Hungary Amends VAT Act – Real-Time Reporting Affects All

The Hungarian Ministry of Finance had a productive end to the decade. As outlined in an earlier article, the MoF announced a package of measures and proposals as part of its Economic Action Plan for 2020.  The aim of the plan is to improve VAT compliance and reduce fraud.  A bill to amend the laws implementing certain tax measures in the Hungarian VAT Act was formally proposed – and the bill was ultimately adopted by the Hungarian Parliament in November 2019.

What this means for taxpayers

One of the most significant impacts is the change in threshold for when real-time reporting becomes a reality for businesses. From 1 July 2020, the current threshold of HUF 100,000 has been abolished.  This means the scope of the obligation to disclose the invoice data on a real-time basis has effectively been expanded and all transactions must be reported to the National Tax and Custom Administration (NTCA) of Hungary, regardless of the amount of VAT accounted. 

For businesses operating in Hungary, this means that all domestic B2B transactions must be reported to the tax authority in real-time, including both operations that are VAT exempt and transactions carried out under a domestic reverse-charge mechanism.

These legal changes won’t affect the timelines adopted for the mandatory migration to the new API and XML schema for the real-time reporting version 2.0. Therefore, as originally planned, from 1 April 2020, version 2.0 will be mandatory for all taxpayers and the current version 1.1 will no longer be accepted.

Impact on B2C transactions

According to the amendment, all domestic invoices, including those issued for B2C transactions must be reported to the NTCA after 31 December 2020.  From this date, the NTCA will therefore have data on domestic sales, intra-community supplies and exports.

Looking ahead

As Hungary joins other countries in its crackdown on fraud, the challenges grow for companies to keep abreast of and maintain tax compliance.  There are more than legal changes on the horizon and upcoming technical changes indicate that the current reporting system will receive further investment. The NTCA has published this year’s development roadmap and an upgrade of the system to an XML API 3.0 on the test environment along with documentation is expected during Q3 of this year.

The combination of the expanded scope of Hungary’s real-time reporting system with the technical improvements of the environment used to comply with this mandatory requirement suggest that the government views the existing framework as a data collection to be a success – and indeed is here to stay.