Hungary: eVAT– What does the new draft eVAT return mean for taxpayers?

Based on the bill submitted in October 2020 and approved in November, Hungarian taxpayers should have been able to use the system for draft VAT returns (eVAT returns) offered by the tax authority as of July 2021. Pursuant to a Government Decree, the roll-out of draft VAT returns has been switched to the tax assessment period starting on 1 October 2021.

What should you keep in mind when you open your draft VAT return?

eVAT returns become available for taxpayers online on the 12th day from the end of the reporting period. Therefore, in practice you will have eight days to review the draft and reconcile it with the return generated by your accounting program (deadline of a monthly VAT return is the 20th of the month following the reporting period). The tax authorities will prepare the eVAT returns and the adherent statement (i.e. the recapitulative statement also known as M sheet) about domestic input invoices, based on the data of online cash registers and online invoice data reports.

Active participation is needed regarding the draft VAT return as deductible tax should be evaluated per invoice. In terms of the draft, we note further that by filing the VAT return the taxpayer assesses its right for input VAT deduction and VAT reclaim. So it is particularly important to amend / supplement or thoroughly review it before submission.

A possible problem can also emerge as eVAT returns will include import VAT only from January 2023. Thus, these data will be missing in the draft return of previous periods. Of course, invoices which were not reported due to some reason by the partner, or by the taxpayer itself in case of self-billing, will not be involved in a draft VAT return either. Thus, the draft must be supplemented with such non-reported invoices. Risk can also occur if the draft VAT return includes invoices that were incorrectly issued to a company. The above should be checked and reconciled by taxpayers for each tax period.

What to do if the draft is incorrect?

The taxpayer is responsible for the correctness of the VAT returns. So it is worthwhile to check the draft VAT return alongside the adherent M-sheets with an expert, taking into consideration that in the event of an ineligible VAT refund, i.e. the right for VAT deduction was applied based on an incorrect invoice, the tax shortfalls will be assessed on the taxpayer’s side.

Is the administrative burden really decreasing?

The declared purpose of the draft VAT return, which is not obligatory for taxpayers, is to reduce the administrative burden, although this may differ in practice. Indeed, for multinational companies it means an extra administrative burden to check/modify etc. and approve the draft VAT return and adherent M-sheets.

Conclusion

For multinational companies with complex transactions, it may still be worthwhile to meet their VAT return obligations as usual until the system has been fine-tuned. So only small and medium-sized enterprises will perceive a substantial change.

Read the WTS Global VAT Newsletter here.