Online invoicing: experiences and version 2.0

Hungary introduced its online invoice reporting system on July 1, 2018 for invoices issued to another Hungarian taxpayer with a VAT amount reaching or exceeding HUF 100,000. More than a year has elapsed so it is worth taking a look at what the experiences with the system have been and what developments will follow next year based on the practical feedback from taxpayers and the Hungarian tax authority (NAV). In our article, we will focus on this IT development which aims to reduce the VAT gap in Hungary and detect VAT fraud (needless to say, the 27% VAT rate is a temptation for fraudsters).

Taxpayers and tax advisors initially had some concerns as to how the system would work, but online invoicing has started and the statistics show that millions of invoices have been uploaded to the Hungarian tax authority. Major discrepancies can trigger tax inspections, so taxpayers should check the system and may occasionally need to reconcile the reported data with that in the VAT report.

Practical experiences, errors in the systems

• The data uploaded without human intervention to the Hungarian tax authority’s system and the list supporting monthly VAT returns may differ. Sometimes the reason for this is obvious, but the online reporting may sometimes be incorrect and this may trigger exposure to a serious penalty.
• There are companies where the bookkeeping system is not so simple or is outsourced to non-Hungarian service providers. The fact that the bookkeeping and issue of invoices take place outside Hungary may not mean that the invoice details are not uploaded to the Hungarian tax authority.
• Some taxpayers have problems with cancelling or modifying invoices since they cannot link them to the original invoice(s).
• Downloading information from the system is not easy.

The penalty

Failure to provide data can result in a default penalty of up to HUF 500,000 (roughly EUR 1,500) for each missing or incorrect invoice. We note that in addition to automatic reporting to the online system of the NAV, there is another administrative liability with respect to invoices. A “data export” function has to be built into the invoicing software and, at the request of the Hungarian tax authority, taxpayers have to hand over the XML file including all the invoice details for the period under review.

Increasing administration

The online invoicing system generates error and warning messages if there is any problem with the XML files submitted. It is vital to review these replies from the Hungarian tax authority. In our experience, the Hungarian tax authority’s system still needs some development (verification of invoices submitted or issued to taxpayers could be renewed and developed further).

What lies ahead in 2020?

Taxpayers’ developers and in-house IT experts can review the new development documentation on the website of the Hungarian tax authority. By checking this website (available in Hungarian, English and German), it can be seen that the developer’s documentation of version 2.0 of the Online Invoicing System as well as scheme descriptors are available now and can be downloaded from the Documentation menu item.

All the functions of version 2.0 of XML API have been available in the test environment since the end of September, except for the metrics query service. The Hungarian tax authority will publish specific information on the exact schedule for implementation later.