It’s busy for the Hungarian National Tax and Customs Administration (NTCA). Currently this public body is in the midst of overseeing a transition period for the real-time invoice data reporting system, from version 2.0 to version 3.0.
This new version will be mandatory for all taxable persons in the country from 1 April 2021 and the system upgrade that will be made available through the new version will significantly simplify reporting for businesses, should they choose to opt-in to some of the voluntary changes.
Among the key upgrades in the system is the reporting schema that lets taxable persons fulfill the reporting requirement by submitting an electronic invoice containing the full invoice data content. This optional e-invoicing feature is only available for B2B transactions.
Navigating the ‘customer’s consent’ requirement
While this development is a welcome move, especially for many large corporations in Hungary, the question has arisen about how this move aligns with EU law.
According to the EU VAT Directive and the provisions transposed in the Hungarian VAT Act, the exchange of e-invoices requires the consent of the person accepting the invoice. In other words, a supplier cannot force a buyer into accepting e-invoices instead of paper invoices.
As opposed to the Italian e-invoicing reform that took place a few years ago, Hungary’s move towards e-invoicing isn’t mandatory and buyers can choose to not agree to e-invoicing. For those who do opt in, the view of the NTCA is that the consent can be made in the form of a prior written agreement between the parties or implicitly (e.g. by paying the invoice).
e-Invoice inbound functionality
The customer who consents to e-invoicing will be able to retrieve the invoices received in the system under their tax ID and issued by their suppliers in the tax authority’s online system. Customers need to provide the invoice number in their request to download the invoice. The NTCA’s system response will include the invoice issued and the hash code assigned during the invoicing process.
If the tax number of the customer is not correct in the e-invoice, the customer will not be able to download the electronic invoice from the system.
How to ensure integrity and authenticity in the new process
During the invoicing process, an electronic invoice document is created on the seller’s side. The seller’s system generates a hash code for the file, using one of the hash algorithms indicated in the tax authority’s official standard.
The electronic invoice issued on the seller’s side and the electronic invoice received from the seller on the customer’s side must be stored along with the hash code generated during the invoicing process. This can be used to meet the requirements for integrity and authenticity, as alternative measures to the methods mentioned in the law: qualified electronic signatures and electronic data interchange (EDI) with agreement.
e-invoicing future
With this new initiative, the Hungarian Government has taken a significant step forward on the path to invoicing digitisation. It reflects the need for more control over and insight into the operations of taxable persons in their jurisdictions and the government’s commitment to reduce the relevance of paper invoices. A natural next step could be the adoption of a mandatory CTC model inspired by the Italians; such a move would however require the blessing of the EU institutions.
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