Real-time data feed:
stricter rules to justify VAT exemptions
According to an official announcement, published before Christmas, until 1 April 2021, the Hungarian Tax Authority will not penalize taxpayers who do not use the latest, version of their IT interface (3.0) during their real-time data feed provisions. However, regardless of the grace period, this interface has already been introduced: it has been mandatory to provide data with it since 1 January 2021, there is simply no sanction for using the last version before that. Interface 3.0 includes several new features, one of which is related to the justification for the VAT exemption, in our current newsletter we summarize the most important rules regarding to this topic.
Pursuant to Point m) of Section 169 of the Hungarian VAT Act, the obligatory content of an invoice in the case of VAT exemption is a reference to the relevant provisions of the legislation, or any other clear indication that the sale of the product or provision of services is exempt from VAT.
According to the description of interface 3.0, companies must, with the help of their IT partners of course, be able to adjust their invoicing software, so that it is clear to the Hungarian Tax Authority from the data submitted in connection with a VAT-free invoice, why the company in question is reporting a VAT-free transaction.
Consequently, the above-mentioned Section of the Hungarian VAT Act in relation to real-time data feed must be interpreted as the obligatory content of an invoice in the case of VAT exemption is a reference to the relevant provisions of the legislation or any other clear indication that the sale of the product or provision of services why is exempt from VAT. To this end, in the interface 3.0, the Hungarian Tax Authority – in accordance with the rules of the Hungarian VAT Act – predefined the possible grounds for VAT exemption.
This change may lead to additional administrative burdens, especially for companies using a non-automated ERP or invoicing solution, as in extreme cases such invoices, and even their background (including the circumstances of the case, the relevant agreements and written contracts, etc.) need to be reviewed. Therefore, the Hungarian legislator expects a significant reduction in the number of such transactions in the future, which will be labelled VAT-exempt incorrectly.
As mentioned in the introduction, until 1 April 2021, the invoicing programs can be tested “live” for compliance with the “new” (effective since 1 January) rules, even without penalty. It is therefore strongly recommended to review the invoicing structure within the company, also with such focus, even before that target date.
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Should you have any further questions regarding this newsletter, should you are unsure whether your company has any transactions related to the change, or should you would like to handle them according to the rules of real-time data feed, VGD Hungary’s tax advisors are at your disposal.
