As we wrote in an earlier article, based on the bill submitted last October and approved in November, in addition to the draft personal income tax returns – ePIT – Hungarian taxpayers should have been able to use the system for draft VAT returns offered by the tax authority as of July. Pursuant to Government Decree 429/2021 (VII.16) published in the Hungarian Gazette on 16 July, the roll-out of draft VAT returns has been switched to the tax assessment period starting on 1 October 2021, but the testing phase of the new system will launch in the meantime according to information from the Ministry of Finance.
What is already known about draft VAT returns?
Draft VAT returns can only qualify as tax returns with the active participation of the taxpayers affected as they have to decide on the deductible tax for each invoice. If the taxpayer completes, accepts then submits the draft return online, this must be considered as fulfilment of the required invoice data reporting obligation in respect of the invoices received. It is important to highlight that using the draft is not obligatory for Hungarian businesses.
Draft VAT returns become available for taxpayers online on the 12th day from the end of the tax assessment period. Therefore, in practice you will have eight days to review the draft and reconcile it with the return generated by your accounting programme.
What steps are there to the implementation of draft VAT returns?
According to the Minister of Finance, Hungary is among the first countries to implement such a VAT return service. The system will be introduced in several stages. The test phase will be launched soon, and the first draft VAT returns will be available for the tax assessment period starting on 1 October 2021. This means that the first draft tax returns will be available from 12 November. The drafts will then be generated exclusively using the data reported directly to the Hungarian tax authority. The system is expected to be expanded in subsequent phases:
- From February 2022 the eVAT system will be extended with VAT on product imports. This means that the Hungarian tax authority will provide the taxpayer with the following data drawn from its records for the tax assessment period starting after 31 January 2022:
– VAT payable by the authorised taxpayer on product imports, and
– input VAT related to product imports.
- From the tax assessment period including 1 April 2022, taxpayers in Hungary will be able to decide on the accounting of budgetary funding.
- The following taxpayers may first use the draft VAT returns from the period including 1 July 2022:
– taxpayers who request deferred payment owing to compensation because of pandemic measures in connection with diseases affecting animals,
– taxpayers obliged to submit an EC sales list,
– taxpayers purchasing or selling passenger cars within the EU,
– taxpayers declaring certain transactions subject to the reverse charge mechanism (certain agricultural and metal industry products).
Further useful information regarding eVAT
In addition, please note that taxpayers whose tax return submission frequency changes compared to that as of 1 October 2021 may first use draft VAT returns for the period starting on 1 January 2022.
Another modification is that by means of a self-revision on a designated form, the taxpayer can correct the tax base and tax in the electronically submitted return of a tax assessment period including a date prior to 1 July 2022.
If the tax return submitted based on the finalised draft is subject to a self-revision or correction, it may only be filed on the designated form.
Naturally, these options are not only available for taxpayers, but also for the permanent representatives of taxpayers, following electronic identification. Similarly to the online invoicing system, taxpayers may appoint a natural person as secondary user, who has the right to modify, supplement and approve the data in the draft, but are not authorised to submit the return.
The system is being introduced to reduce administrative burdens, yet you should not forget that active participation from you as the taxpayer is still required. The development of the system will be carried out in multiple phases, so individual taxpayers will have to consider when is the right time to switch to draft VAT returns. If you have any questions related to the options available for your business regarding draft tax returns, feel free to contact WTS Klient Hungary.