Hungary’s Real-Time VAT Reporting Begins July 2018

Brian Elswick
October 30, 2017

Indirect taxes contribute to almost half of Hungary’s total tax revenues, making accurate, efficient VAT collection critical to keeping the government running. With a VAT Gap (the difference between the amount of VAT actually collected and total VAT owed) of 13.7%, well above the E.U. median of 10.9%, Hungary’s tax authority has implemented several efforts to curb tax evasion and increase revenues in recent years. Some of these measures have included electronically monitoring the movement of goods, fiscal cash registers to better track retail transactions and lowering threshold for reporting domestic recapitulative statements for invoices from 2 HUF to 1 million. These efforts are proving effective; Hungary has reduced its VAT Gap by 10.7 percentage points since 2013.

Now, the country is turning its focus to business-to-business transaction level reporting with the implementation of real-time VAT reporting starting in July 2018.

Draft e-invoicing regulation, published this summer by the Ministry of National Economy, gives insights into the legal and technical details businesses need to understand in order to become compliant. Below are some of the important aspects of the new law that will impact companies operating in Hungary:

  • 24-hour reporting timeline – All VAT-registered businesses must submit domestic business-to business (B2B) sales invoices with a VAT amount equal to or more than 100,000HUF (~320€) to the NAV, Hungary’s Tax and Customs Administration, within 24 hours of issuing the invoice.
  • XML format required – The data should be submitted in XML format through the government web portal, referred to as KOBAK. A draft of this XML schema is available in the draft ordinance. Use of Microsoft Excel, Word or PDF submissions is not acceptable.
  • Significant penalties – Failure to report invoices in real-time could result in penalties of up to 500,000HUF (~1,600€) per invoice.

The implications of real-time VAT reporting in Hungary

The new mandate creates a significant compliance burden for businesses. Given the 24-hour reporting window, the requirement to record, store and connect the confirmation code to the respective invoice, and the potentially large number of impacted transactions means that tax, compliance and IT departments could face significant challenges. An automated and intelligent solution is the only way businesses can efficiently comply with this new mandate and future mandates yet to come.

The new reporting requirement will also provide the government with a significant amount of data that it will use to help combat VAT fraud and increase revenue collection. This likely means an increased audit exposure for companies in Hungary. Simply put, with this new information at their fingertips,the tax authority will be able to more easily identify errors and data discrepancies, initiate audits, and make tax and penalty assessments.

Businesses should prepare now

Limited testing of XML files is already possible, and a more formal and advanced test period is expected to begin on January 1, 2018. Companies should take advantage of this test period so that they are ready for the 2018 deadline, avoid potentially sizeable fines for noncompliance and add value to internal processes.

Businesses in Hungary also need to consider how they will comply with this new requirement. They should evaluate whether to continue along a reactive path, using internal IT, tax and compliance resources to ensure compliance, or whether the time is right to consider an intelligent solution. Key questions to ask include:

  • Is our compliance approach capable of addressing this new mandate?
  • Can we ensure continual compliance as requirements change?
  • Are we positioned to adapt as new countries adopt a similar mandate?

Take Action

To learn more about how IT, tax and compliance teams should proactively prepare for this impending mandate, watch the on-demand webinar here.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Brian Elswick

Brian Elswick is the Marketing Programs Manager for Sales & Use Tax, Business-to-Government Reporting, and VAT.
Share this post

North America Tax Information Reporting
March 22, 2024
Market Conduct Annual Statement Reminders and More

On the second Wednesday of each month, Sovos experts host a 30-minute webinar, Water Cooler Wednesday, to share the latest updates on statutory filings. In March, Sarah Stubbs shared information about the many filings due after March 1, from Market Conduct Annual Statements to health supplements for P&C and life insurers writing A&H businesses and […]

North America ShipCompliant
March 21, 2024
How Producers Can Build a DtC Shipping Market

Direct-to-consumer (DtC) shipping has become one of the leading sales models for businesses of all sizes and in all markets. The idea of connecting directly with consumers is notably attractive, as it helps brands develop a personal relationship and avoid costly distribution chains. Yet, for all its popularity, DtC is often a hard concept to […]

North America ShipCompliant
March 20, 2024
Key Findings from the 2024 DtC Beer Shipping Report

This March, Sovos ShipCompliant released the fourth annual Direct-to-Consumer Beer Shipping Report in partnership with the Brewers Association. The DtC beer shipping report features exclusive insights on the regulatory state of the direct-to-consumer (DtC) channel, Brewers Association’s perspective and key data from a consumer preferences survey. Let’s take a deeper dive into some of the […]

March 20, 2024
As the World Gets Smaller, Think Bigger About Global Tax Compliance

For the past few weeks back, my colleagues and I have been talking a lot about the importance of a global strategy when it comes to addressing today’s modern tax environments. On the heels of Sovos introducing the Sovos Compliance Cloud, many in our company’s leadership team have blogged about related topics and the critical […]

North America ShipCompliant
March 12, 2024
Florida HR 583 Set to Uncork Larger Format Wine Bottles

Florida wine lovers could soon enjoy a bigger selection of bottles based on a recent bill passed by the state’s legislature (HR 583) that would remove the existing cap on wine bottle sizes. What is Florida’s HR 583 bill? Currently, Florida law prohibits the sale of wine in bottles larger than one gallon (a little […]