Who should switch to electronic invoicing and archiving?
If paper invoicing is the standard practice at a company, receiving an electronic invoice is an unexpected challenge, which may lead the company to crossroads. Should they continue issuing and archiving invoices on paper, while now having to comply with the archiving rules for electronic invoicing, too? Can any of the partners even expect them to do this? Or should they move to e-invoicing by digitising the processes, saving the company duplication of administration and cost?
There are so many open questions that each company needs to consider individually and then decide whether a sole or a hybrid solution would best optimise its internal resources.
Let’s pay close attention to detail. What makes an e-invoice legitimate?
There are several types of e-invoicing solutions, as the legislation lists examples of accepted methods, but leaves open the possibility for specific versions.
Under the VAT Act certain conditions must be met by both the invoice issuer and the recipient during the period for which the invoice is to be kept, and these are important for both paper and electronic invoices. In addition, companies must also comply with archiving requirements.
It is important to emphasise that a "plain" pdf received by email without any authentication will not meet the requirements without a business verification process.
Also, please note that the parties must agree upon electronic invoicing. Although a written agreement is not always mandatory for e-invoicing, it is strongly recommended to avoid difficulties later on.
You should which invoice will meet the conditions for exercising the right of tax deduction:
- the paper based invoice,
- pdf certified by e-signature,
- or an XML based invoice submitted via the online invoice data reporting service.
Everyone has their own way with e-invoicing...
With the rise of e-invoicing, invoice recipients may find that different partners use different e-invoicing solutions. They may attach a machine-processable XML file to the certified PDF invoice, or they may send an XML invoice with a hash code, which is validated using the online invoice solution provided by the Hungarian Tax Authority.
Therefore, the question arises: what is the scope of the retention obligation, how should the procedure be followed when issuing an electronic invoice and storing an electronic invoice? Is it possible to keep the invoice in another data format without changing the data content? How can an electronic invoice be corrected or modified in a legitimate way?
Different solutions pose challenges for businesses, so it is advisable to have a well thought-out, well-documented electronic invoicing and archiving process.
XML = invoice
The Hungarian Tax Authority's ambitions go even further, towards contactless electronic invoicing, where it would no longer be necessary to send invoice images via e-mail. The 3.0 XML schema, effective from the beginning of 2021, allows companies to issue invoices in a processable data file, which their partners will be able to retrieve via the Online Invoice system. The standardised format and easy data processing will also take a significant administrative burden off the partner's shoulders, as the invoices will be automatically retrieved and entered in their own ERP system.
Instead of the “wax seal,” the authenticity of the data will be ensured by the hash code, the use of which is not exclusive to XML files. The use of the hash code can thus provide a new, more secure solution for both invoicing and archiving in the invoicing process via electronic channels.
If we wish to adopt the XML file from the invoice data reporting as an invoice and introduce this new solution into our invoicing processes, it is important to first ensure the appropriate quality of the data that we are reporting. In this case the XML file itself will become the invoice issued.
Are you sure your company's invoicing is compliant, do you have the right practices?
In order to establish good e-invoicing and archiving practice, in addition to the VAT Act, several other Hungarian and EU regulations must be taken into account. Failure to comply with any of the rules carries serious risks in the long term. It is therefore necessary to have a full understanding of the requirements in order to design and control the invoicing process and to mitigate potential risks. A well functioning invoicing and invoice archiving process can be developed within the legal framework.
For example, if we do not pay sufficient attention to the acceptance of electronic invoices issued by our partners, we can easily receive invoices without any specific validation that do not comply with the requirements. This can carry a significant risk down the line.