Hungary Expands Real-Time VAT Controls

Victor Duarte
November 26, 2020

The scope of Hungary’s real-time reporting has been extended. From 1 January 2021, reporting obligations will also include invoices issued for domestic B2C transactions in addition to invoices relating to intra-community supplies and exports. However, the Ministry of Finance has granted a sanction-free three month grace period from 1 January to 31 March 2021 allowing businesses more time to comply with these new reporting obligations. This will also help with the transition from the current v2.0 XSD real-time reporting to the latest v3.0 XSD, which will be mandatory from 1 April 2021. For now, it’s uncertain if there will be a requirement to retroactively report the transactions not declared during the grace period.

Personal data protection

The new version of the format has been significantly enhanced to allow businesses to comply with the extended reporting obligations. This system is also essential from a data protection perspective as this specification ensures the anonymity of public data. The personal data of the individual buyer isn’t required, nor is it seen by the tax authority.

New e-invoicing functionality

Version 3.0 will also have a significant impact on e-invoicing. The new system will allow taxpayers to, optionally, implement the data report by submitting an electronic invoice containing the full invoice data content. Therefore, suppliers can opt to submit the electronic invoice itself as the data report. This option will be available only for B2B transactions; B2C transactions will be out of this service’s scope.

It’s essential to highlight that according to the Hungarian VAT Act, customers must consent to electronic invoicing, and this must be previously agreed upon between both parties. The buyer’s consent may be made in writing, orally, or by implied conduct. Under this scheme, the supplier is always responsible for fulfilling the obligation of invoice issuance and must meet the e-invoice archiving compliance rules.

Impact on businesses

Businesses operating in Hungary must be ready to provide the data for all invoices issued for supplies from Hungary to any other EU Member State. They must also adapt their business processes to report all B2C transactions including the distance sales and the internal supplies under the scope of the Hungarian mandate. Invoices issued in respect of B2C transactions carried out from another EU Member State on which the supplier accounts for VAT under the MOSS scheme won’t be subject to the real-time invoice data reporting obligation, since this scheme allows companies not registered in Hungary to comply with VAT obligations.

What’s next?

From 1 April 2021, the Hungarian tax authority will have visibility of all invoices issued for B2B and B2C transactions, having a significant impact on the use of e-invoices and boosting the digitization of sales processes in the country and the rest of the region. The next logical step for the Hungarian Government is to adopt an e-invoicing mandate similar to Italy’s clearance model. However, to achieve this, like Italy the Hungarian Government would first need to obtain the EU Council’s authorization to introduce a special measure derogating rules from the EU VAT Directive. It remains to be seen if the Hungarian Government is content with stopping short of introducing a clearance model and instead keeping the current real-time reporting model in place for the foreseeable future.

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Victor Duarte

Victor is a Senior Regulatory Counsel at Sovos. Based in Stockholm and originally from Venezuela, he obtained a Law degree and a specialisation degree in Tax Law in his home country. Victor also earned a Master´s degree in European and Internal Tax Law from Lund University in Sweden.
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