From 1 July 2018, taxpayers are as stated earlier obliged to provide within 24 hours invoice data for domestic transactions with a minimum VAT amount of HUF 100,000 (322 EUR). The ERP system must be able to detect sales invoices meeting reporting requirements: the minimum VAT amount. To be able to comply with the requirements and provide the data on in time, a taxpayer needs to develop either tooling or purchase a solution.
When invoicing takes place using an accounting/billing program, the invoice information has to be transmitted immediately from the billing program to the National Tax and Customs portal (NAV) without human intervention, via public internet, shortly after the invoice has been issued. Taxpayers who do not send the data online immediately will be subject to tax penalties.
The fundamental principle of the data supply is that an XML data file may contain only one invoice. If for technical reasons, the billing program sends multiple invoice data to the tax office at a time; it cannot do so in a single data file. Breaking the accounts into separate data files is necessary. Data supply includes the following primary data circuits:
- Technical data of data service: exact time, endpoint identifier
- Billing software data: manufacturer's name, software name, version number
- Invoice type
- Initial invoice details
- Modification invoice details
From 1 July 2018, taxpayers are obliged to provide within 24 hours invoice data for domestic transactions with a minimum VAT amount of HUF 100,000 (322 EUR). The billing program must be able to detect invoices meeting reporting requirements, i.e., minimum VAT amount.
Hungary allows a voluntary option that discloses more data content than requested. The schema file (XSD) defines the XML set with invoice data. The billing/invoicing software should legally transmit at least the mandatory data content of an invoice – as stipulated in the VAT Act – to NTCA. That data set is the minimum legal requirement to submit.
However, the taxpayer may opt to transmit a broader range of data. That is feasible as in the XSD schema file can include more data than legally required according to the VAT Act. For example, additional data based on the taxpayer’s own decision or due to further requirements defined in the Excise Tax Act.
Hungary has today a similar obligation in place as the SAF-T on request as we know in Poland. That file has to be submitted when the tax authorities announce a tax audit. That legal requirement came into force in 2016. It is called 'Adatexport' or in English the data export function. The data export feature of the billing software allows the taxpayer who is subject to a tax audit to hand over the full data content of all invoices to the tax inspectorate in electronic form and in a manner that can be handled and assessed by the tax authorities.
In comparison with the online data supply in force from mid-2018, the data export feature contains all the taxpayer's invoices that have been generated by the billing/invoicing software and the VAT threshold, therefore, does not apply.
With the new e-invoicing data obligation starting mid-2018, this audit file will remain in principle in force. However, the prerequisite for ending this function is that the requirement to provide online data from the billing software covers all the invoices of the taxpayer and their total data content.
The XSD of the online data-supply from the billing/invoicing software was designed to fit 'data export'. It is however not anticipated that the XSD will be the method for such data export. The taxpayer decides to use this XSD or not. New functionality could, therefore, cover both types of data supplies on conditions that all invoices and data content is extracted from the system.
For data supply from mid-2018, the taxpayer may decide to include a broader dataset than required by the VAT Act. A reason could be that the taxpayer wants to use the dataset created for transmission to NTCA (data-supply) also for other purposes, such as electronic invoicing. That is a taxpayer’s own choice, but critical is that an IT solution can facilitate such dataset.
For the new mid-2018 obligation, it is also allowed to voluntary provide all data including data below this threshold to the tax authorities. The in-house tax function might however not allow such practical solution. The tax department might be reluctant to submit voluntary data as that data could contain unforeseen tax risks resulting in tax assessments, tax penalties, and a future tax audit.
Only clients can, therefore, decide to submit all data or not to the tax authorities.
Submitting all data is in practice only allowed when a risk assessment - SAP VAT health check - is performed, and any material tax risks found is remediated. Disclosing invoices without such assessment for invoice data below the VAT threshold can result in (extra) financial risks. All discrepancies will lead to incorrect data supply. According to provisions related to HU RTIR, the Hungarian tax authorities will raise tax penalties from taxpayers who fail to fulfill their obligation to submit data or delayed incomplete, erroneous or incorrect data content. The tax penalty is HUF 500,000 per invoice.
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Last week the Hungarian tax authorities finally released the technical documentation and in the PowerPoint below we provide a summary.
SAP health check: data in SAP incorrect and incomplete!
It is essential to review whether the data in SAP itself is correct and complete. The Key Group has recently delivered its Hungarian SAP health check pilot for one of its major clients, and the outcome was that quite some changes in SAP had to be made to avoid either future questions by the tax authorities or announcement of a tax audit when data is submitted mid-2018.
Please keep in mind that the Hungarian tax authorities are aware that SAP setup itself is often not in order and that tools outside the ERP system are used to remediate and manipulate tax data outside of SAP with the purpose to improve tax reporting. The full automated legal requirement is to force taxpayers to remediate the ERP VAT setup itself and realize that taxpayers do not use workarounds as Excel sheets or similar tools outside the ERP system as human intervention is not allowed.
When the definitive EU VAT system becomes in force - expected in 2021 - these data requests become even more critical. The local tax authorities will use the acquired tax data to check whether sufficient tax revenue is received from the other Member State(s).
Based on this pilot we have designed an efficient and effective assessment process that will include not only an overview of gaps but as well our view how to remediate these gaps in SAP itself.
The Key Group offers an SAP health check specifically on the Hungarian legal requirements defined in XML format:
- Disclose all SAP setup gaps that need remediation to avoid incorrect and incomplete data during submission of data
- Identify areas for improvement, which would be necessary for real-time invoice reporting:
- Type of billing documents
- Details of invoices,
Every company that has to meet these Hungarian requirements have to ensure that incorrect and incomplete tax data in SAP itself has to be ﬁxed ﬁrst to realize that validation of submitted data via tooling results in a positive validation by the Hungarian tax authorities. Contact us if you like to know more about the executive summary of our findings of our SAP health check for own benchmark purposes.
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Hungary legislation and status - eInvoicing requirements in Hungary per July 1, 2018
Written by Richard Cornelisse
Richard advises multinational businesses in improving the efficiency and effectiveness of their Indirect Tax Function and Tax Control Framework.
He started his career as a manager at Arthur Andersen and then became a partner in EY where I led the indirect tax performance team for Netherlands and Belgium. Currently, he is a senior managing director of KEY Group.
Richard has over 20 years’ experience advising clients on international VAT issues. He is specialized in the tax aspects of financial transformations, shared service center migration, and post-merger integration work. Richard is also somewhat of a mentor, giving back to the profession. If you are interested in conversation and discussion, please feel free to contact him.