VAT digitalization – What are the expected changes?

In our previous newsletter we have introduced the reader to the key measures of the “VAT in the Digital Age” Council proposal. Now we will be focusing on the most considerable first pillar, namely the introduction of the standardized EU-level invoicing and invoice data reporting and give a brief summary on the expected changes. Meanwhile, the Hungarian tax administration is ready to launch eVAT regime, including a great variety of services, like preparing draft VAT-return. In the second part of the newsletter we provide some update on this topic as well.

Standardized EU-level e-invoicing and invoice data reporting

The first pillar of the VAT in the Digital Age (ViDA) proposal concerns the introduction of harmonized e-invoicing and invoice data reporting liabilities for intra-Community B2B transactions, in a uniform structured format (DRR), so the tax administrations will be able to track the cross-border invoicing based on up-to-date transactional level. It is not just an initiative but the Council also proposes detailed regulations aiming to provide the smooth operation of the system.

If the Council adopts the proposal, from 1 January 2024, an invoice will only be regarded as ‘electronic invoice’ when it is transmitted and received in a structured electronic format which allows it for automatic and electronic processing (such a data structure might as well be attached to a simple PDF invoice). The issuance of electronic invoices by the supplier and its transmission to the customer will no longer subject to prior authorisation or verification by the tax administration. The proposal is to extend the minimum data content of the invoices, insofar as the indication of the bank account number and the payment deadlines will be compulsory and in case of rectification of invoices a reference to the original invoice will be required. As of 1 January 2028, a uniform invoice data structure will be applied for intra-Community B2B transactions to make the electronic invoices capable of automatic and electronic processing throughout the EU, both for commercial and tax administration purposes. The existing common invoicing schemes are still not uniform nor widespread enough, so challenge lies ahead of the software developers and the tax administrations to learn, develop, and implement them to the existing system. Parallelly, Member States will have the autonomy to introduce domestic reporting liabilities or to keep their existing ones however, the domestic systems will have to be compatible with the Union scheme. With the introduction of DRR, from 1 January 2028, the possibility to issue summary invoices will be eliminated. Furthermore, the current scheme of VIES (which only provides monthly or quarterly aggregated data for each taxable person) will be replaced with central-VIES which will contain up-to-date and transaction-by-transaction data. The proposal sets up a deadline of two days after the chargeable event takes place for the issuance of invoices, and an additional two working days will be provided for data reporting.

The Hungarian tax administration provides more support than ever

Hungarian taxpayers are not only affected by the ViDA proposal and the anticipated regulations on eReceipts nowadaysbut they might also welcome that the tax administration provides more and more extensive support for the fulfilment of VAT compliance liabilities. The so-called ‘NAV-XML’ has been working for almost two years now and enables the customer to treat the supplier’s invoice data reporting per se as an invoice received in electronic format. From February 2023, businesses applying online cash registers may extract log files from the tax administration’s system. In addition, taxpayers will be enabled to have access to their business partner’s historical data through the Online Invoice System as well as to download reporting statistics. Furthermore, the tax administration is approaching to make the reported invoices downloadable in a depicted format and keeps reviewing the Online Invoicing System’s warning messages, with the intention to make them the most reliable. The foregoing additional functions are all serving verification purposes.

The revised eVAT is coming

Under the new form of eVAT-return, the tax administration on the basis of the data reported in the Online Invoicing and Cash Register Systems, would provide the taxpayer with a draft VAT analytics, arranged by VAT-codes. The taxpayer will be responsible for its review and finalizing, and the ‘customization’ of the draft analytics will also be possible (e.g., the taxpayer will be able to manage the titles of VAT-deductions). The draft returns will be accessible from 2024, either on a designated online platform or through machine-to-machine (M2M) connection. The draft return will not be considered as a VAT declaration until it is approved and filed by the taxpayer. Certainly, taxpayers will be free to apply the regular filing methods (the current ’65 forms). In case of a relatively low number of transactions, the taxpayer would receive easy-to-review draft returns without the obligation to prepare and file the domestic purchase lists (‘M’-sheets). However, the tax administration tends to provide support also for taxpayers having many transactions. For example, in M2M communication the eVAT System will be able to make an on-demand preliminary validation of VAT analytics. Moreover, a variety of queries will support the verification process. The test environment is set to be launched in autumn 2023, whilst the live environment is planned to be opened at the beginning of 2024. For the purposes of the smooth transition and in order for the accounting software to be properly connected to the eVAT system the tax administration created GitHub platform (https://github.com/nav-gov-hu) on which the specifications and the descriptions of operational procedures are shared and this is also the field of public consultation with the software developers.

Should you have any questions on the above, please feel free to contact our advisors.

Krisztián Vadkerti, Partner
Márta Pénzely, Tax Manager
Katalin Volpert, Senior Tax Advisor
Márton Ráskai, Senior Tax Advisor

This newsletter provides only high-level information and insufficient for tax advisory purposes. We reserve the right to change the information and opinions presented thereof, without prior notification. Neither PKF nor its partners and employees are responsible for the completeness and accuracy of the newsletter nor for any damages resulting from actions and inactions established thereon.

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