Although the e-VAT draft offers were postponed, Hungarian Tax Authority's focus on taxpayers' data, improving of the data quantity of online invoice reporting and managing invoice problems is apparently growing. This is understandable as Hungarian Tax Authority is providing the data submitted to it and included in its records to clients when offering the draft VAT return. The tax authority will most likely use the time won by this postponement to improving the quantity of online invoice data reporting.
Based on the declaration of the Ministry of Finance, the postponed offering of draft VAT returns may bring a service more complex than originally planned, which will this way also become suitable partly to support the administrative processes of companies. For example, the scope of data that may be requested from computer to computer may be extended and, in respect of incoming VAT, the number of customizable settings in the system is likely to increase also (in line with the specific business policies of companies).
Tax digitalization - blessing or curse?
Hungarian Tax Authority now has a huge amount of data at its disposal as a result of the tax digitalization efforts, which have been going on for years but mostly, as a result of the launce of online invoice data reporting. The tax authority developing its unique service package of offering draft tax returns, which is unique in the European Union also, has a dual purpose here: on the one hand, it intends to give companies administrative support and, on the other, the goal is the whitening of the economy and controlling of business players.
The focus on improving data quality is becoming greater because Hungarian Tax Authority can only rely on the data included in its records, which are won from three sources:
- the online invoice data reporting system;
- online cash registers, simplified invoice data;
- CDPS – data of import customs declarations (from February 2022).
This data is, however, not comprehensive for there are transactions on which Hungarian Tax Authority has no information: such as intra-Community acquisitions, for instance. It is possible, however, that the data should be available but one of the parties to the transaction fails to fulfil its relating obligation, e.g. it does not report properly in online invoice data reporting.
Although the data available to Hungarian Tax Authority is incomplete, the dedicated competence centre of the authority applies enhanced monitoring on the data it has access to; it sees the payables side and the tax content of the invoices issued, which it compares to the VAT returns submitted. If there is a substantial difference, it will contact the taxpayers concerned.
Warning expected to be followed by enhanced authority scrutiny
One of the main pillars for accurate VAT returns is online invoice data reporting. It is a key purpose of Hungarian Tax Authority to improve data quality and, for this reason, larger differences are monitored continuously and the clients concerned are contacted: from October, the tax authority is already sending letters on erroneous invoice data reporting. Clients receive such notice if, due to some error, the tax authority is unable to accept the data reports submitted. The most common causes are the following:
- compulsory data missing from the XML file;
- erroneous data fill-out (e.g. the use of letters instead of the prescribed date format);
- failure to review the invoicing program at the time of the XML version update.
Based on surveys carried out among our partners, online invoice checking and error correction and the fulfilment of technical requirements give companies the most trouble. Our research shows that even though most companies regularly check their invoice data reporting, this is mostly done manually although fast and cost effective software solutions are already available for this purpose. The data of online invoice data reporting should already at this point be used as a control during the preparation of VAT returns.
The correction of invoice errors and the checking of data (to ensure that correct invoice XML is generated) is not only important because of the draft VAT returns but also because of e-invoicing offering the option of paper-free invoicing and also because of the penalty of up to 500 thousand forints pr invoice.