Today you can hear the phrases electronic invoices (e-invoice), i.e. electronically transmitted invoices, and online data reporting almost daily as they have become part and parcel of everyday life in Hungary. What do these phrases mean exactly? What rules apply to the data content and storage of electronic invoices? Who are subject to online data reporting and how can you comply with the rules? These are just some of the questions we want to answer in our current series of articles.
Definition of electronic invoices
An invoice can be issued on paper or electronically. Based on the definition set out in the VAT Act an invoice qualifies as electronic if it contains the data prescribed in the Hungarian VAT Act and was issued and accepted electronically. (According to the information booklet on invoices issued by the Hungarian Tax and Customs Administration (NAV), an invoice is only considered electronic if it was sent to the recipient in an email, regardless whether the document is attached to the email via invoicing software or as the scanned version of a paper-based document.)
These invoices do not need to be sent by post, however, there are technical conditions for the entity purchasing the product / using the service with regard to receiving electronic invoices and in relation to the taxpayer’s obligation set forth in the VAT Act in respect of authenticity of origin, integrity of data and readability of the invoice. Consequently, cooperation between the parties is vital for electronic invoicing. As prerequisites for electronic invoices the Hungarian VAT Act prescribes the recipient’s approval (which doesn’t just have to be formal, i.e. it can be implied by payment of the amount on the invoice as well), and a preliminary written agreement between the parties about the use of the EDI (electronic data interchange) system.
Ensuring authenticity, integrity and readability
As we have already mentioned, according to the legislation governing such invoices, the authenticity of origin, the integrity of data and the readability of electronic invoices must be guaranteed. The Hungarian VAT Act provides two ways to comply with these rules:
- the invoice is issued with a qualified electronic signature, or
- it is created and transmitted within the EDI system. There are only two entities in the electronic data interchange system, which means that the authenticity and integrity of the invoice data is ensured by the closed system, which does not allow for unauthorised persons to access data. Electronic signatures are not a basic requirement of the EDI system, however, the parties must agree in advance on the exact format used and the technological background required for this.
When issuing invoices through the electronic data interchange system, prior, written agreement on the application and use of the system is obligatory.
Archiving electronic invoices
Electronic invoices (including those accepted and those issued by the taxpayer) must be stored in electronic format. Stored electronic invoice data might have to be presented during a tax authority inspection. If the storage is carried out pursuant to the rules of digital archiving, a copy of the invoice generated by invoicing software and printed on paper may be retained as electronic data at the issuer.
Invoices issued by invoicing software entail a reporting obligation with regard to the software. Any newly acquired invoicing software must be reported to the Hungarian tax authority within 30 days of the usage on the designated form (“Szamlazo”).
Storing and archiving electronic invoices is governed by the decree on the rules of digital archiving. In line with this decree, the entity subject to safekeeping invoices must ensure the integrity of the electronic document during the storage and make sure it is not damaged, subsequently modified, deleted or prematurely erased.
In the second part of our series of articles in a few weeks’ time we will look at the data content of electronic invoices and the online data reporting obligation.
During their work the accountants of WTS Klient Hungary also prefer to forward and store documents electronically since bearing the requirements of digitalisation in mind we constantly strive to develop modern solutions to enhance the efficiency of work processes and provide data as quickly as possible. We look forward to hearing from you should you need a reliable team with expertise in electronic invoicing.