Hungary VAT Reporting: The Final Countdown

April 20, 2018 Andrew Decker

Only two months remain until Hungary's new real-time VAT reporting requirements kick in on July 1, 2018, and businesses must be prepared to comply with a fully automated process.

Spain was the first country in Europe to adopt a Latin American-style VAT reporting model with its Immediate Supply of Information (SII), which requires companies to report ledger information (e.g.,: sales, purchases, intercommunity and capital assets) up to 4 days after issuing an invoice. However, Hungary is now the first European country demanding invoice reporting electronically.

Hungary’s Mandate Is Unlike Any Other.

Unlike many other countries that have introduced eInvoicing, Hungary requires no human or manual intervention. Businesses cannot amend or update incorrect invoices; instead they must issue an entirely new document in the event of an error or change.

Also unlike other countries, Hungary’s eInvoicing requirement is mandated at the invoice level versus the company level. Any B2B invoices including VAT greater than 100,000 HUF (~US$398 or ~€321) must be submitted electronically. Companies affected must prepare invoices in small batches (maximum 100 invoices per batch), using an XML format defined by Hungary's National Tax and Customs Administration (NAV). Once businesses request and receive a token from the NAV, they have five minutes to submit invoices, then record and store invoice data for eight years.

Non-compliance with eInvoicing requirements can be costly, with penalties reaching up to 500,000 HUF (~€1,600) per invoice.

Companies Must Be Ready to Go Live by July 1, 2018.

Hungary’s eInvoicing regulations are the latest step in the country’s efforts to reduce its large VAT gap and ensure collection of the indirect taxes, which account for almost half of its revenue used to make public investments such as schools and infrastructure. The country first began electronically monitoring the movement of goods, then required fiscal cash registers to better track retail transactions. To date, these efforts have reduced the country's VAT gap by 10.7% since 2013, with a bigger reduction anticipated now that eInvoicing is in place.

Though some wondered if this requirement would be postponed or even canceled because of the elections, recent actions prove this isn’t the case. The April 8 election results coupled with the tax authority’s updates and detailed information releases since the beginning of the year confirm that the go-live is July 1, 2018.

Focus on Must Have Features to Prepare.

With little time left, companies need to focus on the must-have capabilities from their solution provider, since it would be hard to build an in-house solution on time, including:

  • Register for technical users (primary and secondary) as well as generate signature and replacement software key
  • Submit authentication data and invoices automatically, without human intervention within the system
  • Request and process five-minute data reporting token
  • Segment invoices to submit no more than 100 per batch
  • Track submission status, handle reporting, etc.
  • Support BASE64 / SHA-512 / AES-128 and CRC32 Checksums
  • Store invoices for eight years.

Take Action

To learn more about how to prepare for Hungary’s impending VAT reporting mandate and ensure your company remains in compliance, call us today.

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.

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