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Guide to NAV Online Invoice reporting - lessons to learn

The online invoice experience of nearly 300,000 first Hungarian swallows can be found useful for those taxpayers who join later. Summarizing our experience as a tax consultant and digital tax solution provider, with the understanding of corporate operations and expectations of the Hungarian Tax Authority (NAV),we would like to draw your attention to some challenges and faults to help newcomers to the world of online invoice reporting.

From 1 July, the scope of online invoice data supply will be expanded, all invoices issued between domestic business partners will be obliged to provide online invoice data, the threshold will be reduced to zero. Reverse charge VAT transactions and transactions of taxpayers exempt from VAT will also have to be reported. In addition, the expansion of the M-sheet obligation related to purchases may be a nightmare for accountants. What should taxpayers who are just beginning to provide online invoice data pay attention to?

1.     It is good to know that online invoicing is not exclusively a technological task!

Although companies initially expected a solution solely from the developers of the invoicing program/s, it soon became apparent that this was not working in practice. Based on the documentation issued by the tax authority, detailed invoice XML schemas and sample XML files, it is not feasible to prepare invoicing programs for the online invoice reporting with development skills alone. It further complicates the situation if the company uses a foreign or some individual invoicing program, or if its invoicing also extends to special transactions. In each case, it turned out that a combination of IT and professional competencies was needed for a proper solution.

2.     The reporting module should not only implement the mandatory features

The tax authority infrastructure created for invoice data supply, in addition to the legal requirement for real-time data provision, offers further opportunities for companies. There are already several data export options available in the online invoicing system, which could reduce the financial administrative burden besides invoice submission. These can help automate the accounting processes and internal control procedures of an organization. Through the online invoicing system, all taxpayers can now access the invoice data that the tax authority stores in relation to it. Also, this scope will further expand with the proposed expansion of data reporting.

3.     The reporting module operation should be transparent to the user

The data of the invoices to be issued is provided in the background, through the automatic communication between servers and applications. As other automated systems, its operation requires human monitoring. This can only be achieved if the submission of invoices can be tracked in the system, the steps for submission are well documented, and this information can be exported and easily interpreted by users. Solutions that do not have the features and interfaces required for monitoring involve serious tax risks. Especially, if this deficiency comes to light when a problem arises and action should be taken quickly.

4.     The reporting module should not only be parameterizable by developers

The scope of invoices and data to be reported has changed several times and may change more. It can already be seen that the regulation will be amended in two steps over the next one-year period, on 1 July, 2020 and 1 January, 2021. The invoicing system can later be used to create documents not to be reported (e.g. internal invoices, advance invoices, etc.). It is therefore expedient to allow the reporting module to be parameterized from its interface for those with the appropriate rights. The 'branded' solution that requires developer input for minor changes and parameterizations, makes the system inflexible. It is important that small changes be managed efficiently, quickly and flexibly.

5.     Multiple invoicing programs can have a common reporting module

If invoices are issued from more than one invoicing system, it is definitely suggested to consider installing an external data reporting module that is able to report invoices from all systems concerned to NAV. Such a central system can significantly simplify the tasks related to the operation of data supply and the possible future expansion of the invoicing system scope. When setting up a new invoicing program, its integration into the latest central reporting system often requires less investment than the installation and continuous maintenance of the invoicing system's own individual reporting module.

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6.     The reporting module is always to be updated in a timely manner

Both as a developer and a consultant, we see that the digitalisation of taxation in Hungary constantly and significantly challenges market participants. The online invoice system debuted last year, and its related services can change several times a year and add new elements.

The larger and more complex an ERP system is, the more considerable the investment requirement is to track changes. Users of individually or highly customized systems are in a similar situation. If the required software updates are late and installed, tested, then going live beyond the statutory deadline, it may block the invoicing process or cause failed invoice data supply. Appropriate, subsequent problem management (e.g. subsequent invoice data supply, failed data filtering, etc.) may be a further task and extra cost for the company. This adds value to systems that have a regular, predictable, and scheduled compliance, whether it’s an invoicing program or an external reporting solution.

7.     The reporting module must be thoroughly tested!

An online invoice reporting system is expected to stably manage the circumstances that may stand in the way of successful reporting. Incorrectly generated XML files planned outages and unexpected malfunctioning of the tax authority servers, also an erratic network connection with the NAV servers can all be the causes of delays or in the worst case, failures in data supply. The online invoice reporting module can be prepared and to be prepared for all these events.

8.     Is incorrect data supply to be submitted manually via NAV Online Invoice Portal subsequently?

The tax authority provides an online interface for the manual submission of the online invoice data supply. Even though this is intended to serve the reporting of declining paper-based invoices, it also gives an opportunity to report failed or incorrectly reported automatic invoices due to malfunction. Anyone who has already used this interface knows that manual data entry is very time-consuming. It is more efficient to perform the subsequent correction and submission of faulty automatic data supply with a reporting module. Therefore, it is advised to opt for a reporting solution that will take care of it.

9.     The organization must have a dedicated person responsible for online invoice data supply

Compliance with online invoice regulation has also resulted in new tasks and challenges within companies. For those involved in tax and accounting processes of organizations, it has often become inevitable to learn about the related technological requirements and to work more closely with the IT team responsible. The lack of certain rights or legal knowledge could easily generate difficult tasks for the IT team. Depending on how challenging the development of online invoicing is for the company, it is worth appointing a dedicated person (team) who, on the one hand, brings the project together and, on the other hand, can support the continuous operation of the online invoicing system in the future.

The experience of our customers proves that the solution we have developed manages the data of dozens of international and Hungarian companies efficiently, even beyond NAV online invoice data supply possibilities. In addition to the online invoice reporting module, the platform can also serve the needs of partners for, M-sheet preparation, and partner tax number verification. The modular structure of the Connectax platform allows our partners to use a variety of features from one interface, choose from a “basket of services”, and to customize and parameterize their own dashboard. An additional advantage of the unified platform is that legislative and technical changes can be tracked continuously and quickly, developments are not limited by the technological constraints of large-scale, complex ERP systems.

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