With another extension of the taxpayers having online invoice data reporting obligation in January, invoice data reporting may become comprehensive in Hungary. The new 3.0 NAV online invoice reporting schema will already be suitable for all issued invoices including invoices issued to private persons and invoices on Community and export transactions in addition to the B2B invoices reported so far. At the same time, online invoice data reporting will also impact the practice of VAT return filing as the tax authority's goals also include the preparation of VAT return proposals in 2021. Also, due to the virus situation, the focus on electronic invoices has increased, which option will also be available in the Hungarian Tax Authority's (NAV's) XML.
The previous version of the invoice XML structure changing
Careful consideration of the required XML changes is, by all means, necessary on companies' side as, while a part of the changes affects all taxpayers in the same way, some of them will have to be applied to individual businesses on a customized basis. The scope of invoices to be reported is extended and new codes will have to be classified in the case of tax-free items. In addition, if electronic invoicing is a goal also, many details must be considered beyond the change of the invoice XML, for example, archiving rules.
The following must be considered by all means before the implementation of the NAV 3.0 schema:
- Assessment of the group of invoices to be reported.
- Clarification of whether there are any supplies to private persons.
- Is there a solution for the differentiation of supply transactions to private and taxable persons?
- Is the introduction of electronic invoicing possible?
- Can invoice data processing be automated?
- What kind of transactions are there, are there any VAT-exempt supplies or supplies not falling within the scope of the VAT regime? Can this be clearly determined from the tax codes in the documentation or is the involvement of an expert necessary?
- Are advance and final invoices being issued?
- A review of master data and checking of tax numbers is a must for new joiners to online invoice data reporting and highly recommended for all other companies.
What important content changes will come in the NAV data reporting schema?
1. Fields pointing towards e-invoicing
It will bring a substantial change in electronic invoicing in 2021 that the XML according to the NAV online invoice schema will itself also qualify as an invoice if the taxable person declares as part of data reporting that an electronic invoice is being sent in. In this case, the company will have to provide, in its own interest, the complete data content of the invoice, not only the compulsory items prescribed by the VAT Act as without this, the company's partners will not be able to treat the issued invoice XML as an e-invoice and to process it appropriately. However, the invoices issued to private persons may not be replaced with XML-based e-invoices as personal data cannot be entered in the XML file.
2. New data field supporting automated data processing
For those considering automated invoice data processing, it will help in the new schema that the data most commonly used in market practice will receive new dedicated fields. This includes, for example, order numbers, company codes, article codes, delivery note numbers, contract numbers, cost centers, and material numbers. All this will effectively support automated invoice processing.
3. Tax code for tax-exempt transactions or transactions not falling within the VAT regime
In the future, text specification of the cause of tax exemption or a text reference to the transaction not falling within the VAT regime will no longer be sufficient in data reporting. The tax authority specifies this information through the introduction of new codes based on which it will be able to assign individual items to the right VAT return lines, which is an important step in preparing VAT return proposals.
For companies, correct classification is critical! At this point, a tax expert should, by all means, be involved in development in addition to an IT expert as false transaction type classification may lead to incorrect VAT return proposals and incorrect VAT returns.
4. VAT rate - a new type of data
A new code element will assist the setting of one type of VAT rate in the 3.0 NAV schema version. In these cases, there is a tax base but no tax is being charged. According to the document recently published by the tax authority, free-of-charge transactions fall in this category as well as cases where no VAT is charged based on Section 17 of the VAT Act. Also, in the case of foreign exchange invoices, 0 value will also be acceptable in the exchange rate field.
5. Data of the advance invoice may also be provided in the final invoices
The indication of advance payments will change in the 3.0 schema. Companies will be able to enter the serial number of the invoice issued on the advance payment, the due date of the advance invoice, and the exchange rate applied. This is typically an issue in various ERP systems and the tax authority may this way receive easier-to-use and easier-to-analyze correct data from the invoice data reports.
6. Differentiation of invoices issued to private persons
Companies must systematically differentiate the transactions performed for private persons in the XML file. For example, the lack of a tax number will not automatically mean that a partner is a private person. For this reason, a new element was included in the schema to differentiate invoices issued to (domestic, Community and third-country) taxable persons and the ones issued to private persons. If the value of this element is "true", i.e. if the buyer is a private person, it will not be possible to enter the name and address data in the XML file. This must be considered as if the name or address of a private person is included in a NAV XML, the tax authority will reject the invoice data report!
7. Multiple tax numbers can no longer be provided
Although different tax numbers of both the buyer and the seller may be shown on the invoice (e.g. domestic and Community tax numbers),in the new NAV schema version, only one tax number may be provided. For domestic transactions, this will of course be the Hungarian tax number. For Community and third-country transactions, the Community or third-country tax number will have to be entered in the XML.
As NAV's documentation is already available, there is no obstacle to starting the necessary developments. However, companies should not start working on this relying only on their development team! As 3.0 may lead to VAT return proposals or perhaps to e-invoices, stakes and responsibility are higher in the case of potential errors.