As we previously advised in the IVA October Newsletter from 2014, businesses issuing invoices from their Hungarian VAT number are required to inform the authorities about the invoicing software they use …
New invoicing software requirements and how this may affect your business
Hungarian regulation on invoicing software gradually becomes stricter.
As we previously advised in the IVA October Newsletter from 2014, businesses issuing invoices from their Hungarian VAT number are required to inform the authorities about the invoicing software they use. Amongst others the name of the invoicing program, version, and developer’s details must be reported. The invoicing software used must comply with strict requirements such as sequential numbering of the invoices, etc. Failure to use the appropriate software and failure to report it results in administrative penalty of up to EUR 1700. Examples of inappropriate invoicing software include the use of Microsoft Excel or Word.
From 2016 the invoicing software must also be capable of collecting data in pre-defined format to the Hungarian Tax Authority in case of the tax audit. The Hungarian Tax Authority has issued a detailed guidance on what the standard accounting file (SAF) should look like, more specifically which fields should be reported and how the reporting should be presented.
What this means potentially to your business
The Hungarian Tax Authority is very particular in respect of the structure of the fields of the SAF. This may cause issues if your software is not configured in the same way. For example, under the new specification, the number of the house block in your or your customer’s address must be in a different field than the street name, city and postal code, names of all fields are predefined such as house, number, street, city, postal code. If previously you have entered the number of the house block, street name, city or postal code in one single field codenamed address or other information, then your invoicing software will not comply from 2016. Similar specifications exist in respect of taxable base, VAT amount and the nature of the invoice (normal invoice, credit note, etc.).
The new invoicing requirement raises many legal questions as well, for example to what extent can an EU member state introduce new requirements with respect to the invoicing software without expanding the invoice content as specified in Article 226 of the EU VAT Directive.
You may need to check whether your invoicing software is in line with the guidance issued by the Hungarian Tax Authority. If you are using an external software, you may need to contact the software developer and seek confirmation that the software is compliant. If you have outsourced your invoicing function or if your customer practices self-billing in your name, you may need to contact the person that issues invoices on your behalf to seek such confirmation.
Possible consequences of non-compliance
If the invoicing software you use is not in line with the new requirements or if you fail to report the invoicing software to the Hungarian Tax Authority, you may face an administrative penalty of up to EUR 1700. We believe that the probability of such penalty remains low during the introductory phase of the new regulation. However, if frequent administrative penalties are imposed, the Hungarian Tax Authority may become even stricter, when auditing vat refund requests.