The clock is ticking for companies that do business in Hungary to prepare for the July 1, 2018, mandate for real-time eInvoicing announced last summer. Only two months remain to ensure your systems are capable of automatically submitting invoice data to Hungary's National Tax and Customs Administration (NAV) as soon as the invoice is issued.
The new Hungary eInvoicing requirement is the next step in efforts to minimize tax evasion and reduce its VAT gap, which at one point reached 13.7%, well over the E.U. median of 10.9%.
Who Must Comply?
Unlike Latin America and Spain, Hungary’s eInvoicing mandate is based on the invoice, not the company. Data from domestic business-to-business sales invoices in which the VAT is greater than 100,000 HUF (~US$398 or ~€321) must be electronically submitted per sections 169-172 of the VAT Act. Invoices below this threshold may also be submitted voluntarily.
Invoice data must be submitted to the National Tax and Customs Administration of Hungary (NAV) at the time invoice is issued with no manual or human intervention. To submit invoice data, the billing system must request a token from the NAV, which is only valid for 5 minutes. The token can be used for multiple invoices, but not for more than 100 and not for any invoices issued outside of the five-minute window.
What Are the Penalties for Non-compliance?
Fines for non-compliance are estimated to be 500,000 HUF (~US$1,972 or ~€1,601) per invoice. Failure to fulfill reporting requirements can also result in minimum penalties of 500,000 HUF.
How Do I Comply?
These requirements impact your entire organization – from finance and accounting to the IT team that has to support the transition to electronic filing. The IT team will be responsible for adapting the ERP/billing system invoice data extraction, integrating it with a direct, live data connection to the NAV web portal and ensuring the proper conversion of invoice data in XML. IT will also have to manage NAV confirmation codes and ensure the company is using a fixed IP address.
Submitted sales invoices cannot have manual or human intervention, so it will be up to the finance and accounting teams to ensure that invoices are complete and correct. If not, the invoice will need to be reprocessed; Hungarian laws do not allow businesses to modify and re-submit invoices. This requirement is more stringent than those in Latin America and Spain, which enable businesses to correct and resubmit erroneous invoices.
What Do Companies Need to Do Now?
Companies wishing to test the XML files of their invoices can do so now through June 30 through Hungary's Online Invoice System, after completing a mandatory registration procedure. Without testing and verification that your company’s processes work, you could be facing steep penalties.
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About the Author
Andrew Decker is a Junior Regulatory Counsel at Sovos Compliance. Working within Sovos’ Regulatory Analysis Department, Andrew’s work centers on indirect taxes (VAT, GST, Sales Tax), with a particular focus on jurisdictions in Europe and Asia. Andrew is a member of the Massachusetts Bar with a J.D from Northeastern University School of Law and a B.A. from Bates College.More Content by Andrew Decker