Since April 2021, with very few exceptions, all invoices issued under a Hungarian VAT number have been required to be reported to the tax authority. The data thus reported is going to constitute the basis of the e-VAT proposals published by NAV in the near future; therefore, checking this data is going to receive even more attention.
More than 40 thousand NAV audits
According to the latest statistics from NAV, the number of compliance audits performed based on data from the Online Invoice System exceeded 44 thousand, while the number of tax audits exceeded 5 thousand. The rate at which audits were performed was not reduced in spite of the pandemic. In the past six months, nearly 6 thousand compliance audits and more than a thousand tax audits were performed by the tax authority, during which a net tax deficiency of HUF 27 billion was identified in total.
Up to HUF 500 thousand in fines per invoice
Although the tax authority takes into account all circumstances of each case, such as the error, the extent of the deficiency, the practices of the taxpayer, it is entitled to impose even the maximum fine of HUF 500 thousand per invoice. Although NAV has never exercised its right to impose such a high fine in practice, it has already imposed HUF 50 and 100 thousand fines per invoice at certain companies, which represented several million HUF penalties in total in each case.
Common Online Invoice System data reporting mistakes
Unfortunately, even if the data reporting process is concluded successfully, this still does not mean that we have complied with all requirements as NAV Online Invoice System does not yet have access to the actual data content of the invoice during the data reporting process; therefore, it is only able to perform certain checks.
To give an example: in the case of a final invoice, pursuant to the VAT Act, data is required to be provided on the tax difference arising from any advance payments as well. The data reporting is going to be accepted even if it is not indicated that a certain item is classified as an advance payment since, at the time, NAV is not yet aware that the data provided pertains to a final invoice. Therefore, the fact that the obligatory advance payment classification was missing will only be discovered after a thorough investigation, as the Online Invoice System data reporting process will not encounter a technical error because of this.
Although it is required by law to report data on invoices and their data content, it happens often that in the case of VAT-exempt invoices that fall outside the scope of the VAT, developers provide the meaning of the exemption code included in the developer documentation in the system instead of the reference to the exemption included on the invoices, as the former is easier to use from a technical point of view.
However, even the items specified in the VAT Act are often not sufficient. If we wish to ensure that the files constituting the basis for our data reporting are in line with the data export requirements as well or wish to use the new service of the tax authority, the XML-based e-invoicing option, we have to strive to provide all relevant data. In such cases, it is also necessary to check if the data reported includes all information we wish to include in the invoice.
Financial and IT expertise are both necessary
The quality of the data reporting is required to be checked from both a fiscal and IT point of view. This is the only way to ensure that it complies with both the VAT Act and the requirements included in the developer documentation published by NAV.
At companies, it is generally the developer, the accountant, or some other financial expert who monitors the data reporting process and consults with the stakeholders. However, due to differences in the specialised language of IT and finance, without a comprehensive understanding of both fields, correct data reporting may face obstacles; therefore, the close cooperation of the parties is required. In such cases, it can be useful to involve an external expert, who is aware of both the fiscal and technical requirements and helps ensure full compliance of the Online Invoice System data reporting process.
Self-audits can help avoid tax fines
The good news is that if a company has already taken an in-depth look at its Online Invoice System data reporting once, it has ensured its compliance with the requirements, and corrected its process in light of this audit, errors are much less likely to occur afterwards.
However, upon changes in the invoicing process, the introduction of a new tax code, the application of a new transaction or invoice type, it always serves right to verify compliance. For full compliance, it is recommended to monitor data reporting and the status of invoices continuously, and if the Online Invoice data reporting is rejected, resolve the errors as soon as possible.
Let’s not forget about appropriate documentation either. If notes and records are taken in the event of an error and it can be demonstrated that the company did everything it could to remedy the error and rectify the deficiencies, this will be taken into account as a mitigating factor during audits.
Perform Online Invoice System data reporting self-audits before the tax authority audits the company to avoid any risks that may arise and correct any errors in the data reporting process in time.