Decree 6/2021 (VI.25) PM published in the Hungarian Gazette on 25 June 2021 puts an end to the problems arising in connection with online data reporting for proxy invoicing, including self-billing. The decree modifies (among other things) Section 13/A of Decree 23/2014 (VI.30) NGM on the tax identification of invoices and receipts as well as the tax authority inspection of invoices stored in electronic format, and adds two additional paragraphs. In the case of self-billing, the change brings some relief related to the online data reporting obligation, i.e. when the foreign partner issues invoices on behalf of the taxpayer performing the sales.
Self-billing with a foreign partner
In addition to Hungarian domestic VAT transactions, self-billing is a common method for cross-border transactions. In these cases, the foreign buyer issues the invoice for the Hungarian purchase on behalf of its supplier. According to the rules on online invoice data reporting in force from 4 January 2021, from that date onwards both Community supplies and export invoices are subject to the reporting obligation (in addition to sales to private individuals). We discussed this earlier.
What is the challenge?
According to the relevant rules, it is essentially the taxpayer in the other country who is required to fulfil the online invoice data reporting obligation, while the partner issuing the invoice and the taxpayer assigning this task are jointly and severally liable for any failures. However, the fulfilment of this obligation and its practical implementation raise a number of issues. For example, one of the most common questions related to the online data reporting of self-billing is whether it is necessary to implement any IT development in the foreign partner’s invoicing software so that it can provide data on the invoice to the Hungarian tax authority, or do the supply chain and invoicing procedure have to be completely reconsidered?
Temporary grace period for penalties
The Hungarian authority recognised the complexity of the issue related to self-billing, and as a result, the Ministry of Finance extended the moratorium until 30 June for cases where the invoice is issued by the buyer on behalf of the distributor, by agreement with the buyer of the product, provided that the buyer of the product is not established in Hungary for economic purposes, while it does not, and does not need to, have a Hungarian tax number. Up to now, the Hungarian tax authority has therefore refrained from imposing any default penalties if the taxpayer obliged to provide the invoice data has not, or not properly, complied with the online reporting obligation. Both the legislator and the taxpayers and their partners involved in self-billing were given some time to work out a solution.
What has changed with this amendment?
The solution was finally reached by the end of June. According to the legislative amendment that entered into force on 26 June, if a taxpayer fulfils its invoicing obligation with the help of a proxy, and this proxy is a customer who is not established in Hungary and is not registered for VAT purposes in Hungary in relation to the transaction underlying the invoice, then the online data reporting obligation does not have to be fulfilled from the customer’s invoicing software. The data reporting obligation may also be fulfilled from another computer system, provided that it is carried out electronically via a machine-to-machine connection. The data must be provided within six days following the issue of the invoice or document qualifying as an invoice.
If you want to know how your company will be affected by the changes in the online data reporting of proxy invoicing, including self-billing, please contact the tax experts at WTS Klient Hungary.