Our experience shows that with the end of the grace period approaching, the tax authority applies enhanced scrutiny to the data reporting of outgoing invoices and the values reported on the same invoices by buyers in their domestic recapitulative statements. If the tax authority's risk analysis system detects a difference between the two sets of data, companies can expect to be contacted by the tax authority.
How can we prevent questions from the tax authority and a compliance audit?
1. Continuous monitoring of invoices
We have to make sure that all invoices to be reported are in fact reported to the National Tax and Customs Administration (NAV). Enhanced monitoring and checking of invoice reporting is necessary, for example, after an internet breakdown, downtime, or program error. Any non-reported data must be reported immediately after the elimination of the error as the tax authority is informed of the existence of the invoice from the domestic recapitulative statements (page M) of our buyers.
In relation to the changes of 1 July 2020, not only the structure of the XML file determining the content of the invoice data is new, but also the encryption of data reporting and the specification of termination points. The testing of successful data reporting is also, by all means, recommended in the case of version changes.
2. Checking invoice data for correctness
Successful data reporting in itself does not guarantee the compliance of reporting to legal regulations and only half of the work is done with the acceptance of the invoice data by the Online Invoice interface.
The most frequent problems that are quickly spotted by NAV are the following:
- Data are not reported for the partner to whom the invoice is issued;
- An invalid tax number or a tax number with character errors is reported due to inadequate maintenance of partner data;
- There are character errors in the invoice number;
- The invoice date is reported instead of the date of performance.
You can read more on this in our summary of the most frequent errors of VAT returns.
What are the consequences of erroneous or incomplete online invoice data reporting?
If you are contacted by phone by the tax authority due to the above-detailed differences, you will first be called to clarify the circumstances and correct the data. If the reconciliation of data by the tax authority fails at both the issuer and the recipient of the invoice and NAV does not receive a satisfying answer as to the cause of the difference between online invoice data reporting and the data declared on page M, a compliance audit will be initiated.
In addition to a mapping of the invoice data reporting processes, during a compliance audit NAV carries out wider-range testing, which may focus on the following:
- operation of the Enterprise Resource Planning (ERP) system,
- declaration regarding the closed structure of the invoicing program,
- ability to generate data exports and correctness of the same,
- matching of the invoice structure and the xml file determining it,
- operation of invoicing processes,
- testing of the compliance of records with legal regulations (e.g. VAT analytical records).
The quality of data reporting must be tested from both a tax and an IT perspective to ensure compliance with not only the VAT Act but the requirements of the developer documentation published by NAV. Asking questions is useful in this phase also and an expert on both tax and IT can help a lot.
The deadline for compliance with the new statutory requirements set by the tax authority is 30 September 2020. After the expiry of the grace period, a penalty of up to HUF 500,000 per invoice may be imposed. For this reason, a review of the invoicing practice and the process of data reporting is a very urgent task.
Thanks to the inquiry services made available by the tax authority in the online invoice reporting system and on the NAV website, a large part of testing can be performed in an automated manner using the digitax software developed for this purpose. A number of companies solved the testing of data reporting with the help of our technology experts. If you have questions, you still have a chance to prepare until the end of the grace period.