Previously we reported on the fact that the introduction of the global minimum tax triggered an amendment to the Act on Accounting, allowing the recognition of deferred tax in Hungarian financial statements. This can be done for the first time for the 2023 financial year.

For companies making use of this option, the profit after tax is calculated from the profit before tax, tax payable and the reporting-year change in the deferred tax difference. Accordingly, the balance sheet and income statement under the Act on Accounting have been amended as follows:

Recognition of deferred tax in reports published electronically

Companies can easily reflect these changes in their own financial statements and reports. But how is this handled by the Electronic Reporting Portal?

The information is now available on the Online Reporting and Form Completion System (OBR), which provides guidance on the above changes as well as practical information. Accordingly, you can select the reporting format with the new rows at point 17 of the Cover Page. So anyone who wants to publish a report that includes deferred tax can now do so. However, please note that in this case, due to changes in the balance sheet and income statement rows, the data for the previous year will not be included automatically, it must be filled in manually.

The situation is different for tax returns though.

Recognition of deferred tax in 2023 corporate tax returns

It is always important to stress that in Hungary, deferred tax can only be interpreted in relation to corporate tax, since only this tax has a carry-over effect through items reconciling the tax base.

Consequently, only with corporate tax returns (2329) may you run into problems with the recognition of deferred tax when completing annual tax returns. Form A-01 of the return contains the balance sheet data, which must be completed based on the financial statements. At the minute, form 2329 cannot yet fully handle the recognition of deferred tax in the balance sheet.

According to information obtained from the tax authority by telephone, if a company has a deferred tax liability it should be reported on form 2329-A-01, row 31, under Long-term liabilities.

However, in the case of a deferred tax asset, there is currently no appropriate row under Fixed assets, since only Intangible assets, Tangible assets and Investments can be classified here.

UPDATE! The above issue regarding the completion of the corporate tax return has been resolved. According to the written information from the tax authority, new lines have been added to the A-01 sheet of the 2329 return, where the balance sheet data must be shown:

2329-A-01, line 44: amount of deferred tax asset (under fixed assets)

2329-A-01, line 45: total amount of deferred tax liability (under long-term liabilities, deducted from the amount on line 31)

The above lines are now included in the updated ÁNYK form, so there is no obstacle to submit in the correctly completed corporate tax return by the deadline (31 May).

The accounting specialists and tax advisers at WTS Klient Hungary are in regular contact with the tax authority to seek answers to clients’ questions as soon as possible, and to draw the tax authority’s attention to any shortcomings with the system of tax returns or with publishing reports and financial statements. We believe it is important to share with our clients the latest accounting and tax law changes, professional knowledge, and practical advice on the problems they face. If you have any other questions about deferred tax, please contact us.

A UPDATED! Recognition of deferred tax in Hungarian tax returns and e-reports bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

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.

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.

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