data of these invoices need to be recorded manually. The deadline for doing so is five days if the invoice is for less than HUF 500,000 VAT , otherwise one day.
Are there any penalties for non-compliant taxpayers?
The penalties can be enormous: up to HUF 500,000 (approx. EUR 1,600) per invoice if not reported or not appropriately reported.
What are the reporting rules if the invoice is issued by someone else?
Invoices may be issued not only by the supplier, but an authorised representative may also issue the invoices in the name of the supplier based on a prior, written agreement. Even in this case the supplier is obliged to fulfill the reporting obligation, but the supplier and the invoice issuer are jointly liable. Technically, the reporting must be done also in this case via the invoicing system, i.e. in practice only the authorised representative can fulfill this obligation., If the supplier therefore outsources the invoicing function or enters into a self-billing agreement with its customer, the supplier needs to ensure that the invoicing system is compliant with the reporting rules.
How can foreign companies with VAT registration in Hungary only be compliant?
The development of the invoicing systems in order to be compliant with the Hungarian reporting rules can cost a considerable amount. However, the tax authority will be developing and make available its own, web-based invoicing system that will be fully compliant with the Hungarian rules.
As the new legislation is planned to come into force on 1st July, 2018, and the penalties for non-compliance are quite high, it is strongly recommended that the invoicing practice of each company be reviewed. The tax experts of Ecovis Tax Solution are happy to provide assistance.
Contact
Dr. Laszlo Kelemen, tax expert, partner, ECOVIS TAX SOLUTION, Budapest, Hungary
The draft legislation and the technical requirements have already been published by the Ministry for National Economy/tax authority. However, the final regulation cannot be presented until April 2018 at the earliest, as the draft must be approved by the European Union Commission in a notification procedure.
Based on the draft legislation already published, the main rules are the following:
Who is affected by these rules?
• Hungarian VAT payers that issue invoices to another Hungarian taxpayer with a VAT amount exceeding HUF 100,000 (approx. EUR 320) are subject to the real time invoicing obligation. Further to this, when such invoices require correction, the correction/cancellation must also be reported.
• Businesses established outside Hungary but registered for VAT in Hungary are also affected by these rules.
• Only invoices issued to Hungarian taxpayers are affected, i.e. invoices to foreign taxpayers or to private persons are exempt.
• Invoices without VAT (e.g. domestic reverse charge transactions, VAT exempt sales) are also not affected.
What does real time reporting mean in practice?
• The invoices must be issued using qualified invoicing software that is capable of online communication with the tax authority in a pre-defined way. The technical specification details of which data on the invoices need to be reported, in the pre-described format (xml), the technical specification and the format requirements have already been published by the tax authority.
• The online reporting must be done immediately the invoice is issued.
• Data must be transmitted automatically by the invoicing program without any human intervention. The reporting obligation is only fulfilled if the tax authority system confirms that the data reported are correct.
• Invoices issued manually also need to be reported, through the website of the tax authority. The relevant data of these invoices need to be recorded manually. The deadline for doing so is five days if the invoice is for less than HUF 500,000 VAT , otherwise one day.
Are there any penalties for non-compliant taxpayers?
The penalties can be enormous: up to HUF 500,000 (approx. EUR 1,600) per invoice if not reported or not appropriately reported.
What are the reporting rules if the invoice is issued by someone else?
Invoices may be issued not only by the supplier, but an authorised representative may also issue the invoices in the name of the supplier based on a prior, written agreement. Even in this case the supplier is obliged to fulfill the reporting obligation, but the supplier and the invoice issuer are jointly liable. Technically, the reporting must be done also in this case via the invoicing system, i.e. in practice only the authorised representative can fulfill this obligation., If the supplier therefore outsources the invoicing function or enters into a self-billing agreement with its customer, the supplier needs to ensure that the invoicing system is compliant with the reporting rules.
How can foreign companies with VAT registration in Hungary only be compliant?
The development of the invoicing systems in order to be compliant with the Hungarian reporting rules can cost a considerable amount. However, the tax authority will be developing and make available its own, web-based invoicing system that will be fully compliant with the Hungarian rules.
As the new legislation is planned to come into force on 1st July, 2018, and the penalties for non-compliance are quite high, it is strongly recommended that the invoicing practice of each company be reviewed. The tax experts of Ecovis Tax Solution are happy to provide assistance.
Contact
Dr. Laszlo Kelemen, tax expert, partner, ECOVIS TAX SOLUTION, Budapest, Hungary
