Why is the data reconciliation procedure necessary?
The Hungaryan tax authority has developed the new measures in cooperation with the Ministry of Finance, with the aim of improving data quality, reducing the shadow economy, simplifying administration, enhancing tax authority database analyses, and offering simplified procedures to enhance due care and compliance. In recent years, the tax authority’s data assets have grown significantly, uncovering more and more discrepancies during analyses. Until now, resolving these discrepancies often required time-consuming and labour-intensive tax audits, which were not always efficient. The goal of the new procedure is to ensure that businesses are promptly informed of data discrepancies and given the opportunity to correct them before potential compliance inspections or tax audits.
Participation in the data reconciliation procedure is mandatory, and all affected entities must respond to the tax authority’s notification. Failure to meet the deadline will result in an automatic default penalty and may lead to further tax administration procedures.
How does the data reconciliation procedure work in Hungary?
During the procedure, the tax authority sends notifications to the affected businesses regarding discrepancies found in the data provided by them and their contractual partners via their Client Gate.
The process can conclude in two ways:
1. Discrepancies that can be resolved with data correction:
After clarifying the background of the discrepancies, if they are due to errors or omissions, the issue must be resolved through data reporting correction. The solution depends on whether the error occurred on the invoice issuer’s or recipient’s side. For issuers, online invoice data reporting corrections are required, while for recipients, corrections must be made to the VAT return’s domestic recapitulative statement (M-sheets).
2. Failure to respond or lack of correction:
If a company does not respond to the tax authority’s notification in time, an automatic default penalty of HUF 300,000 will be imposed. If the correction is still not made, a tax administration procedure will be initiated, typically involving a compliance review and the imposition of further penalties.
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Why is data quality important?
The tax authority aims to ensure data-driven operations, which require accurate and consistent data sets.
This benefits not only the tax authority but also taxpayers. Transparent and precise data reporting reduces the administrative burden and enables businesses to access accurate data in the eVAT and online invoice systems. Timely data reconciliation prevents lengthy tax audits and increases the consistency of invoice data between contractual partners.
How can businesses prepare for the data reconciliation procedure?
To minimize the number of data reconciliation procedures, companies should take the following key steps:
1. Regularly reviewing data reporting: Ensuring the accuracy and completeness of online invoice data submitted to the tax authority is crucial. For inbound invoices, it is particularly important to check the accuracy of the details of the invoices subject to VAT deduction in the domestic recapitulative statements (M forms).
2. Checking partners’ data: Since data reconciliation applies not only to company’s own data but also to that of its contractual partners, reviewing the authenticity of partners’ online invoice data on the recipient side is essential.
3. Quick response: Meeting the 15-day deadline in a data reconciliation procedure is key to avoiding penalties and audits.
Control and prevention processes can be effectively managed through automated solutions.
It is particularly recommended to use a solution that can handle typos and abbreviations in invoice numbers, ensuring consistency between internal records and online invoice data reporting.
Since the tax authority also uses artificial intelligence, businesses will need AI-based solutions to ensure quick response times, thereby avoiding penalties and reducing audit risks.
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The impact of data reconciliation on business operations
From 2025, the data reconciliation procedure will not only be a challenge but also an opportunity for businesses. Data accuracy and transparency enhance a company’s credibility and contribute to the tax authority’s more efficient, data-driven operations. With preparation and a proactive tax strategy, businesses can not only avoid sanctions but also reduce additional administrative burden.
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