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VAT – 10 things worth paying attention to in 2020!

The changes of VAT regulations may concern several sectors and companies; we have collected the areas worth paying special attention to in 2020 due to amendments of local or European legal regulations.

1. Quick fixes - VAT of customer stock and chain transactions

From 2020, the rules of simplifying the customer stock will change, and it was clarified how, in the case of a chain transaction, the presumption relating to the classification of an intermediate transport operation can be rebutted. The modifications are of fine-tuning character and affect certain operators. It is worthwhile for the businesses involved to start preparing for the changes in due time and, if necessary, to restructure the logistic, billing, business and administrative processes as well as the underlying contractual background. 

Affected: Call-off stock, customer stock, consignation warehouses, companies performing chain transactions, including both domestic ventures and foreign companies having a Hungarian tax number

2. Quick fixes - certification of the transportation of products to other member states and amended conditions of tax-exemption

From 2020, the certification scheme of tax exemptions for supplies to other EU Member States will change. According to the rules of 2019, the way of documenting the product's exit to another Member State is not obligatory in Hungary: exit is typically verified by CMR. As from 2020, proof of delivery to another Member State will be standardized, and it has been specified in case of what kind of evidences submitted the delivery presumption will occur. The rules will be uniform across the EU, so for a multinational company operating in several Member States, it is not necessary to face up to as many as 28 different regulatory systems. Instead, supporting documentation can be designed according to a consistent set of criteria. 

In addition, a further condition for exemption, uniform throughout the EU, from Community law as from 2020, is that the buyer should have a valid tax number, which they are required to communicate to the seller.

Also, from 2020, it is a uniform condition within the EU that the seller should report the transaction in his Intra-Community summary declaration (practically y the form A60).

Affected: Every domestic company selling products within the Community

3. For some transactions, an accounting document under the Accounting Act is no longer sufficient

As of July 1, 2020, the scope of transactions exempt from VAT where no invoice is required will be restricted. So, for example, in the case of other education or real property sale exempt from VAT, it will be mandatory to issue an invoice. Issuance of an invoice (an accounting document in accordance with the Accounting Act is required instead) is still not obligatory in case of the leasing of real property-exempt from VAT. Issuance of an invoice is still mandatory, of course, if the lessor has opted for taxability on the leasing.

Affected: companies performing transactions exempt from VAT 

4. Reduction of reasonable time available for invoicing from 15 to 8 days

As from July 1, 2020, the 15-day time limit that is considered reasonable to issue an invoice will be shortened to 8 days. This means that the invoice must be issued within 8 days of completion, and not within 15 days.

Affected: every company that is issuing invoices

5. Annulment of the limit value of HUF 100 thousand 

As from July 1, 2020, it will be mandatory to indicate the tax number of the customer not only if the amount of transferred VAT reaches or exceeds HUF 100 thousand, but on all invoices issued to customers with a domestic tax number. Therefore, this rule applies to all taxable persons, including small taxpayers with a fixed-rate tax, persons not subject to value added tax, businesses carrying out transactions exempt from VAT issuing invoices, as well as transactions are subject to a reverse charge procedure.

As from July 1, 2020, the  HUF 100 thousand value limit for the provision of real-time invoice data reporting will be abolished. It means that real-time invoice data reporting is mandatory not only in the event that the amount of transferred VAT reaches or exceeds HUF 100 thousand, but in case of all invoices issued to customers with a domestic tax number. This rule applies to all taxable persons, including small taxpayers with fixed-rate tax, persons not subject to value added tax, businesses carrying out transactions exempt from VAT which issue invoices, as well as transactions are subject to a reverse charge procedure.

So, the limit of HUF 100 thousand will be cancelled in respect of two rules:

  • Indication of the customer’s tax number on the invoice
  • Scope of invoices affected by real-time invoice data reporting

The two rules need to be considered separately because there is a possibility that the business has solved one of the problems, e.g. by indicating the customer’s tax number on the invoice in the event of every domestic transaction; however, this does not mean that the problem of real-time invoice data reporting is automatically resolved.

Affected: each company issuing invoices, but especially persons not subject to value-added tax, small taxpayers with fixed-rate tax, and companies performing transactions subject to a reverse charge procedure

6. Extension of the real-time invoice data reporting obligation

As from January 1, 2021, the scope of invoices for real-time invoice data reporting will be further extended: basically to all invoices issued by domestic taxpayers, except for transactions with non-taxable persons, which should be reported in the “one-stop-shop system”.

The table below summarizes which transactions are subject to the real-time invoice data reporting obligation in 2019, as from July 1, 2020 and as from January 1, 2021 respectively.

Real-time invoice data reporting obligation

2019

1 July 2020

2021

Domestic transaction subject to VAT (B2B)

Only above VAT HUF 100,000

Yes

Yes

Domestic reverse charge taxation (B2B)

No

Yes

Yes

Transactions of tax-exempt persons (B2B)

No

Yes

Yes

Invoice issued about transactions exempt from VAT (B2B)

No

Yes

Yes

Domestic tax-free sales or services (B2B)

No

Yes

Yes

Product export

No

No

Yes

Intra-Community sales

No

No

Yes

Sales towards domestic individual

No

No

Yes

Transactions performed abroad

No

No

Yes

Transactions performed in other member state in a one-stop-shop system

No

No

No

Affected: Every domestic VAT-subject (including foreign persons with a Hungarian tax number) issuing invoices

7. Introduction of real-time invoice version 2.0

As from April 1, 2020 there are major changes to the xsd schema for real-time invoice data reporting, but this also offers new opportunities for automation.

Billing software developers are challenged by the new version of the real-time invoice, as the schema associated with it also offers or expects the provision of data that are not always available at the time the invoices are closed and issued. By these new data, the authority would intends to obtain information that goes beyond the original concept of instant data  reporting for invoices issued. Such data did not appear either on invoice images or in the VAT Act in 2019, so most invoicing programs will not be suitable for reporting unless modified.

Affected: Each domestic VAT-subject (including foreign persons with a Hungarian tax number) issuing invoices

8. Brexit

Being aware of the result of the British elections on December 11, 2019 now it can be stated nearly certainly that the United Kingdom will leave the EU in 2020. The only question is under which scenario/agreement the United Kingdom will leave the European Union. Businesses should be prepared for the potential scenarios of Brexit. In the field of VAT, Brexit can bring about several changes in business. For example, care should be taken that goods coming from the United Kingdom will be treated as import of goods, and sales to the United Kingdom will be treated as export of goods. These transactions require different shipping certificates, and businesses need to adjust their invoicing programs, corporate governance, and other IT systems to comply with the new processes.

British businesses that have a tax number in Hungary can only carry on their business through financial representation! However, special rules apply to the provision of financial representation, which set additional criteria for financial representatives at the same time. It is already worthwhile for the British businesses concerned to look for companies authorized for financial representation.

Affected: Each domestic company trading with the United Kingdom and British companies with a Hungarian tax number

9. EKAER fines

The rules of the EKAER have not changed, but due to the entry into force of the regulation as from 2015, repeated offenders may face heavier fines by the tax authority. In the field of EKAER, it is important that entrepreneurs are aware of and apply the rules of EKAER correctly. It is of utmost importance that businesses pay proper attention to the training and further training of their EKAER staff.

Affected: Companies trading with products, logistic companies, transportation companies

10. E-commerce rules

It is already worth preparing for the amended VAT Directive already adopted by the European Commission! Pursuant to this, the number of transactions to be reported through a one-stop-shop system (MOSS) will increase, import duty ceases on products with a value below € 22, and VAT rules for e-commerce web platforms that promote products from third countries will be introduced. These rules will be in effect from 2021, and the domestic regulations implementing the changes to the directive will  probably be published in 2020.

Affected: Webshops, distance sellers, e-commerce agents
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