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All roads lead to digitization in taxation as well

Also as a result of electronic data disclosures – real-time invoice data reporting, EKAER, or online cash register data – the estimated VAT gap in Hungary has decreased considerably in the course of the past 5 years, to 9 per cent in 2018. In the meantime, the scope of tax information possible to be digitally queried from HU TA databases is extended significantly.

Although the proportion of the VAT gap has decreased significantly – already below the EU average –still, nearly HUF 350 billion per year does not flow in the budget. All this continues to motivate the Tax Authority to introduce further changes, such as the preparation of e-VAT schemes as soon as possible. In addition to real-time invoice data, the VAT return scheme – intended to be introduced by 2021 – can also be based on data received from online cash registers and ATMs. The plans of the HU TA include machine-aided processing of cash register log files, channelling them to accounting, and machine-aided electronic invoicing as well. 

The digitization of taxation, the automation of invoicing and VAT returns entail both opportunities and risks for taxpayers. As shown by tax inspections considerably altered in recent years, there is an increased emphasis on continuous risk analysis based on the analysis and verification of information received online. Both domestic and international regulations build on data requests and data analyses more and more extensively. As a result, it is required to develop more efficient control and data processing strategies at management levels as well, in order to enable taxpayers to keep pace with following the information expected by and available to the Tax Authority. 

VAT returns – keeping abreast of HU TA 

For companies of rather complex operations, compilation of VAT analytics and VAT returns can be a challenge, tying up considerable capacities month by month. Where it is necessary to synchronize the work of several people and several systems, it is definitely worthwhile to take into consideration what means can be relied on for automation, even supported by databases made available by the HU TA. 

As the first-round investigations by the HU TA are also conducted digitally, immediately, using risk analysis software products, those who do not want to fall behind the Tax Authority in terms of digitization are not offered the opportunity but are rather expected to compare information possible to be queried digitally with their own systems. Those who continue to perform manual checks only, and still try to reconcile increasing data piles and to detect potential errors only manually, are required to make allowance for more and more potential errors and greater risks. The control process can be shortened and risks can be reduced by automation and software support .

All in all, by reason of the reporting obligations introduced by the tax authority, the lack of experts on the labour market and wage pressures, the solution for companies can be provided by investing into automation, perhaps by way of efficient risk management applications and software products developed by external service providers. 

According to HU TA data, the number of taxpayers registered for the real-time invoicing system has exceeded 350 thousand, and real-time invoice data reports have been submitted by more than 260 thousand taxpayers. The number of invoices submitted is already around 60 million, associated with a total of 32 million successful data transmissions. Although the success rate is increasing, it is far from being perfect: on working days, the success rate is about 80% according to HU TA data. This is why on-going checks of real-time invoice data reports are required on the taxpayer side as well! 

Real-time invoice 2.0, the countdown has started 

While major anomalies are eliminated by the system – for example, if data reporting of an invoice is attempted several thousand times by a system, even HU TA employees will become alerted and phone the taxpayer for reconciliation –, reports with errors must be dealt with by companies to find the root causes. To highlight some of the most frequent problems occurring in connection with real-time invoicing, it is important to establish a correct invoicing process and data content, to send them correctly to the HU TA, as well as to monitor – and correct, if necessary – certificates returned by the Tax Authority. 

Real-time invoice data reporting will be extended by further data as from 01 April 2020; it is worthwhile to commence preparations for this as soon as possible, especially if the company uses its own individual ERP system or invoicing system. Reporting is feasible by external data disclosure modules, but XML files are required to contain the new data as well from April onwards. Such data include data that are not necessarily required to be indicated on the invoice itself pursuant to the VAT Act. Besides, there are data associated with relief or legal consequences by EU regulations in respect of displaying them on invoices, such as specifying the tax number of a (foreign) buyer. And companies need to start their switchover to the integration of new mandatory and recommended data content into their invoices in due time. The test interface of real-time invoice 2.0 is already available for preparations. 

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