The amendment of the tax laws passed last autumn brought significant changes, primarily in the data disclosure obligation, but also in the domestic summary report (sheet “M”) and in invoicing. We have already written about the amendments in our earlier newsletter; however, since the effective date of the changes is now approaching, we believe it is worth calling attention to these again. If you have any questions, please contact our experts.
Invoice data disclosure obligation
The data disclosure obligation related to invoices will be extended in two steps after 1 July 2020. First, from 1 July 2020, the value limit will be eliminated, and then from 1 January 2021, the scope of the data disclosure obligation will be extended in terms of recipients of the invoices.
From 1 July 2020, data must be reported on all invoices issued by a taxpayer to another domestic taxpayer on transactions performed in Hungary. This means that data must be reported, among other things, on:
- invoices issued under the ordinary VAT system, regardless of their value;
- invoices that are exempt from VAT because of individual exemption or if the goods/services invoiced are exempted;
- domestic invoices issued subject to reverse charge.
However, there is still no data disclosure obligation for invoices issued to persons who are not taxpayers (e.g. private individuals) or to foreign taxpayers on transactions where the place of performance is in Hungary (e.g. tax-exempt intra-Community supplies, export of goods).
The extended data disclosure obligation must be first applied to invoices issued on or after 1 July 2020. (This means that the date when the invoice is issued counts, not the date of performance.)
From 1 January 2021, the scope of invoices subject to the data disclosure obligation will be extended further. Beginning from next year, data must be reported on all invoices that were issued or should have been according to the Hungarian invoicing rules. Thus, the data disclosure obligation will extend to invoices issued to persons who are not taxpayers (however, in this case, there will be no obligation to report the name and address of the customer), as well as invoices for tax-exempt intra-Community supplies, and the export of goods. The only exceptions will be invoices on distance selling of goods or provision of services (transactions realized in the framework of the mini one-stop shop system) in which the place of performance is another member state of the Community.
In case of manual invoices (printed invoice books filled in by hand), the data disclosure must be carried out manually, within
· one calendar day after the date of invoice issuance if the amount of the VAT charged is HUF 500,000 or more,
· four calendar days in all other cases (earlier, there were 5 days for this data disclosure).
In case of invoicing software, there is no change in that the data disclosure must take place immediately when the invoice is issued, automatically, without human intervention. Therefore, the relevant development of the invoicing software used must be completed by the above deadlines. In connection with the necessary developments, we would like to note that from 1 July, also the new version 2.0 file structure must be used (new XSD scheme to be uploaded to the Online Invoice system).
An important change concerning the content of the data reported is that from 1 July 2020, when advance and final invoices are used, data must be reported with respect to the final invoice only on the difference.
We call your attention to the fact that, according to the statement by Norbert Izer, state secretary in charge of tax matters, with a view to the difficulties caused by the coronavirus pandemic, until 30 September 2020, the tax authority will not impose sanctions on businesses unable to comply with the new data disclosure obligation due to the elimination of the HUF 100 thousand limit.
Domestic summary report (sheet “M”)
Simultaneously with the extension of the scope of the data disclosure obligation, from 1 July 2020, receivers of invoices will have a data disclosure obligation on sheet “M” of their VAT returns with respect to all invoices on the basis of which the taxpayers deducts VAT.
With a view to the fact that taxpayers also deduct VAT in case of invoices issued subject to reverse charge, it was not clear if the legislator also wished to involve such invoices into the data disclosure by way of sheets “M” or only intends to eliminate the HUF 100 thousand limit. On the basis of our verbal consultations with the Hungarian Tax and Customs Administration, this latter interpretation is the correct one; in other words, the amendment is only intended to eliminate the HUF 100 thousand limit. Therefore, from 1 July 2020, all incoming invoices issued by domestic taxpayers that contain charged VAT (i.e. invoices issued under the ordinary VAT system) must be reported in case the taxpayer deducts VAT on the basis of such invoices. The report must include:
· the tax number of the taxpayer supplying the goods/service;
· the serial number of the invoice;
· the tax base shown on the invoice, as well as the amount of the VAT charged; and
· the date of performance of the invoice.
It is important that, parallel with the data disclosure, when advance and final invoices are used, data must be reported with respect to the final invoice only on the difference.
The new rules must be applied in case the taxpayer exercises its right of VAT deduction in connection with the invoice in a tax return covering the period including 1 July 2020 or thereafter, or makes any changes to the same (e.g. correcting invoice). For example, if an invoice was issued in December 2019, with the performance date also in December 2019, and the amount of the VAT charged is less than HUF 100 thousand, in case the taxpayer exercises its right of deduction in the tax returns of July 2020 (other in a tax return after that date), then the invoice must be included in sheet “M”.
Changes in the rules of invoicing
From 1 July 2020:
· invoices must include the first eight digits of the Hungarian tax number/group identification number of the customer, if the issuer of the invoice has its registered seat or a permanent establishment in Hungary;
· the time limit for the issuance of invoices is reduced from 15 days to 8 days.
The currently effective provisions of the VAT Act do not prescribe an obligation to issue an invoice in case of certain tax-exempt transactions, provided that the taxpayer issues another accounting document. From 1 July 2020, however, the following activities will be removed from this circle:
· other education;
· tax-exempt sale of real property;
· provision of human healthcare services;
· provision of dental or dental technician’s services;
· certain services provided by a cooperating community to its members.
Therefore, even such transactions will keep their tax-exempt status, but after the amendment becomes effective, it will be required to issue invoices for their performance.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!